Chapter 31 Open-Economy Macroeconomics: Basic Concepts

Suppose that a television in the U.S. sells for $500, a television in France sells for 440 euros, and the nominal exchange rate (e) equals .80 euros per dollar. What is the real exchange rate between U.S. and Japanese rice?

.91 of a French television per U.S. television

Suppose the price of Viagra -- a prescription drug -- is $8.00 per pill in the U.S. In Indonesia the price of one Viagra pill is 51,400 rupiah. If purchasing-power parity exists, what is the predicted exchange rate?

6425 rupiah/$

An excess of imports over exports is called...

a trade deficit.

An excess of exports over imports is called...

a trade surplus.

A situation in which exports equal imports is known as...

balanced trade.

When Microsoft establishes a distribution center in France, U.S. net capital outflow...

increases because Microsoft makes a direct investment in capital in France.

In an open economy, gross domestic product (Y) equals $1,850 billion, consumption expenditure (C) equals $975 billion, government expenditure (G) equals $225 billion, investment (I) equals $500 billion, and national savings (S) equals $650 billion. What is the value of net exports (NX)?

$150 billion

In an open economy, gross domestic product (Y) equals $1,650 billion, consumption expenditure (C) equals $875 billion, and savings (S) equals $550 billion. What is government expenditure (G)?

$225 billion

In an open economy, gross domestic product (Y) equals $2,450 billion, consumption expenditure (C) equals $1,390 billion, government expenditure (G) equals $325 billion, investment (I) equals $510 and national savings (S) equals $735 billion. What is net capital outflow (NCO)?

$225 billion

In an open economy, gross domestic product (Y) equals $1,950 billion, consumption expenditure (C) equals $890 billion, investment (I) equals $500 and net capital outflow (NCO) equals $280 billion. What is government expenditure (C)?

$280 billion

In an open economy, gross domestic product (Y) equals $1,850 billion, consumption expenditure (C) equals $975 billion, government expenditure (G) equals $225 billion, national savings (S) equals $650 billion, and net exports (NX) equals $150 billion. What is investment (I)?

$500 billion

In an open economy, gross domestic product (Y) equals $2,450 billion, consumption expenditure (C) equals $1,390 billion, government expenditure (G) equals $325 billion, net capital outflow (NCO) equals $225 billion, and national savings (S) equals $735 billion. What is investment (I)?

$510 billion

In an open economy, gross domestic product (Y) equals $1,850 billion, consumption expenditure (C) equals $975 billion, government expenditure (G) equals $225 billion, investment (I) equals $500 billion, and net exports (NX) equals $150 billion. What is national savings (S)?

$650 billion

n an open economy, gross domestic product (Y) equals $1,650 billion, government expenditure (G) equals $250 billion, and savings (S) equals $550 billion. What is consumption expenditure (C)?

$850 billion

In an open economy, gross domestic product (Y) equals $1,950 billion, government expenditure (G) equals $280 billion, investment (I) equals $500 and net capital outflow (NCO) equals $280 billion. What is consumption expenditure (C)?

$890 billion

Suppose that a bushel of U.S. rice sells for $10, a bushel of Japanese rice sells for 1,600 yen, and the nominal exchange rate (e) equals 80 yen per dollar. What is the real exchange rate between U.S. and Japanese rice?

.5 bushels of Japanese rice per bushel of U.S. rice

Suppose the price of Viagra -- a prescription drug -- is $8.00 per pill in the U.S. In Canada the price of one Viagra pill is 10.72 C$. If purchasing-power parity exists, what is the predicted exchange rate?

1.34 C$/$

Suppose that a television in the U.S. sells for $500, a television in Japan sells for 80,000 yen, and the nominal exchange rate (e) equals 80 yen per dollar. What is the real exchange rate between U.S. and Japanese rice?

1/2 of a Japanese television per U.S. television

Suppose the price of Viagra -- a prescription drug -- is $8.00 per pill in the U.S. In Hungary the price of one Viagra pill is 1,472 forints. If purchasing-power parity exists, what is the predicted exchange rate?

184 forints/$

Suppose the price of Viagra -- a prescription drug -- is $8.00 per pill in the U.S. In the Czech Republic the price of one Viagra pill is 180.8 korunas. If purchasing-power parity exists, what is the predicted exchange rate?

22.6 korunas/$

Suppose the price of Viagra -- a prescription drug -- is $8.00 per pill in the U.S. In Israel the price of one Viagra pill is 38.56 shekels. If purchasing-power parity exists, what is the predicted exchange rate?

4.82 shekels/$

In an open economy, gross domestic product (Y) equals $2,450 billion, consumption expenditure (C) equals $1,390 billion, government expenditure (G) equals $325 billion, investment (I) equals $510 and net capital outflow (NCO) equals $225 billion. What is national saving (S)?

c. $735 billion

Suppose the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad. Based on this information, the Kenyan real exchange rate...

declines

When a French vineyard establishes a distribution center in the U.S., U.S. net capital outflow...

declines because the foreign company makes a direct investment in capital in the U.S.

Suppose the Australian nominal exchange rate declines, and prices rise faster abroad than in Australia. Based on this information, the Australian real exchange rate...

declines.

Suppose the Mexician nominal exchange rate does not change, but prices rise faster abroad than in Mexico. Based on this information, the Mexican real exchange rate...

declines.

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow...

increases because an American company makes a portfolio investment in Germany.

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by...

net capital outflow.

Suppose the Canadian nominal exchange rate does not change, but prices rise faster in Canada than in all other countries. Based on this information, the Canadian real exchange rate...

rises.

The value of a nation's exports minus the value of its imports is known as...

the trade balance.