INTL ECON Final Exam

Government purchases currently take up about A) 20 percent of U.S. GNP, and this share has not changed much since the late 1950s. B) 38 percent of U.S. GNP, and this share has not changed much since the late 1950s. C) 18 percent of U.S. GNP, and this share has been increasing since the late 1950s. D) 18 percent of U.S. GNP, and this share has been decreasing since the late 1950s. E) 25 percent of U.S. GNP, and this share has been decreasing since the late 1950s.

A) 20 percent of U.S. GNP, and this share has not changed much since the late 1950s.

Which one of the following statements is the MOST accurate? A) A depreciation of a country's currency makes its goods cheaper for foreigners. B) A depreciation of a country's currency makes its goods more expensive for foreigners. C) A depreciation of a country's currency makes its goods cheaper for its own residents. D) A depreciation of a country's currency makes its goods cheaper. E) An appreciation of a country's currency makes its goods more expensive.

A) A depreciation of a country's currency makes its goods cheaper for foreigners.

Which one of the following expressions is the MOST accurate? A) CA = EX - IM B) CA = IM - EX C) CA = EX = IM D) CA = EX + IM E) CA - IM = EX

A) CA = EX - IM

Government savings, , is equal to A) T - G. B) T + G. C) T = G. D) T + G - I. E) T - G = I.

A) T - G.

The CA is equal to A) Y - (C - I + G). B) Y + (C + I + G). C) Y - (C + I + G). D) Y - (C + I - G). E) Y + (C - I - G).

A) Y - (C - I + G).

The dollar rate of return on euro deposits is A) approximately the euro interest rate plus the rate of depreciation of the dollar against the euro. B) approximately the euro interest rate minus the rate of depreciation of the dollar against the euro. C) the euro interest rate minus the rate of inflation against the euro. D) the rate of appreciation of the dollar against the euro. E) the euro interest rate plus the rate of inflation against the euro.

A) approximately the euro interest rate plus the rate of depreciation of the dollar against the euro.

A country's current account A) balance equals the change in its net foreign wealth. B) balance equals the change in its foreign wealth. C) surplus equals the change in its foreign wealth. D) deficit equals the change in its foreign wealth. E) balance equals its GNP.

A) balance equals the change in its net foreign wealth.

For most macroeconomists A) gross national income and gross national product are the same. B) gross national income exceeds gross national product. C) gross national product exceeds gross national product. D) it is hard to tell whether gross national income equal gross national product. E) gross national product is much more important than gross national income.

A) gross national income and gross national product are the same.

If the goods' money prices do not change, an appreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) doesn't change the relative price of sweaters and jeans. D) makes American jeans cheaper in terms of British sweaters. E) makes British jeans more expensive in Britain.

A) makes British sweaters cheaper in terms of American jeans.

Investment is usually A) more variable than consumption. B) less variable than consumption. C) as variable as consumption. D) It is hard to tell from the data whether investment is more or less variable than consumption. E) a larger component of the GNP than consumption.

A) more variable than consumption.

For most macroeconomists A) national income accounts and national output accounts are equal to each other. B) national income accounts exceed national output accounts. C) national output accounts exceed national income accounts. D) it is impossible to tell whether national income accounts equal to national output accounts. E) national income accounts is much more important than national output accounts.

A) national income accounts and national output accounts are equal to each other.

The action of arbitrage is A) the process of buying a currency cheap and selling it dear. B) the process of buying a currency dear and selling it cheap. C) the process of buying and selling currency at the same price. D) the process of selling currency at different prices in different markets. E) the process of buying a currency and holding onto it to take it off the market.

A) the process of buying a currency cheap and selling it dear.

A country's gross national product (GNP) is A) the value of all final goods and services produced by its factors of production and sold on the market in a given time period. B) the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period. C) the value of all final goods produced by its factors of production and sold on the market in a given time period. D) the value of all final goods and services produced by its factors of production and sold on the market. E) the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period.

A) the value of all final goods and services produced by its factors of production and sold on the market in a given time period.

GDP is supposed to measure A) the volume of production within a country's borders. B) the volume of services generated within a country's borders. C) the volume of production of a country's output. D) GNP plus depreciation. E) net unilateral transfers from foreigners.

A) the volume of production within a country's borders.

What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 Pounds in London? A) 1.5 dollars per British pound B) 0.5 dollars per British pound C) 2.5 dollars per British pound D) 3.5 dollars per British pound E) 2 dollars per British pound

B) 0.5 dollars per British pound

In the United States, (gross) investment has fluctuated between ________ of GNP in recent years. A) 2 and 12 percent B) 11 and 22 percent C) 22 and 32 percent D) 32 and 42 percent E) 42 and 52 percent

B) 11 and 22 percent

What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.10 per euro, next year's expected exchange rate is $1.166 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0% E) 15%

B) 11%

Which one of the following statements is the MOST accurate? A) GNP plus depreciation is called net national product (NNP). B) GNP less depreciation is called net national product (NNP). C) GNP less depreciation is called net factor product (NFP). D) GDP plus depreciation is called net national product (NNP). E) GDP less depreciation is called net national product (NNP).

B) GNP less depreciation is called net national product (NNP).

In a closed economy, private saving, , is equal to A) I - (G - T). B) I + (G - T). C) I + (G + T). D) I - (G + T). E) I + (G - T) + C.

B) I + (G - T).

For open economies, A) S = I. B) S = I + CA. C) S = I - CA. D) S > I + CA. E) S < I + CA.

B) S = I + CA.

Which one of the following statements is the MOST accurate? A) The sale of a used textbook does generate income for factors of production. B) The sale of a used textbook does not generate income for any factor of production. C) The sale of a used textbook sometimes does and sometimes does not generate income for factors of production. D) It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production. E) The sale of a used textbook is a part of the GNP.

B) The sale of a used textbook does not generate income for any factor of production.

In a closed economy, national saving A) sometimes equals investment. B) always equals investment. C) is always less than investment. D) is always more than investment. E) is never equal to investment.

B) always equals investment.

Movements in GDP A) and GNP usually do not differ greatly. B) and GNP usually do not differ greatly, as a practical matter. C) and GNP usually do differ greatly. D) are usually smaller than those of GNP movements, in practice. E) are inversely proportional to movements in GNP.

B) and GNP usually do not differ greatly, as a practical matter.

The position of the United States current account balance in 2009 was A) lent over 6 percent of its GNP, resulting in a large current account surplus. B) borrowed over 9 percent of its GNP, leading to a large current account deficit. C) achieved a currant account balance of zero. D) borrowed over 10 percent of its GNP, leading to a large current account deficit. E) borrowed less then 5 percent of its GNP, leading to a large current account surplus.

B) borrowed over 9 percent of its GNP, leading to a large current account deficit.

A closed economy A) can save either by building up its capital stock or by acquiring foreign wealth. B) can save only by building up its capital stock. C) can save only by acquiring foreign wealth. D) cannot save either by building up its capital stock or by acquiring foreign wealth. E) can save by avoiding excessive imports.

B) can save only by building up its capital stock.

Movements in GDP A) differ greatly from movements in GNP. B) do not differ greatly from movements in GNP. C) are not allowed to differ at all from movements in GNP by definition. D) need to be inflation adjusted in order to match movements in GNP. E) are not relevant to an examination of national income.

B) do not differ greatly from movements in GNP.

Purchases of inventories by A) firms are not counted in investment spending. B) firms are also counted in investment spending. C) households are also counted in investment spending. D) households and Firms are also counted in investment spending. E) foreign consumers are counter in investment spending.

B) firms are also counted in investment spending.

If the goods' money prices do not change, a depreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) makes American jeans more expensive in terms of British sweaters. D) doesn't change the relative price of sweaters and jeans. E) makes British jeans more expensive in Britain.

B) makes British sweaters more expensive in terms of American jeans.

Government transfer payments like social security and unemployment benefits are A) included in government purchases. B) not included in government purchases. C) not included in government purchases, but they are included in the consumption component of GNP. D) not included in government purchases, but they are part of the investment component of GNP. E) included in government purchases but not in the GNP.

B) not included in government purchases.

In 1929, government purchases accounted for A) only 18.5 percent of U.S. GNP. B) only 8.5 percent of U.S. GNP. C) 28.5 percent of U.S. GNP. D) 38.5 percent of U.S. GNP. E) 48.5 percent of U.S. GNP.

B) only 8.5 percent of U.S. GNP.

In an open economy, private saving, , is equal to A) I - CA + (G - T). B) I + CA - (G - T). C) I + CA + (G - T). D) I - CA - (G - T). E) I + CA + (G + T).

C) I + CA + (G - T).

In 2006, the United States had A) a surplus in the current account. B) a balance in the current account. C) a deficit in the current account. D) From 2006 data, it is too difficult to determine whether a surplus or a deficit existed in the current account. E) a positive balance of net financial flows.

C) a deficit in the current account.

The sale of A) a used textbook does enter GNP. B) a used textbook does not enter GNP, but the sale of a used house does. C) both a used textbook and a used house do not enter GNP. D) a used house does not enter GNP, but the sale of a used book does. E) the GNP does not include sale of used items priced below $1000.

C) both a used textbook and a used house do not enter GNP.

Ricardian equivalence argues that when the government cuts taxes and raises its deficit, A) consumers anticipate that they will face lower taxes later to pay for the resulting government debt. B) consumers anticipate that they will higher services from the government. C) consumers anticipate that they will face higher taxes later to pay for the resulting government debt. D) consumers anticipate it will affect their future taxes, in general in the direction of lowering future taxes. E) consumers anticipate that the low tax rates will continue.

C) consumers anticipate that they will face higher taxes later to pay for the resulting government debt.

A(n) ________ of a nation's currency will cause imports to ________ and exports to ________, all other things held constant. A) depreciation; increase; decrease B) appreciation; decrease; increase C) depreciation; decrease; increase D) appreciation; increase; increase E) depreciation; decrease; decrease

C) depreciation; decrease; increase

Which of the following type of funds cater to wealthy individuals, are not bound by government regulations, and are actively traded in foreign exchange markets? A) pension funds B) mutual funds C) hedge funds D) exchange funds

C) hedge funds

GDP is different than GNP in that A) it accounts for net unilateral transfers. B) it does not account for indirect business taxes. C) it does not account for a country's production using services with foreign-owned capital. D) it accounts for depreciation. E) it is unhelpful when tracking national income.

C) it does not account for a country's production using services with foreign-owned capital.

In open economies A) saving and investment are necessarily equal. B) as in a closed economy, saving and investment are not necessarily equal. C) saving and investment are not necessarily equal as they are in a closed economy. D) saving and investment are necessarily equal contrary to the case of a closed economy. E) investment always refers to the domestic stock market.

C) saving and investment are not necessarily equal as they are in a closed economy.

Over the 1980s A) there is no question that a large increase in U.S. foreign assets did occur. B) there is a question whether a large decrease in U.S. foreign assets did occur. C) there is no question that a large decrease in U.S. foreign assets did occur. D) there is no question that there was almost no change in U.S. foreign assets. E) there is no question that rising exports exceeded U.S. foreign debt.

C) there is no question that a large decrease in U.S. foreign assets did occur.

Government purchases are defined as A) only goods purchased by federal, state, or local governments. B) all goods and services purchased by the federal government. C) all goods and services purchased by the federal or state government. D) all goods and services purchased by the federal, state, or local government. E) goods and services purchased from the government.

D) all goods and services purchased by the federal, state, or local government.

An open economy A) can save only by building up its capital stock. B) can save only by acquiring foreign wealth. C) cannot save either by building up its capital stock or by acquiring foreign wealth. D) can save either by building up its capital stock or by acquiring foreign wealth. E) can save by avoiding excessive imports.

D) can save either by building up its capital stock or by acquiring foreign wealth.

The highest component of GNP is A) the current account. B) investment. C) government purchases. D) consumption. E) trade.

D) consumption.

An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is A) earnings of a Spanish factory with British owners counts only in Spain's GDP. B) earnings of a Spanish factory with British owners counts only in Britain's GNP. C) earnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP. D) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP. E) earnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.

D) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP.

GNP equals GDP A) minus net receipts of factor income from the rest of the world. B) plus receipts of factor income from the rest of the world. C) minus receipts of factor income from the rest of the world. D) plus net receipts of factor income from the rest of the world. E) minus depreciation.

D) plus net receipts of factor income from the rest of the world.

An appreciation of a country's currency A) decreases the relative price of its exports and lowers the relative price of its imports. B) raises the relative price of its exports and raises the relative price of its imports. C) lowers the relative price of its exports and raises the relative price of its imports. D) raises the relative price of its exports and lowers the relative price of its imports. E) raises the relative price of its exports and does not affect the relative price of its imports.

D) raises the relative price of its exports and lowers the relative price of its imports.

The United States began to report its gross domestic product (GDP) only since A) 1900. B) 1921. C) 1931. D) 1941. E) 1991.

E) 1991.

What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 60 dollars in New York and 30 Pounds in London? A) 1.5 dollars per British pound B) 0.5 dollars per British pound C) 2.5 dollars per British pound D) 3.5 dollars per British pound E) 2 dollars per British pound

E) 2 dollars per British pound

In the United States over the past fifty years, the fraction of GNP devoted to consumption has fluctuated in a range of about A) 42 to 49 percent. B) 32 to 39 percent. C) 22 to 29 percent. D) 82 to 89 percent. E) 62 to 70 percent.

E) 62 to 70 percent.

In 2010, about A) 20 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. B) 10 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. C) 30 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. D) 40 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. E) 85 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars.

E) 85 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars.

Which of the following is TRUE? A) A country with a current account surplus is earning more from its exports than it spends on imports. B) A country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports. C) A country with a current account deficit must be increasing its net foreign debts by the amount of the deficit. D) We can describe the current account surplus as the difference between income and absorption. E) All of the above are true of current account balances.

E) All of the above are true of current account balances.

Which of the following is FALSE about private savings and government savings? A) SP = Y - T - C B) Unlike private saving decisions, government saving decisions are often made with an eye toward their effect on output and employment. C) Total savings (S) = SP + . D) The national income identity can help us to analyze the channels through which government saving decisions influence macroeconomic conditions. E) None of the above; all statements are true.

E) None of the above; all statements are true.

Net unilateral transfers A) are part of a national income. B) are part of a country's product. C) must be added to NNP in calculations of national income. D) are part of a country's GNP. E) Only A and C.

E) Only A and C.

Which one of the following statements is FALSE? A) The United States had accumulated substantial foreign wealth by the early 1980s. B) The 1980s witnessed a sustained current account deficit of proportions unprecedented in the twentieth century opened up. C) In 1987, the country became a net debtor to foreigners for the first time since World War I. D) U.S. foreign debt has continued to grow and now stands at 25 percent of GNP. E) The U.S. foreign debt was paid off in the 1990s, allowing the U.S. to attain a current account surplus. However, the deficit has returned in recent years.

E) The U.S. foreign debt was paid off in the 1990s, allowing the U.S. to attain a current account surplus. However, the deficit has returned in recent years.

Ricardian equivalence argues that when the government A) increases taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. B) cuts taxes and decreases its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. C) cuts taxes and raises its surplus, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. D) cuts taxes and raises its deficit, consumers anticipate that they will face lower taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. E) cuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.

E) cuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.

When a country's currency depreciates A) foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive. B) foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper. C) foreigners find that its exports are cheaper; however, domestic residents are not affected. D) foreigners are not affected, but domestic residents find that imports from abroad are more expensive. E) foreigners find that its exports are cheaper and domestic residents find that imports from abroad are more expensive.

E) foreigners find that its exports are cheaper and domestic residents find that imports from abroad are more expensive.

National income equals GNP A) less depreciation, less net unilateral transfers, less indirect business taxes. B) less depreciation, plus net unilateral transfers, plus indirect business taxes. C) less depreciation, less net unilateral transfers, plus indirect business taxes. D) plus depreciation, plus net unilateral transfers, less indirect business taxes. E) less depreciation, plus net unilateral transfers, less indirect business taxes.

E) less depreciation, plus net unilateral transfers, less indirect business taxes.

Disposable income is National income A) less taxes collected from households and firms by the government. B) plus net taxes collected from households and firms by the government. C) less net taxes collected from firms by the government. D) less net taxes collected from households by the government. E) less net taxes collected from households and firms by the government.

E) less net taxes collected from households and firms by the government.