Question 1

From 2000-2004 net capital outflow as a percent of GDP became a

Accepted Answer

A)  larger positive number.
B)  smaller positive number.
C)  larger negative number.
D)  smaller negative numberE) A) and B)
F) B) and D)

Question 2

From 1970 to 1998 the U.S.dollar

Accepted Answer

A)  gained value compared to the Italian lira because inflation was higher in the U.S.
B)  gained value compared to the Italian lira because inflation was lower in the U.S.
C)  lost value compared to the Italian lira because inflation was higher in the U.S.
D)  lost value compared to the Italian lira because inflation was lower in the U.S.E) A) and B)
F) B) and D)

Question 3

A country has $200 billion of domestic investment and net capital outflow of $100 billion.What is saving?

Accepted Answer

A)  $100 billion
B)  $300 billion
C)  -$200 billion
D)  -$300 billionE) None of the above
F) A) and B)

Question 4

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Accepted Answer

A)  P = e/P*
B)  1 = e/P*
C)  e = P*/P
D)  None of the above is correct.E) B) and C)
F) A) and B)

Question 5

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Accepted Answer

A)  e(P*/P) .
B)  e(P/P*) .
C)  e + P/P.
D)  e - P/P*.E) B) and C)
F) All of the above

Question 6

If a U.S.textbook publishing company sells texts overseas,U.S.net exports

Accepted Answer

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.E) A) and B)
F) B) and C)

Question 7

Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area.Suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area.If the nominal exchange rate is .75 euros per dollar,the prices of which goods have prices that are consistent with purchasing power parity?

Accepted Answer

A)  Both the tall-latte and the Big Mac.
B)  Neither the tall-latte nor the Big Mac.
C)  The tall-latte but not the Big Mac.
D)  The Big Mac but not the tall-latte.E) B) and C)
F) A) and D)

Question 8

Purchasing-power parity theory does not hold at all times because

Accepted Answer

A)  many goods are not easily transported.
B)  the same goods produced in different countries may be imperfect substitutes for each other.
C)  Both a and b are correct.
D)  prices are different across countries.E) C) and D)
F) None of the above

Question 9

The nominal exchange rate is 4 Saudi Arabian riyals,9 Moroccan dirham,45 Indian rupee,or .6 British pounds per U.S.dollar.A double latte espresso and a cinnamon biscotti costs $6 in the U.S.,24 riyals in Saudi Arabia,45 Moroccan dirham in Morocco,250 Indian rupees in India,and 5 British pounds in Britain.According to these numbers,where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A)  Saudi Arabia
B)  Morocco
C)  India
D)  BritainE) A) and B)
F) A) and C)

Question 10

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Accepted Answer

A)  prices in the U.S.were higher, or the number of South African rand the dollar purchased were higher.
B)  prices in the U.S.were higher, or the number of South African rand the dollar purchased were lower.
C)  prices in the U.S.were lower, or the number of South African rand the dollar purchased were higher.
D)  prices in the U.S.were lower, or the number of South African rand the dollar purchased were lower.E) All of the above
F) A) and D)

Question 11

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Accepted Answer

A)  if the nominal exchange rate is 2.0 Singaporean dollars per U.S.dollar, purchasing power parity holds.
B)  if the nominal exchange rate is 1 Singaporean dollars per U.S.dollar, purchasing power parity holds.
C)  if the nominal exchange rate is .50 Singaporean dollars per U.S.dollar, purchasing power parity holds.
D)  purchasing power parity does not hold at any of the above exchange rates.E) B) and C)
F) A) and B)

Question 12

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Accepted Answer

The theory of purchasing-power parity su...

Question 13

Which of the following equations is always correct in an open economy?

Accepted Answer

A)  I = Y - C
B)  I = S
C)  I = S - NCO
D)  I = S + NXE) All of the above
F) None of the above

Question 14

Suppose that the real exchange rate between the United States and Zambia is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Zambian goods a basket of U.S.goods buys) ?

Accepted Answer

A)  a decrease in the number of Zambian Kwacha that can be purchased with a dollar
B)  a decrease in the price of U.S.baskets of goods
C)  a decrease in the price in Zambian Kwacha of Zambian goods
D)  None of the above is correct.E) B) and C)
F) B) and D)

Question 15

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Accepted Answer

A)  .91 pints of Irish beer per pint of Australian beer
B)  1.1 pint of Irish beer per pint of Australian beer
C)  3.64 pints of Irish beer per pint of Australian beer
D)  4.4 pints of Irish beer per pint of Australian beerE) B) and D)
F) All of the above

Question 16

Foreign-produced goods and services that are sold domestically are called

Accepted Answer

A)  imports.
B)  exports.
C)  net imports.
D)  net exports.E) A) and C)
F) B) and C)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Correct Answer
verified

Which of the following equations is always correct in an open economy?

Correct Answer
verified

Purchasing-power parity theory does not hold at all times because

Correct Answer
verified

From 2000-2004 net capital outflow as a percent of GDP became a

Correct Answer
verified

From 1970 to 1998 the U.S.dollar

Correct Answer
verified

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Correct Answer
verified

Correct Answer
verified

Suppose that the real exchange rate between the United States and Zambia is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Zambian goods a basket of U.S.goods buys) ?

Correct Answer
verified

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Correct Answer
verified
The theory of purchasing-power parity su...
View Answer

Foreign-produced goods and services that are sold domestically are called

Correct Answer
verified

If a U.S.textbook publishing company sells texts overseas,U.S.net exports

Correct Answer
verified

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Correct Answer
verified

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Correct Answer
verified

A country has $200 billion of domestic investment and net capital outflow of $100 billion.What is saving?

Correct Answer
verified

Correct Answer
verified

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

Which of the following equations is always correct in an open economy?

Correct AnswerverifiedShow Answer

Purchasing-power parity theory does not hold at all times because

Correct AnswerverifiedShow Answer

From 2000-2004 net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S.dollar

Correct AnswerverifiedShow Answer

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the real exchange rate between the United States and Zambia is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Zambian goods a basket of U.S.goods buys) ?

Correct AnswerverifiedShow Answer

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Correct AnswerverifiedThe theory of purchasing-power parity su...View AnswerShow Answer

Foreign-produced goods and services that are sold domestically are called

Correct AnswerverifiedShow Answer

If a U.S.textbook publishing company sells texts overseas,U.S.net exports

Correct AnswerverifiedShow Answer

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Correct AnswerverifiedShow Answer

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Correct AnswerverifiedShow Answer

A country has $200 billion of domestic investment and net capital outflow of $100 billion.What is saving?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Correct AnswerverifiedShow Answer

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verified
The theory of purchasing-power parity su...
View Answer

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Correct Answer
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Correct Answer
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