ch 31

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to boy a meal in Rio?

10 and your purchase will increase Brazil's net exports

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

2

The Open Market Macroeconomic Theory the following identity is always true

NCO = NX

Bill, a U.S. citizen, pays a Spanish architect (living in Spain), to design a metal casting factory. Which country's exports increase?

Spain's

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

U.S prices divided by foreign prices

Which of the following will increase the United States trade deficit?

United States firms buying technologically advanced computers from Germany

The law of one price states that

a good must sell at the same price at all locations

A country sells more goods and services to foreign countries than it buys from them. It has

a trade surplus and positive net exports

If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by

buying bananas in Honduras and selling them in Guatemala, which could tend to raise the price of bananas in Honduras.

When Ghana sells chocolate to the United States, U.S. net exports

decrease, and U.S net capital outflow decreases

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

imports

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow.

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

If Norway sold more goods and services abroad than it purchased from abroad, then it had

positive net exports which is a trade surplus

If the real exchange rate between the U.S. and Argentina is 1, then

purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

The nominal exchange rate is the

rate at which a person can trade the currency of one country for another

If purchasing-power parity holds, then the value of the

real exchange rate is equal to one. A dollar buys as many goods in the U.S as it does overseas.

Other things the same, an increase in the foreign price level

reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level

The dollar is said to depreciate against the euro if

the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods

Net capital outflow is equal to

the trade balance or ? = value of exports-value of imports