ECON

2. One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports. a. its trade surplus fell. b. its trade surplus rose. c. its trade deficit fell. d. its trade deficit rose

2. ANSWER: d

1. 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.

1. ANSWER: d

10. A U.S. citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are U.S. a. foreign direct investment that increase U.S. net capital outflow. b. foreign direct investment that decrease U.S. net capital outflow. c. foreign portfolio investment that increase U.S. net capital outflow. d. foreign portfolio investment that decrease U.S. net capital outflow.

10. ANSWER: c

11. If Canada's national saving exceeds its domestic investment, then Canada has a. positive net capital outflows and negative net exports. b. positive net capital outflows and positive net exports. c. negative net capital outflows and negative net exports. d. negative net capital outflows and positive net exports.

11. ANSWER: b

12. In an open economy, gross domestic product equals $1,970 billion, government expenditure equals $300 billion, investment equals $500 billion, and net capital outflow equals $280 billion. What is consumption expenditure? a. $280 billion b. $780 billion c. $890 billion d. $1,170 billion

12. ANSWER: c

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

16. ANSWER: d

17. Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar a. appreciates and buys more Chinese goods. b. appreciates and buys fewer Chinese goods. c. depreciates and buys more Chinese goods. d. depreciates and buys fewer Chinese goods.

17. ANSWER: a

23. Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports a. increase and U.S. net capital outflow decreases. b. decrease and U.S. net capital outflow increases. c. and U.S. net capital outflow both increase. d. and U.S. net capital outflow both decrease.

23. ANSWER: d

24. According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate? a. 8 pesos per dollar b. 1 peso per dollar c. 1/8 peso per dollar d. none of the above is correct

24. ANSWER: a

26. 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.

26. ANSWER: a

27. If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity? a. P = e/P* b. 1 = e/P* c. e = P*/P d. None of the above is correct.

27. ANSWER: c

28. If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate a. does not change. b. rises. c. declines. d. There is not enough information to answer the question

28. ANSWER: b

29. During a hyperinflation the real domestic value of a country's currency a. falls and its nominal exchange rate depreciates. b. falls and its nominal exchange rate appreciates. c. rises and its nominal exchange rate depreciates. d. rises and its nominal exchange rate appreciates.

29. ANSWER: a

3. 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.

3. ANSWER: d

5. A Swiss company sells chocolates to a retailer in the United States. These sales by themselves a. decrease U.S. net export and Swiss net exports. b. decrease U.S. net exports and increase Swiss net exports. c. increase U.S. and Swiss net exports. d. increase U.S. net exports and decrease Swiss net exports.

5. ANSWER: b

6. If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be a. $0 billion. b. $20 billion. c. $40 billion. d. $60 billion

6. ANSWER: d

7. Net capital outflow equals a. the value of domestic assets purchased by foreigners. b. the value of foreign assets purchased by domestic residents. c. the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. d. the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

7. ANSWER: d

9. Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners a. more willing to purchase U.S. bonds, so U.S. net capital outflow would fall. b. more willing to purchase U.S. bonds, so U.S. net capital outflow would rise. c. less willing to purchase U.S. bonds, so U.S. net capital outflow would fall. d. less willing to purchase U.S. bonds, so U.S. net capital outflow would rise.

9. ANSWER: a

13. In an open economy, gross domestic product equals $3,500 billion, consumption expenditure equals $2100 billion, government expenditure equals $400 billion, investment equals $800 billion, and net exports equals $200 billion. What is national savings? a. $200 billion b. $600 billion c. $800 billion d. $1,000 billion

13. ANSWER: d

14. You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then a. the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. b. the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. d. the dollar buys more pesos. Your hotel room in Mexico will require more dollars.

14. ANSWER: c

18. The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate? a. 700/600 b. 600/700 c. 700/720 d. None of the above is correct.

18. ANSWER: d

19. The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange rate is a. 3/8 b. 2/3 c. 3/2 d. 8/3

19. ANSWER: c

20. In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China? a. 7.2 yuan b. 6 yuan c. 5 yuan d. 3.6 yuan

20. ANSWER: c

21. A depreciation of the U.S. real exchange rate induces U.S. consumers to buy a. fewer domestic goods and fewer foreign goods. b. more domestic goods and fewer foreign goods. c. fewer domestic goods and more foreign goods. d. more domestic goods and more foreign goods.

21. ANSWER: b

22. An appreciation of the U.S. real exchange rate induces U.S. consumers to buy a. fewer domestic goods and fewer foreign goods. b. more domestic goods and fewer foreign goods. c. fewer domestic goods and more foreign goods. d. more domestic goods and more foreign goods.

22. ANSWER: c

4. If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct? a. The U.S. has a trade surplus of $350 billion. b. The U.S. has a trade surplus of $50 billion. c. The U.S. has a trade deficit of $350 billion. d. The U.S. has a trade deficit of $50 billion.

4. ANSWER: d

8. If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets, a. U.S. net capital outflow is $300 billion; capital is flowing into the U.S. b. U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. c. U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. d. U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

8. ANSWER: b

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same, a. the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services. b. the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services. c. the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services. d. the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services.

15. ANSWER: b

25. If a dollar buys more corn in the U.S. than in Mexico, then a. the real exchange rate is greater than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico. b. the real exchange rate is greater than 1; a profit might be made by buying corn in Mexico and selling it in the U.S. c. the real exchange rate is less than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico. d. the real exchange rate is less than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.

25. ANSWER: c