Deck 31: Open-Economy Macroeconomics: Basic Concepts

Question 1

International trade

A)raises the standard of living in all trading countries.
B)lowers the standard of living in all trading countries.
C)leaves the standard of living unchanged.
D)raises the standard of living for importing countries and lowers it for exporting countries.

Answer 1

A

Question 2

Suppose a country had $2.4 billion of net exports and bought $4.8 billion of goods and services from foreign countries.This country would have

A)$7.2 billion of exports and $4.8 billion of imports.
B)$7.2 billion of imports and $4.8 billion of exports.
C)$4.8 billion of exports and $2.4 billion of imports.
D)$4.8 billion of imports and $2.4 billion of exports.

Answer 2

A

Question 3

Net exports of a country are the value of

A)goods and services imported minus the value of goods and services exported.
B)goods and services exported minus the value of goods and services imported.
C)goods exported minus the value of goods imported.
D)goods imported minus the value of goods exported.

Answer 3

B

Question 4

If U.S.imports total $100 billion and U.S.exports total $150 billion,which of the following is correct?

A)The U.S.has a trade surplus of $100 billion.
B)The U.S.has a trade surplus of $50 billion.
C)The U.S.has a trade deficit of $100 billion.
D)The U.S.has a trade deficit of $50 billion.

Question 5

Ivan,a Russian citizen,sells several hundred cases of caviar to a restaurant chain in the United States.By itself,this sale

A)increases U.S.net exports and has no effect on Russian net exports.
B)increases U.S.net exports and decreases Russian net exports.
C)decreases U.S.net exports and has no effect on Russian net exports.
D)decreases U.S.net exports and increases Russian net exports.

Question 6

The value of Peru's exports minus the value of Peru's imports is called

A)Peru's foreign portfolio investment.
B)Peru's foreign direct investment.
C)Peru's net exports.
D)Peru's net imports.

Question 7

One year a country has negative net exports.The next year it still has negative net exports and imports have risen more than exports.

A)its trade surplus fell.
B)its trade surplus rose.
C)its trade deficit fell.
D)its trade deficit rose

Question 8

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania.Supposing this is the only trade that these countries do.What are the net exports of Oceania and Escudia in that order?

A)$140 and $140
B)$100 and $40
C)$60 and -$60
D)None of the above is correct.

Question 9

Mike,a U.S.citizen,buys $1,000 worth of cheese from France.His action alone

A)increases U.S.imports by $1,000 and increases U.S.net exports by $1,000.
B)increases U.S.imports by $1,000 and decreases U.S.net exports by $1,000.
C)increases U.S.exports by $1,000 and increases U.S.net exports by $1,000.
D)increases U.S.exports by $1,000 and decreases U.S.net exports by $1,000.

Question 10

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

A)increase U.S.net exports and have no effect on Danish net exports.
B)decrease U.S.net exports and have no effect on Danish net exports.
C)increase U.S.net exports and decrease Danish net exports.
D)decrease U.S.net exports and increase Danish net exports.

Question 11

Clear Brook Farms,a U.S.manufacturer of frozen vegetarian entrees,sells cases of their product to stores overseas.Its sales

A)decrease U.S.exports but increase U.S.net exports.
B)decrease both U.S.exports and U.S.net exports.
C)increase both U.S.exports and U.S.net exports.
D)increase U.S.exports but decrease U.S.net exports.

Question 12

A German company sells cameras to a retailer in the United States.These sales by themselves

A)have no affect on U.S.net exports and increase German net exports.
B)decrease U.S.net exports and increase German net exports.
C)increase U.S.and German net exports.
D)increase U.S.net exports and decrease German net exports.

Question 13

Bob traps lobsters in Maine and sells them to a restaurant in Egypt.Other things the same,these sales

A)increase U.S.net exports and has no effect on Egyptian net exports.
B)increase U.S.net exports and decrease Egyptian net exports.
C)decrease U.S.net exports and have no effect on Egyptian net exports.
D)decrease U.S.net exports and increase Egyptian net exports.

Question 14

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States.The motorcycle is

A)both a U.S.and Ecuadorian export.
B)both a U.S.and Ecuadorian import.
C)a U.S.import and an Ecuadorian export.
D)a U.S.export and an Ecuadorian import.

Question 15

You buy a new car built in Sweden.Other things the same,your purchase by itself

A)raises both U.S.exports and U.S.net exports.
B)raises U.S.exports and lowers U.S.net exports.
C)raises both U.S.imports and U.S.net exports.
D)raises U.S.imports and lowers U.S.net exports.

Question 16

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

A)imports.
B)exports.
C)net imports.
D)net exports.

Question 17

A firm in China sells jackets to a U.S.department store chain.Other things the same,these sales

A)increases U.S.and Chinese net exports.
B)decrease U.S.and Chinese net exports.
C)increase U.S.net exports and decrease Chinese net exports.
D)decreases U.S.net exports and increase Chinese net exports.

Question 18

When Dee,a U.S.citizen,purchases a designer dress made in Milan,the purchase is

A)both a U.S.and Italian import.
B)a U.S.export and an Italian import.
C)a U.S.import and an Italian export.
D)neither an export nor an import for either country.

Question 19

Suppose a country had net exports of $8.3 billion and sold $52.4 billion of goods and services abroad.This country had

A)$60.7 billion of imports and $52.4 billion of imports.
B)$60.7 billion of exports and $52.4 of imports.
C)$52.4 billion of imports and $44.1 billion of exports.
D)$52.4 billion of exports and $44.1 billion of imports.

Question 20

Suppose that a country imports $100 million of goods and services and exports $75 million of goods and services,what is the value of net exports?

A)$175 million
B)$75 million
C)$25 million
D)-$25 million

Question 21

Which of the following would be U.S.foreign portfolio investment?

A)Disney builds a new amusement park near Barcelona, Spain.
B)A U.S.citizen buys stock in companies located in Asia.
C)A Dutch hotel chain opens a new hotel in the United States.
D)A citizen of Singapore buys a bond issued by a U.S.corporation.

Question 22

Which of the following is an example of U.S.foreign portfolio investment?

A)Albert, a German citizen, buys stock in a U.S.computer company.
B)Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States.
C)Ruth, a U.S.citizen, buys bonds issued by a German corporation.
D)Dustin, a U.S.citizen, opens a country-western tavern in New Zealand.

Question 23

Which of the following would be U.S.foreign direct investment?

A)Your U.S.based mutual fund buys stock in Eastern European companies.
B)A U.S.citizen opens and operates a law firm in Norway.
C)A Swiss bank buys a U.S.government bond.
D)A German tractor factory opens a plant in Waterloo, Iowa.

Question 24

A country sells more to foreign countries than it buys from them.It has

A)a trade surplus and positive net exports.
B)a trade surplus and negative net exports.
C)a trade deficit and positive net exports.
D)a trade deficit and negative net exports.

Question 25

About what percentage of GDP are U.S.imports?

A)less than 1 percent
B)about 4 percent
C)about 7 percent
D)over 10 percent

Question 26

A country's trade balance

A)must be zero.
B)must be greater than zero.
C)is greater than zero only if exports are greater than imports.
D)is greater than zero only if imports are greater than exports.

Question 27

Which of the following is an example of U.S.foreign portfolio investment?

A)Toni, a U.S.citizen, buys bonds issued by a Swedish corporation.
B)Randall, a U.S.citizen, opens a cheesecake factory in Italy.
C)Both A and B are examples of U.S.portfolio investment.
D)Neither A nor B are examples of U.S.portfolio investment.

Question 28

Over the last 50 years or so,U.S.exports as a percentage of GDP have approximately

A)stayed constant.
B)doubled.
C)tripled.
D)quadrupled.

Question 29

Suppose that more Chinese decide to vacation in the U.S.and that the Chinese purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,

A)the first action by itself raises U.S.net exports, the second action by itself raises U.S.net capital outflow.
B)the first action by itself raises U.S.net exports, the second action by itself lowers U.S.net capital outflow.
C)the first action by itself lowers U.S.net exports, the second action by itself raises U.S.net capital outflow.
D)the first action by itself lowers U.S.net exports, the second action by itself lowers U.S.net capital outflow.

Question 30

Which of the following would be U.S.foreign direct investment?

A)A Polish company opens a shipbuilding plant in the United States.
B)A Bolivian bank buys U.S.corporate bonds.
C)A U.S.bank buys Bolivian corporate bonds.
D)A U.S.furniture maker opens a plant in Mexico.

Question 31

Which of the following would be U.S.foreign direct investment?

A)A Swedish car manufacturer opens a plant in Tennessee.
B)A Dutch citizen buys shares of stock in a U.S.company.
C)A U.S.based hotel chain opens a new hotel in Brazil.
D)A U.S.citizen buys stock in companies located in Japan.

Question 32

Over the last 50 years or so,U.S.imports as a percentage of GDP have approximately

A)stayed constant.
B)doubled.
C)tripled.
D)quadrupled.

Question 33

Net capital outflow measures

A)foreign assets held by domestic residents minus domestic assets held by foreign residents.
B)the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C)the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners.
D)None of the above is correct.

Question 34

Which of the following is correct? Over about the last fifty years

A)U.S.exports and U.S.imports each about doubled.
B)U.S.exports and U.S.imports each about tripled.
C)U.S.exports about doubled and U.S.imports about tripled.
D)U.S.exports about tripled and U.S.imports about doubled.

Question 35

Over the past five decades,the U.S.economy has become

A)more closed.
B)more open.
C)less trade-oriented.
D)more self-sufficient.

Question 36

The increase in international trade in the United States is partly due to

A)improvements in transportation.
B)advances in telecommunications.
C)increased trade of goods with a high value per pound.
D)All of the above are correct.

Question 37

If a country changes its corporate tax laws so that domestic firms build and manage more firms overseas,then this country will

A)increase foreign direct investment which increases net capital outflow.
B)increase foreign direct investment which decreases net capital outflow.
C)increase foreign portfolio investment which increases net capital outflow.
D)increase foreign portfolio investment which decreases net capital outflow.

Question 38

Net capital outflow refers to the purchase of

A)foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
B)foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
C)domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
D)domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Question 39

If the United States had negative net exports,it

A)sold more abroad than it purchased abroad and has a trade surplus.
B)sold more abroad than it purchased abroad and has a trade deficit.
C)bought more abroad than it sold abroad and had a trade surplus.
D)bought more abroad than it sold abroad and had a trade deficit.

Question 40

Which of the following is correct?

A)U.S.exports as a percentage of GDP have about doubled over the last 50 years.The U.S.currently has a trade surplus.
B)U.S.exports as a percentage of GDP have about doubled over the last 50 years.The U.S.currently has a trade deficit.
C)U.S.exports as a percentage of GDP have increased, but have not nearly doubled over the last 50 years.The U.S.currently has a trade surplus.
D)U.S.exports as a percentage of GDP have increased, but have not nearly doubled over the last 50 years.The U.S.currently has a trade deficit.

Question 41

Bob,a Greek citizen,opens a restaurant in Chicago.His expenditures

A)increase U.S.net capital outflow and have no affect on Greek net capital outflow.
B)increase U.S.net capital outflow and increase Greek net capital outflow.
C)increase U.S.net capital outflow, but decrease Greek net capital outflow.
D)decrease U.S.net capital outflow, but increase Greek net capital outflow.

Question 42

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

A)foreign direct investment that increase U.S.net capital outflow.
B)foreign direct investment that decrease U.S.net capital outflow.
C)foreign portfolio investment that increase U.S.net capital outflow.
D)foreign portfolio investment that decrease U.S.net capital outflow.

Question 43

When Ghana sells chocolate to the United States,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.

Question 44

When making investment decisions,investors

A)compare the real interest rates offered on different bonds.
B)compare the nominal, but not the real, interest rates offered on different bonds.
C)purchase the highest-priced bond available.
D)All of the above are correct.

Question 45

Net capital outflow equals the difference between a country's

A)income and expenditure.
B)investment and saving.
C)buying of foreign goods and services and sales of goods and services abroad.
D)purchases of foreign assets and sales of domestic assets abroad.

Question 46

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

A)increases because the foreign company makes a portfolio investment in the U.S.
B)declines because the foreign company makes a portfolio investment in the U.S.
C)increases because the foreign company makes a direct investment in capital in the U.S.
D)declines because the foreign company makes a direct investment in capital in the U.S.

Question 47

Which of the following is correct?

A)NCO = NX
B)NCO + I = NX
C)NX + NCO = Y
D)Y = NCO - I

Question 48

John,a U.S.citizen,opens up a Sports bar in Tokyo.This counts as U.S.

A)exports.
B)imports.
C)foreign portfolio investment.
D)foreign direct investment.

Question 49

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

A)increases because an American company makes a portfolio investment in Germany.
B)declines because an American company makes a portfolio investment in Germany.
C)increases because an American company makes a direct investment in Germany.
D)declines because an American company makes a direct investment in Germany.

Question 50

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

A)increases because Microsoft makes a portfolio investment in France.
B)decreases because Microsoft makes a portfolio investment in France.
C)increases because Microsoft makes a direct investment in capital in France.
D)decreases because Microsoft makes a direct investment in capital France.

Question 51

An Italian citizen opens and operates a spaghetti factory in the United States.This is Italian

A)foreign direct investment that increases Italian net capital outflow.
B)foreign direct investment that decreases Italian net capital outflow.
C)foreign portfolio investment that increases Italian net capital outflow.
D)foreign portfolio investment that decreases Italian net capital outflow.

Question 52

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

A)she dislikes U.S.foreign policy.
B)the Chilean bonds pay a higher rate of interest.
C)the U.S.government is more stable than the Chilean government.
D)None of the above provide an economic reason for buying the riskier bond.

Question 53

Larry,a U.S.citizen,opens and operates a bookstore in Spain.This counts as

A)investment for Larry and U.S.foreign direct investment.
B)investment for Larry and U.S.foreign portfolio investment.
C)U.S.foreign direct investment and U.S.domestic investment.
D)U.S.foreign portfolio investment and U.S.domestic investment.

Question 54

Net capital outflow

A)is always greater than net exports.
B)is always less than net exports.
C)is always equal to net exports.
D)could be any of the above.

Question 55

Paul,a U.S.citizen,builds a telescope factory in Israel.His expenditures

A)increase U.S.and Israeli net capital outflow.
B)increase U.S.net capital outflow, but decrease Israeli net capital outflow.
C)decrease U.S.net capital outflow, but increase Israeli net capital outflow.
D)None of the above is correct.

Question 56

Sue,a U.S.citizen,buys stock in an Italian automobile corporation.Her purchase counts as

A)investment for Sue and U.S.foreign direct investment.
B)investment for Sue and U.S.foreign portfolio investment.
C)saving for Sue and U.S.foreign direct investment.
D)saving for Sue and U.S.foreign portfolio investment.

Question 57

Which of the following is correct?

A)NCO + C = NX
B)NCO = NX
C)NX - NCO = C
D)NX + NCO = C

Question 58

If a Swiss watchmaker opens a factory in the United States,this is an example of Swiss

A)exports.
B)imports.
C)foreign portfolio investment.
D)foreign direct investment.

Question 59

Net exports measures the difference between a country's

A)income and expenditures.
B)sale of goods and services abroad and purchase of foreign goods and services.
C)sale of domestic assets abroad and purchase of foreign assets.
D)All of the above are correct.

Question 60

Greg,a U.S.citizen,opens an ice cream store in Bermuda.His expenditures are U.S.

A)foreign portfolio investment that increase U.S.net capital outflow.
B)foreign portfolio investment that decrease U.S.net capital outflow.
C)foreign direct investment that increase U.S.net capital outflow.
D)foreign direct investment that decrease U.S.net capital outflow.

Question 61

A U.S.firm buys cement mixers from China and pays for them with U.S.dollars.

A)The purchase of the cement mixers increases U.S.net exports and the payment with dollars increases U.S.net capital outflow.
B)The purchase of cement mixers increases U.S.net exports and the payment with dollars decreases U.S.net capital outflow.
C)The purchase of cement mixers decreases U.S.net exports and the payment with dollars increases U.S.net capital outflow.
D)The purchase of cement mixers decreases U.S.net exports and the payment with dollars decreases U.S.net capital outflow.

Question 62

U.S.based John Deere sells machinery to a South African country that pays with South African currency (the rand).

A)This increases U.S.net capital outflow because the U.S.acquires foreign assets.
B)This decreases U.S.net capital outflow because the U.S.acquires foreign assets.
C)This increases U.S.net capital outflow because the U.S.sells capital goods.
D)This decreases U.S.net capital outflow because the U.S.sells capital goods.

Question 63

A Japanese firm buys lumber from the United States and pays for it with yen.Other things the same,Japanese

A)net exports increase, and U.S.net capital outflow increases.
B)net exports increase, and U.S.net capital outflow decreases.
C)net exports decrease, and U.S.net capital outflow increases.
D)net exports decrease, and U.S.net capital outflow decreases.

Question 64

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.

Question 65

A U.S.firm opens a factory that produces camping equipment in Estonia

A)This increases U.S.net capital outflow and decreases Estonian net capital outflow.
B)This decreases U.S.net capital outflow and increases Estonian net capital outflow.
C)This increases only U.S.net capital outflow.
D)This increases only Estonian net capital outflow.

Question 66

Jill uses some euros to purchase a bond issued by a French vineyard.This exchange

A)increases U.S.net capital outflow by more than the value of the bond.
B)increases U.S.net capital outflow by the value of the bond.
C)does not change U.S.net capital outflow.
D)decreases U.S.net capital outflow.

Question 67

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

A)increase both U.S.net exports and U.S.net capital outflow.
B)decrease both U.S.net exports and U.S.net capital outflow.
C)increase U.S.net exports and do not affect U.S.net capital outflow.
D)None of the above is correct.

Question 68

A U.S.pharmacy buys drugs from a British company and pays for them with US dollars.This transaction

A)increases British net exports, and increases U.S.capital outflow.
B)increases British net exports, and decreases U.S.capital outflow.
C)decreases British net exports, and increases U.S.capital outflow.
D)decreases British net exports, and decreases U.S.capital outflow.

Question 69

A citizen of Saudi Arabia uses previously obtained U.S.dollars to purchase apples from the United States.This transaction

A)increases Saudi net capital outflow, and increases U.S.net exports.
B)increases Saudi net capital outflow, and decreases U.S.net exports.
C)decreases Saudi net capital outflow, and increases U.S.net exports.
D)decreases Saudi net capital outflow, and decreases U.S.net exports.

Question 70

A Mexican flour mill buys wheat from the United States and pays for it with pesos.Other things the same,Mexican

A)net exports increase, and U.S.net capital outflow increases.
B)net exports increase, and U.S.net capital outflow decreases.
C)net exports decrease, and U.S.net capital outflow increases.
D)net exports decrease, and U.S.net capital outflow decreases.

Question 71

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

Question 72

Bolivia buys railroad engines from a U.S.firm and pays for them with Bolivianos (Bolivian currency).By itself,this transaction

A)increases both U.S.net exports and U.S.net capital outflow.
B)decreases both U.S.net exports and U.S.net capital outflow.
C)increases U.S.net exports and does not affect U.S.net capital outflow.
D)None of the above is correct.

Question 73

Foreign citizens would be more likely to engage in foreign portfolio investment in the U.S.if,compared to their country's assets,U.S.assets had

A)a higher interest rate and a higher default risk.
B)a higher interest rate and a lower default risk.
C)a lower interest rate and higher default risk.
D)a lower interest rate and a lower default risk.

Question 74

A U.S.firm buys apples from New Zealand with U.S.currency.The New Zealand firm than uses this money to buy packaging equipment from a U.S.firm.Which of the following increases?

A)New Zealand net capital outflow and New Zealand net exports
B)only New Zealand net exports
C)only New Zealand net capital outflow
D)neither New Zealand net exports nor New Zealand capital outflow

Question 75

Tony,a U.S.citizen,uses some previously obtained Portuguese currency (escudo)to purchase a bond issued by a Portuguese company.This transaction

A)increases U.S.net capital outflow by more than the value of the bond.
B)increases U.S.net capital outflow by the value of the bond.
C)does not change U.S.net capital outflow.
D)decreases U.S.net capital outflow.

Question 76

A U.S.firm buys sardines from Morocco and pays for them with U.S.dollars.Other things the same,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.

Question 77

Stacey,a U.S.citizen,buys a bond issued by an Italian pasta manufacturer.

A)This is foreign direct investment.By itself it increases U.S.net capital outflow.
B)This is foreign direct investment.By itself it decreases U.S.net capital outflow.
C)This is foreign portfolio investment.By itself it increases U.S.net capital outflow.
D)This is foreign portfolio investment.By itself it decreases U.S.net capital outflow.

Question 78

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in the United States.Other things the same,

A)this will increases U.S.net capital outflow and decrease Ghanan net capital outflow.
B)this will decreases U.S.net capital outflow and increase Ghanan net capital outflow.
C)this will only increase U.S.net capital outflow.
D)this will only increase Ghanan net capital outflow.

Question 79

A Venezuelan firm purchases earth-moving equipment from a U.S.company and pays for it with Venezuelan currency.This transaction

A)increases U.S.net exports, and increases Venezuelan net capital outflow.
B)increases U.S.net exports, and decreases Venezuelan net capital outflow.
C)decreases U.S.net exports, and increases Venezuelan net capital outflow.
D)decreases U.S.net exports, and decreases Venezuelan net capital outflow.

Question 80

If a country has negative net capital outflows,then its net exports are

A)positive and its saving is larger than its domestic investment.
B)positive and its saving is smaller than its domestic investment.
C)negative and its saving is larger than its domestic investment.
D)negative and its saving is smaller than its domestic investment.