Question 1

If the cost of a typical basket of goods in the U.S.is $100 and in Germany it is 200 euros,and the nominal exchange rate is .7 euro per dollar,what is the real exchange rate?

Accepted Answer

A)  0.35.
B)  0.50.
C)  3.50.
D)  1.50.E) All of the above
F) B) and D) A

Question 2

When a country's ability to maintain its fixed exchange rate is doubted by investors:

Accepted Answer

A)  it may fall under a speculative attack.
B)  the exchange rate is likely to spiral upward,out of control.
C)  the value of its currency tends to appreciate too quickly.
D)  All of these statements are true.E) A) and D)
F) A) and C)

Question 3

When people choose to invest at home it is called ________,and when they invest abroad it is called _______.

Accepted Answer

A)  investment;foreign savings
B)  investment;net capital outflow
C)  savings;net capital outflow
D)  savings;net direct investmentE) A) and B)
F) A) and C)

Question 4

In 2010,imports and exports each represented:

Accepted Answer

A)  about 15 percent of U.S.GDP.
B)  about 1 percent of U.S.GDP.
C)  about 40 percent of U.S.GDP.
D)  nearly 70 percent of U.S.GDP.E) A) and B)
F) A) and C)

Question 5

Alan bought 20 shares of Labatt's stock for himself to celebrate his favorite foreign beer company in 2000.Alan's purchase is an example of:

Accepted Answer

A)  foreign direct investment.
B)  foreign portfolio investment.
C)  importing.
D)  exporting.E) C) and D)
F) A) and B)

Question 6

When the value of one currency increases relative to the value of another currency,it has experienced:

Accepted Answer

A)  exchange rate depreciation.
B)  exchange rate appreciation.
C)  interest rate depreciation.
D)  net capital inflow.E) None of the above
F) A) and C)

Question 7

If people have a sudden increase in confidence in the open economy of the U.S.and want to invest there,the:

Accepted Answer

A)  interest rate increases,as NCO increases.
B)  interest rate falls,as NCO falls.
C)  interest rate falls,as NCO increases.
D)  interest rate increases,as NCO decreases.E) A) and B)
F) A) and C) B

Question 8

The U.S.'s high trade deficit must be balanced by:

Accepted Answer

A)  net capital inflows.
B)  high net capital outflows.
C)  low net capital outflows.
D)  None of these statements is true.E) B) and C)
F) A) and D) A

Question 9

The balance of trade is the value of:

Accepted Answer

A)  exports minus the value of imports.
B)  imports minus the value of exports.
C)  total goods purchased by the U.S.from abroad.
D)  total goods sold by the U.S.to parties abroad.E) B) and D)
F) None of the above

Question 10

The sale of each iPhone in the U.S.counts as:

Accepted Answer

A)  an import,because they are assembled in China.
B)  an import,because they are assembled in Mexico.
C)  an export,because they are assembled in China.
D)  an export,because they are produced in the U.S.E) A) and B)
F) A) and C)

Question 11

Investment is _________ related to the interest rate,and NCO is __________ related to the interest rate.

Accepted Answer

A)  negatively;negatively
B)  negatively;positively
C)  positively;positively
D)  positively;negativelyE) None of the above
F) B) and C)

Question 12

Which of the following can sometimes be referred to as "hot money"?

Accepted Answer

A)  Foreign portfolio investment
B)  Foreign direct investment
C)  Net capital inflow
D)  Net capital outflowE) B) and C)
F) A) and D)

Question 13

Which of the following is foreign portfolio investment sometimes called?

Accepted Answer

A)  Hot investment
B)  Quick sale
C)  Hot money
D)  None of these statements is true.E) A) and B)
F) A) and C)

Question 14

The "crowding out" effect refers to:

Accepted Answer

A)  the increase in domestic investment by foreigners,leaving little investment choice for domestic investors.
B)  the reduction in the interest rate caused by governments running a deficit.
C)  the reduction in domestic investment caused by governments running a deficit.
D)  the irrational exuberance of the market reducing the number of rational investments available.E) B) and C)
F) A) and C)

Question 15

In the forex,the demand for dollars will increase if:

Accepted Answer

A)  foreigners wish to buy U.S.goods.
B)  foreigners wish to buy U.S.financial assets.
C)  interest rates are higher in the U.S.relative to interest rates abroad.
D)  All of these things will increase the demand for dollars.E) B) and C)
F) A) and D)

Question 16

If we consider the savings,investment,and net exports in the United States in recent years,the gap between savings and investment is almost exactly:

Accepted Answer

A)  the net capital outflow.
B)  the balance of payments.
C)  direct foreign investment.
D)  the trade balance.E) All of the above
F) B) and C)

Question 17

Foreign portfolio investment is sometimes called hot money because:

Accepted Answer

A)  it can be withdrawn from a country very quickly.
B)  it is growing very difficult to trace.
C)  it is often invested in the assets which yield the highest returns in the world.
D)  earnings often go untaxed by the home government.E) None of the above
F) A) and D)

Question 18

If China were to adopt a floating exchange-rate regime,it would:

Accepted Answer

A)  cause the Chinese trade balance to fall.
B)  cause the U.S.trade balance with China to fall.
C)  force the U.S.to adopt a fixed exchange rate to maintain the balance of trade.
D)  None of these statements is true.E) All of the above
F) B) and C)

Question 19

The income-expenditure identity for a closed economy is:

Accepted Answer

A)  Y = C + I +G.
B)  Im - Ex = C + I.
C)  Y = C + I + G + NX.
D)  Y + G = C + I - NX.E) B) and C)
F) A) and C)

Question 20

If the cost of a typical basket of goods in the U.S.is $100 and in France it is 400 euros,and the nominal exchange rate is 2 euro per dollar,what is the real exchange rate?

Accepted Answer

A)  0.5.
B)  1.0.
C)  1.5.
D)  2.0.E) B) and D)
F) B) and C)

Exam 34: Open-Market Macroeconomics

If the cost of a typical basket of goods in the U.S.is $100 and in Germany it is 200 euros,and the nominal exchange rate is .7 euro per dollar,what is the real exchange rate?

Correct AnswerverifiedA

When a country's ability to maintain its fixed exchange rate is doubted by investors:

Correct AnswerverifiedShow Answer

When people choose to invest at home it is called ________,and when they invest abroad it is called _______.

Correct AnswerverifiedShow Answer

In 2010,imports and exports each represented:

Correct AnswerverifiedShow Answer

Alan bought 20 shares of Labatt's stock for himself to celebrate his favorite foreign beer company in 2000.Alan's purchase is an example of:

Correct AnswerverifiedShow Answer

When the value of one currency increases relative to the value of another currency,it has experienced:

Correct AnswerverifiedShow Answer

If people have a sudden increase in confidence in the open economy of the U.S.and want to invest there,the:

Correct AnswerverifiedB

The U.S.'s high trade deficit must be balanced by:

Correct AnswerverifiedA

The balance of trade is the value of:

Correct AnswerverifiedShow Answer

The sale of each iPhone in the U.S.counts as:

Correct AnswerverifiedShow Answer

Investment is _________ related to the interest rate,and NCO is __________ related to the interest rate.

Correct AnswerverifiedShow Answer

Which of the following can sometimes be referred to as "hot money"?

Correct AnswerverifiedShow Answer

Which of the following is foreign portfolio investment sometimes called?

Correct AnswerverifiedShow Answer

The "crowding out" effect refers to:

Correct AnswerverifiedShow Answer

In the forex,the demand for dollars will increase if:

Correct AnswerverifiedShow Answer

If we consider the savings,investment,and net exports in the United States in recent years,the gap between savings and investment is almost exactly:

Correct AnswerverifiedShow Answer

Foreign portfolio investment is sometimes called hot money because:

Correct AnswerverifiedShow Answer

If China were to adopt a floating exchange-rate regime,it would:

Correct AnswerverifiedShow Answer

The income-expenditure identity for a closed economy is:

Correct AnswerverifiedShow Answer

If the cost of a typical basket of goods in the U.S.is $100 and in France it is 400 euros,and the nominal exchange rate is 2 euro per dollar,what is the real exchange rate?

Correct AnswerverifiedShow Answer

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When people choose to invest at home it is called __,and when they invest abroad it is called _.

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Investment is _ related to the interest rate,and NCO is __ related to the interest rate.

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