Unit 4 Practice

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

$60 billion

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Its trade deficit rose.

One year a country has positive net exports. The next year it still has positive but larger net exports

Its trade surplus rose

If interest rates rose more in Germany than in the U.S., then other things the same

U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in the United States.

Other things the same, if the exchange rate changes from 125 yen per dollar to 115 yen per dollar, the dollar has

depreciated and so buys fewer Japanese goods

Which of the following both raise net exports?

exports rise and imports fall

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

foreign direct investment

Foreign-produced goods and services that are purchased domestically are called

imports

If a country has a trade deficit

it has negative net exports and negative net capital outflow

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

more goods in that country and buy more dollars

When a country's central bank decreases the money supply, its

price level falls and its currency appreciates relative to other currencies in the world

When a country's central bank increases the money supply, its

price level rises and its currency depreciates relative to other currencies in the world

You buy a new car built in Sweden. Other things the same, your purchase by itself

raises U.S. exports and lowers U.S. net exports

Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default. An economic reason for her decision might be that

the Chilean bonds pay a higher rate of interest