CHAPTER 13 REVIEW-Econ 104 Chapter 18

34. Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase? a. Spain's b. the U.S.'s c. Spain's and the U.S.'s d. neither Spain's nor the U.S.'s

a

38. If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be a. $0 b. $10 billion. c. -$10 billion. d. -$20 billion.

a

56. An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds? a. 2.0 b. 1.0 c. .50 d. None of the above is correct.

a

57. Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price level(s) in a. foreign countries rise. b. the United States rises. c. all countries rise. d. all countries fall.

a

The dollar is said to depreciate against the euro if a. the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods. b. the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods. c. the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods. d. the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.

a

40. Which of the following is an example of U.S. foreign portfolio investment? a. Disney builds a new amusement park near Barcelona, Spain. b. A U.S. citizen buys bonds issued by the British government. c. A Dutch hotel chain opens a new hotel in the United States. d. A citizen of Singapore buys a bond issued by a U.S. corporation.

b

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions a. increase U.S. net exports, and increase Turkish net capital outflow. b. increase U.S. net exports, and decrease Turkish net capital outflow. c. decrease U.S. net exports, and increase Turkish net capital outflow. d. decrease U.S. net exports, and decrease Turkish net capital outflow.

b

If saving is less than domestic investment, then a. there is a trade deficit and Y > C + I + G. b. there is a trade deficit and Y < C + I + G. c. there is a trade surplus and Y > C + I + G. d. there is a trade surplus and Y < C + I + G.

b

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 buy a meal in Rio? a. 40 and your purchase will increase Brazil's net exports. b. 10 and your purchase will increase Brazil's net exports. c. 40 and your purchase will decrease Brazil's net exports. d. 10 and your purchase will decrease Brazil's net exports.

b

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as a. e(P*/P). b. e(P/P*). c. e + P*/P. d. e - P/P*.

b

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has a. appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan. b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan. c. depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan. d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan.

b

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption? a. $700 b. $600 c. $500 d. $300

b

42. Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions a. raise both U.S. net exports and U.S. net capital outflows. b. raise U.S. net exports and lower U.S. net capital outflows. c. lower both U.S. net exports and U.S. net capital outflows. d. lower U.S. net exports and raise U.S. net capital outflows.

c

55. If purchasing-power parity holds, then the value of the a. nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level. c. real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. d. real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level.

c

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales a. decrease U.S. exports but increase U.S. net exports. b. decrease both U.S. exports and U.S. net exports. c. increase both U.S. exports and U.S. net exports. d. increase U.S. exports but decrease U.S. net exports.

c

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate? a. 1/.70 French MP3 players per U.S. MP3 player b. 1 French MP3 players per U.S. MP3 player c. .70 French MP3 players per U.S. MP3 player. d. None of the above are correct.

c

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate? a. 15/4 b. 5/3 c. 3/5 d. 4/15

c

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners? a. $70 billion b. $40 billion c. $30 billion d. $10 billion

c

35. A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has a. a trade surplus and positive net exports. b. a trade surplus and negative net exports. c. a trade deficit and positive net exports. d. a trade deficit and negative net exports.

d

36. A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has a. exports of $3 billion and a trade surplus of $1 billion. b. exports of $3 billion and a trade deficit of $1 billion. c. exports of $2 billion and a trade surplus of $1 billion. d. exports of $2 billion and a trade deficit of $1 billion.

d

39. If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is a. $100 billion and the U.S. has a trade surplus. b. $100 billion and the U.S has a trade deficit. c. -$100 billion and the U.S. has a trade surplus. d. -$100 billion and the U.S. has a trade deficit.

d

41. Which of the following is an example of U.S. foreign direct investment? a. A Chinese company opens a restaurant in the U.S. b. An Australian bank buys stocks issued by a U.S. corporation. c. A U.S. bank buys bonds issued by an Australian corporation. d. A U.S. company opens an auto parts factory in Canada.

d

45. U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports? a. The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets. b. The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. assets. c. The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets. d. The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. asset.

d

If a country has negative net capital outflows, then its net exports are a. positive and its saving is larger than its domestic investment. b. positive and its saving is smaller than its domestic investment. c. negative and its saving is larger than its domestic investment. d. negative and its saving is smaller than its domestic investment.

d