ECO 202 Chapter 18

Which of the following is correct? Since 1950

U.S. exports and U.S. imports each have increased significantly

An open economy's GDP can be expressed by

Y = C + I + G + NX

The "law of one price" states that

a good must sell at the same price at all locations

Suppose that a country imports $120 million worth of goods and services and exports $160 million worth of goods and services. What is the value of net exports?

$40 million

Samuel, a Canadian citizen, is contracted by a Norwegian architect to design a villa at the lake. Which country's exports increase?

Canada's

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 but not Michael's

Domestic saving must equal domestic investment in

closed, but not open economies

If a country sells fewer goods and services abroad than it buys from other countries, it is said to have a trade

deficit and negative net exports

A company in Panama pays a U.S. architect to design a factory building. By itself this transaction

increases Panama's imports and so decreases the Panama's trade balance

A country's trade balance

is greater than zero only if exports are greater than imports

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

If the value of goods and services that Romania purchases from the United States is greater than the value of goods and services that the United States purchases from Romania, then the United States has

positive net exports and a trade surplus with Romania

The purchase of U.S. government bonds by Japanese is an example of

foreign portfolio investment by Japanese

Net exports of a country are the value of

goods and services exported minus the value of goods and services imported