econ ch18

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th? A. 1.33 Barbados goods per U.S. good B. .75 Barbados goods per U.S. good C. 3 Barbados goods per U.S. good D. none of the above is correct Hide Feedback

1.33 Barbados goods per U.S. good

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. 1 peso per dollar B. 1/8 peso per dollar C. 8 pesos per dollar D. none of the above is correct

8 pesos per dollar

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become A.) relatively more expensive for both British and U.S. residents. B.) relatively less expensive for both British and U.S. residents. C.) relatively more expensive for British residents and relatively less expensive for U.S. residents. D.) relatively less expensive for British residents and relatively more expensive for U.S. residents

A.) relatively more expensive for both British and U.S. residents.

Which of the following does purchasing-power parity conclude should equal 1? A. both the nominal and the real exchange rate. B. the real exchange rate but not the nominal exchange rate C. the nominal exchange rate but not the real exchange rate D. neither the nominal exchange rate nor the real exchange rate

the real exchange rate but not the nominal exchange rate

Other things the same, an increase in domestic prices raises the real exchange rate. a. TRUE b. FALSE

true

In an open economy national saving equals domestic investment plus net capital outflow. a. TRUE b. FALSE

true open economy: national saving=domestic investment + net capital outflow

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. 2/3 B. 8/3 C. 3/8 D. 3/2

3/2

If a country has a trade deficit then A. S > I and Y < C + I + G. B. S > I and Y > C + I + G. C. S < I and Y > C + I + G. D. S < I and Y < C + I + G

S < I and Y < C + I + G

Which of the following does purchasing-power parity imply? A.) The nominal exchange rate is the ratio of foreign prices to U.S. prices. B.) the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar) equals the U.S. price level. C.) The price of domestic goods relative to foreign goods cannot change. D.) All of the above are correct.

The nominal exchange rate is the ratio of foreign prices to U.S. prices

Domestic saving must equal domestic investment in A. open, but not closed economies. B. closed, but not open economies. C. both closed and open economies. D. neither closed nor open economies.

closed, but not open economies.

If a U.S. shirt maker purchases cotton from Egypt, 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.

decrease, and U.S. net capital outflow decreases

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has A. appreciated and so buys more Thai goods. B. depreciated and so buys fewer Thai goods. C. depreciated and so buys more Thai goods. D. appreciated and so buys fewer Thai goods.

depreciated and so buys fewer Thai goods.

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.) depreciated, indicating inflation was higher in the U.S. than in India. B.) appreciated, indicating inflation was lower in the U.S. than in India. C.) appreciated, indicating inflation was higher in the U.S. than in India. D.) depreciated, indicating inflation was lower in the U.S. than in India.

depreciated, indicating inflation was higher in the U.S. than in India

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad. a. TRUE b. FALSE

false

To increase domestic investment, a country must increase its saving. a. TRUE b. FALSE

false

A country's trade balance A. is greater than zero only if imports are greater than exports. B. must be zero. C. must be greater than zero. D. is greater than zero only if exports are greater than imports

is greater than zero only if exports are greater than imports

If the exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is A.) less than one and arbitrageurs could profit by buying rice in India and selling it in the U.S.. B.) less than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India. C.) greater than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India. D.) greater than one and arbitrageurs could profit by buying rice in India and selling it in the U.S..

less than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India.

Other things the same, if a country has a trade deficit and saving rises, A. net capital outflow rises, so the trade deficit decreases. B. net capital outflow falls, so the trade deficit decreases. C. net capital outflow rises, so the trade deficit increases. D. net capital outflow falls, so the trade deficit increases

net capital outflow rises, so the trade deficit decreases

If purchasing-power parity holds, when a country's central bank increases the money supply, its A.) price level rises and its currency depreciates relative to other currencies in the world. B.) price level falls and its currency depreciates relative to other currencies in the world. C.) price level rises and its currency appreciates relative to other currencies in the world. D.) price level falls and its currency appreciates relative to other currencies in the world.

price level rises and its currency depreciates relative to other currencies in the world

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A. What would the net capital outflows of both countries be? A. $30 billion for country A and $50 billion for country B B. $50 billion for country A and $30 billion for country B C. $20 billion for country A and -$20 billion for country B D. -$20 billion for country A and $20 billion for country B

$20 billion for country A and -$20 billion for country B

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand? A. None of the above is correct. B. 250 bhat C. 400 baht D. 100 bhat

250 bhat

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises? A. the U.S. nominal exchange rate and the U.S. real exchange rate B. neither the real exchange rate nor the nominal exchange rate C. the U.S. nominal exchange rate, but not the U.S. real exchange rate D. the U.S. real exchange rate, but not the U.S. nominal exchange rate

B. neither the real exchange rate nor the nominal exchange rate

Other things the same, the real exchange rate between American and French goods would be lower if A. prices of French goods were lower, or the number of euros a dollar purchased was lower. B. prices of French goods were higher, or the number of euros a dollar purchased was lower. C. prices of French goods were higher, or the number of euros a dollar purchased was higher. D. prices of French goods were lower, or the number of euros a dollar purchased was higher.

B. prices of French goods were higher, or the number of euros a dollar purchased was lower.

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.) lower both US net exports and US net capital outflows

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year? A. $120 billion B. $150 billion C. $100 billion D. $80 billion

D. $80 billion

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports. a. TRUE b. FALSE

False

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200. a. TRUE b. FALSE

False

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of A. a U.S. export and a Mexican import B. a U.S. import and a Mexican export C. an import for both Mexico and the U.S. D. an export for both the U.S. and Mexico

a U.S. export and a Mexican import