Chapter 31 macro

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate? 15/4 or 3.75 pounds per dollar 5/3 or 1.67 pounds per dollar 3/5 or 0.6 pounds per dollar 4/15 or 2.67 pounds per dollar

3/5 or 0.6 pounds per dollar

Which of the following is an example of U.S. foreign direct investment? A Swedish car manufacturer opens a plant in Tennessee. A Swiss bank buys a U.S. government bond. A U.S. bank buys bonds issued by an Australian corporation. A U.S. based restaurant chain opens new restaurants in India.

A U.S. based restaurant chain opens new restaurants in India

According to purchasing-power parity, inflation in the United States causes the dollar to depreciate relative to all other currencies. depreciate relative to currencies of countries that have lower inflation rates. appreciate relative to all other countries. appreciate relative to currencies of countries that have lower inflation rates.

Depreciate relative to currencies of countries that have lower inflation rates

If the price levels in the United States and in the United Kingdom are unchanged, but the nominal exchange rate (Pound sterling per U.S. dollar) falls, then the U.S. dollar depreciates and so U.S. net exports falls. depreciates and so U.S. net exports rises. appreciates and so U.S. net exports falls. appreciates and so U.S. net exports rises.

Depreciates and so U.S. net exports rises

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction decreases U.S. net capital outflow. does not change U.S. net capital outflow. increases U.S. net capital outflow by more than the value of the bond. increases U.S. net capital outflow by the value of the bond.

Does not change US net capital outflow

Purchasing-power parity describes the forces that determine prices in the short run. prices in the long run. exchange rates in the short run. exchange rates in the long run.

Exchange rates in the long run

A rational investor will always purchase the bond that pays the highest real interest rate. True False

False

If you are vacationing in Spain and the dollar depreciates relative to the euro, then the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros. more euros. It will take more dollars to buy a good that costs 50 euros. fewer euros. It will take fewer dollars to buy a good that costs 50 euros. fewer euros. It will take more dollars to buy a good that costs 50 euros.

Fewer euros. It will take more dollars to buy a good that costs 50 euros

Maria and Michael are both U.S. citizens. Maria opens a café in Spain. Michael builds a U.S.-based factory using equipment from Japan. Whose action is an example of U.S. foreign direct investment? Maria's and Michael's Maria's but not Michael's Michael's but not Maria's Neither Michael's nor Maria's

Maria's but not michael's

If the value of goods and services that Mexico purchases from the United States is greater than the value of goods and services that the United States purchases from Mexico, then the United States has negative net exports and a trade deficit with Mexico. negative net exports and a trade surplus with Mexico. positive net exports and a trade deficit with Mexico. positive net exports and a trade surplus with Mexico.

Positive net exports and a trade surplus with Mexico

Suppose a Starbucks tall latte costs $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is 0.80 euros per dollar, which goods have prices that are consistent with purchasing-power parity? Both the tall latte and the Big Mac The tall latte but not the Big Mac The Big Mac but not the tall latte Neither the Big Mac nor the tall latte

The big max but not the tall latte

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease. True False

True

If a country's saving rises, then either its investment or its net capital outflow rises (or both). True False

True

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950. True False

True

The increase in the trade deficit in the 1980's reflected a decrease in national saving that is associated with an increase in the government budget deficit. True False

True