Chapter 18, 19, 20 -Test Questions

c

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction: a. increases British net capital outflow, and increases U.S. net exports b. increases British net capital outflow, and decreases U.S. net exports c. decreases British net capital outflow, and increases U.S. net exports d. decreases British net capital outflow, and decreases U.S. net exports

c

A basket of goods costs $800 in the U.S. In Canada the same basket of goods costs 800 Canadian dollars and the exchange rate is 1.25 Canadian dollars per U.S. dollars. In Turkey the same basket of goods costs 2400 Lira and the exchange rate is 3 Lira per dollar. Which country has purchasing-power parity with the U.S.? a. Both Canada and Turkey b. Canada but not Turkey c. Turkey but not Canada d. Neither Canada nor Turkey

b

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving? a. $400 billion b. $500 billion c. $600 billion d. $800 billion

a

A nation's domestic investment is greater than its savings. Which of the following is correct? a. This nation has a negative net capital outflow b. This nation has a trade surplus c. Purchases of foreign assets by domestic residents (FAPdom) exceed purchases of domestic assets by foreigners (DAPfor) d. All of the above are correct

c

According to purchasing-power parity, if it took 55 Indian rupees to buy a dollar today, but it took 58 to buy it a year ago, then the dollar has: a. appreciated, indicating inflation was higher in the U.S. than India b. appreciated, indicating inflation was lower in the U.S. than in India c. depreciated, indicating inflation was higher in the U.S. than in India d. depreciated, indicating inflation was lower in the U.S. than in India

b

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level? a. the real exchange rate, but not the nominal exchange rate b. the nominal exchange rate, but not the real exchange rate c. the real exchange rate and the nominal exchange rate d. neither the real exchange rate nor the nominal exchange rate

a

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals: a. net capital outflow b. domestic investment c. foreign currency supplied d. national saving

d

Capital flight refers to: a. the movement of workers across international borders in response to exchange rate changes b. the movement of funds between financial intermediaries when interest rates change c. the ability of foreign direct investment to lift a country out of poverty d. large and sudden movement of funds out of a country

a

During recessions which type of spending falls? a. consumption and investment b. investment but not consumption c. consumption but not investment d. neither consumption nor investment

d

If China expierenced capital flight, the supply of Chinese yuan in the market for foreign-currency exchange would shift: a. left, which would make the real exchange rate of the Chinese yuan appreciate b. left, which would make the real exchange rate of the Chinese yuan depreciate c. right, which would make the real exchange rate of the Chinese yuan appreciate d. right, which would make the real exchange rate of the Chinese yuan depreciate

a

If France had positive net exports last year, then it: a. sold more abroad than it purchased abroad and had a trade surplus b. sold more abroad than it purchased abroad and had a trade deficit c. bought more abroad than it sold abroad and had a trade surplus d. bought more abroad than it sold abroad and had a trade deficit

d

If a country raises its budget deficit, then its: a. net capital outflow and net exports rise b. net capital outflow rises and net exports fall c. net capital outflow falls and net exports rise d. net capital outflow and net exports fall

a

If the exchange rate is 1.25 New Zealand dollars per U.S. dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate? a. 2.50 b. 2 c. 1.25 d. 0.75

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

d

In an open economy, the source for the demand for loanable funds is: a. national saving b. national saving + net capital outflow c. investment d. investment + net capital outflow

b

In the long run, other things the same, continued increases in the money supply lead to: a. continued increases in the price level and real GDP b. continued increase in the price level but not continued increases in real GDP c. continued increases in real GDP but not continued increases in the price level d. a one-time permanent increase in both prices and real GDP as well as unemployment

d

In the open-economy macroeconomic model, if a country's interest rate rises, then its: a. net capital outflow and net exports rise b. net capital outflow rises and its net export falls c. net capital outflow falls and its net exports rise d. net capital outflow and net exports fall

a

In the open-economy macroeconomic model, the supply of loanable funds comes from: a. national saving b. private saving c. domestic investment d. the sum of domestic investment and net capital outflow

b

Net capital outflow (NCO) measures the imbalance between the amount of: a. foreign assets held by domestic residents and total domestic assets held by foreign residents b. foreign assets purchased (bought) by domestic residents (FAPdom) and the amount of domestic assets purchased (bought) by foreigners (DAPfor) c. foreign assets purchased (bought) by domestic residents and the amount of domestic goods and services sold to foreigners d. none of the above

c

Other things the same, an increase in the U.S. real interest rate induces: a. Americans to buy more foreign assets, which increases U.S. net capital outflow b. Americans to buy more foreign assets, which reduces U.S. net capital outflow c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow

a

The aggregate demand is described graphically as: a. sloping downward b. a vertical line c. a horizontal line d. sloping upward

d

The aggregate-demand curve shows the: a. quantity of labor and other inputs that firms want to buy at each price level b. quantity of labor and other inputs that firms want to buy at each inflation rate c. quantity of domestically produced goods and services that households want to buy at each price level d. quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level

d

The open-economy macroeconomic model examines the determination of: a. the output growth rate and the real interest rate b. unemployment and the exchange rate c. the output growth and the inflation rate d. the trade balance and the exchange rate

a

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected (P>P^e) : a. production is more profitable and employment rises b. production is more profitable and employment falls c. production is less profitable and employment rises d. production is less profitable and employment falls

a

The variable that links the market for loanable funds and the market for foreign-currency exchange is: a. net capital outflow b. national saving c. exports d. domestic investment

d

When Ghana sells chocolate to the United States, U.S. net exports: a. increase, and U.S. net capital outflow increases b. increase, and U.S. net capital outflow decreases c. decrease, and U.S. net capital outflow increases d. decrease, and U.S. net capital outflow decreases

b

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is: a. both a U.S. and Irish import b. a U.S. import and an Irish export c. a U.S. export and an Irish import d. neither an export nor an import for either country

c

When Microsoft establishes a distribution center in France, U.S. net capital outflow: a. increases because Microsoft makes a portfolio investment in France b. decreases because Microsoft makes a portfolio investment in France c. increases because Microsoft makes a direct investment in capital in France d. decreases because Microsoft makes a direct investment in capital in France

b

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases? a. U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment b. U.S. imports, U.S. interest rates, the real exchange rate of the dollar c. U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment d. the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports

c

Which of the following equations is correct? a. S=I+C b. S=I-NX c. S=I+NCO d. S=NX-NCO

d

Which of the following explains why production rises in most years? a. increases in the labor force b. increases in capital stock c. advances in technological knowledge d. all of above are correct

a

Which of the following is NOT included in aggregate demand? a. purchases of stocks and bonds b. purchases of services such as doctor visits c. purchases of capital goods such as equipment in a factory d. purchases by foreigners of consumer goods produced in the United States

d

Which of the following is correct? a. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. b. An increase in stock prices reduces consumption spending so that aggregate demand shifts left. c. An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left. d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left

a

Which of the following would cause prices to fall and output to rise in the short run? a. short-run aggregate supply shifts right b. short-run aggregate supply shifts left c. aggregate demand shifts right d. aggregate demand shifts left