Econ Chapter 13

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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 trade deficit and negative net exports.

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.

its trade deficit rose

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

exports of $2 billion and a trade deficit of $1 billion.

4

If US exports are $300 billion and US imports total $350 billion, which of the following is correct?

The US trade has a deficit of $50 billion.

5

A Swiss company sells chocolates to a retailer in the US. These sales by themselves

Decrease US net exports and increase Swiss net exports.

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

$60 billion.

7

Net capital outflow equals

The value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

8

If US residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of US assets,

US net capital outflow is $300 billion; capital is flowing out of the US.

9

Jen and Alicia are both US citizens. Jen opens a cafe in France. Alicia purchases equipment from a company in Canada to use in her factory. Whose action is an example of US foreign direct investment?

Jen's but not Alicias

10

What is an example of US foreign direct investment?

A US based restaurant chain opens new restaurants in India.

11

What is an example of US foreign portfolio investment?

Erica, a US resident, buys bonds issued by the Swiss government.

12

Mark, a US citizen, buys stock in a British shipping company. This purchase is an example of what?

saving for Mark and US foreign portfolio investment.

13

Suppose that real interest rates in the US rise relative to real interest rates in other countries. This increase would make foreigners

more willing to purchase US bonds, so US net capital outflow would fall.

14

A US citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are US

foreign portfolio investment that increase US net capital outflow

15

NCO=NX

NCO=NX

16

If a country has Y > C + I + G, then it has

positive net capital outflow and positive net exports.

17

A country's trade balance will fall if

either savings fall, or investments rise.

18

A country has a trade deficit. its,

net capital outflow must be negative and saving is smaller than the investment

19

If Canada's national national savings exceed its domestic investment, then Canada has

positive net capital outflow and positive net exports.

20

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?

$890 billion.

21

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 equal $200 billion. What are its national savings?

$1000 billion

22

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

the dollar buys more pesos. your hotel room in Mexico will require fewer dollars.

23

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, all other things the same, then

the dollar would buy more pounds. the appreciation would encourage you to buy more British goods and services.

24

If you are vacationing in France and the dollar depreciates relative to the euro, then

the dollar buys fewer euros. it will take more dollars to buy a good that costs 50 euros.

25

other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar

appreciates and buys more Chinese goods.

26

The price of a basket of goods and services in the US is $600 dollars. In canada the same basket of goods costs 700 Canadian dollars. if the nominal exchange rate were 1.2 Canadian dollars per US dollar, what would be the real exchange rate?

None of the above

27

If the nominal exchange rate is 30 Thai bhat for one US dollar. a sub sandwich combo deal in the US costs $6 in the US and 120 bhat in Thailand. the real exchange rate is

3/2

28

In the US 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?

5 yuan

29

A depreciation of the US real exchange rate induces US consumers to buy

more domestic goods and fewer foreign goods.

30

An appreciation of the US real exchange rate induces US consumers to buy

fewer domestic goods and more foreign goods.

31

Other things the same, if the US exchange rate appreciates, US net exports

and US net capital outflow both decrease.

32

If the real exchange rate between the US and Argentina is 1, then

purchasing-power parity holds, and the amount of dollars needed to buy goods in the US is the same as the amount needed to buy enough Argentinian bolviars to buy the same goods in Argentina.

33

According to purchasing-power parity, if a basket of goods in the US costs $100, and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

8 pesos per dollar.

34

If a dollar buys more corn in the US than Mexico, then

the real exchange rate is less than 1; a profit might be made by buying corn in the US and selling it in Canada.

35

An mp3 player in Singapore costs 200 Singaporean dollars. In the US its costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

2.0

36

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

e=P*/P

37

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

declines

38

If the Mexican nominal exchange rate does not change, but prices rise faster in all other countries, then the Mexican nominal exchange rate

rises

39

during a hyperinflation the real domestic value of a country's currency

falls and its nominal exchange rate depreciates.

40

if over the next 6 months inflation is higher in the US than in foreign countries, then according to purchasing-power parity

only the nominal exchange rate depreciates.

41

according to purchasing-power parity, if prices in the US increase by a smaller percentage than prices in the United Kingdom, then the

nominal exchange rate rises.