Deck 13: Open-Economy Macroeconomics: Basic Concepts

Question 1

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

Answer 1

D

Question 2

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

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

Answer 2

B

Question 3

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

A) a U.S. import and a Mexican export
B) a U.S. export and a Mexican import
C) an export for both the U.S. and Mexico
D) an import for both Mexico and the U.S.

Answer 3

B

Question 4

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country 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 5

If Saudi Arabia had negative net exports last year, then it

A) sold more abroad than it purchased abroad and had a trade surplus.
B) sold more abroad than it purchased abroad and had 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 6

Which types) of economies interact with other economies?

A) only closed economies
B) only open economies
C) closed economies and open economies
D) neither closed nor open economies

Question 7

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.

Question 8

One year a country has positive net exports. The next year it still has positive but larger net exports

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

Question 9

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

A) a U.S. import and a Canadian export
B) a U.S. export and a Canadian import
C) an export for both the U.S. and Canada
D) an import for both Canada and the U.S.

Question 10

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.

Question 11

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

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

Question 12

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

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

Question 13

The value of the goods and services Australia purchases from the U.S. are less than the value of goods and services the U.S. purchases from Australia. The U.S. has

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

Question 14

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

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

Question 15

If France had positive net exports last year, then it

A) sold more abroad than it purchased abroad and had a trade surplus.
B) sold more abroad than it purchased abroad and had 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 16

Which of the following both reduce net exports?

A) exports rise, imports rise
B) exports rise, imports fall
C) exports fall, imports rise
D) exports fall, imports fall

Question 17

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

A) Sweden's
B) the U.S.'s
C) Sweden's and the U.S.'s
D) neither Sweden's nor the U.S.'s

Question 18

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 19

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

A) Spain's
B) the U.S.'s
C) Spain's and the U.S.'s
D) neither Spain's nor the U.S.'s

Question 20

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 21

A U.S. firm sells diesel locomotives to a German railroad. Other things the same, this sale

A) increases U.S. net exports and decreases German net exports.
B) decreases U.S. net exports and increases German net exports.
C) increases U.S. and German net exports.
D) decreases U.S. and German net exports.

Question 22

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

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

Question 23

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These 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 24

Table 31-1

Refer to Table 31-1. What are Bolivia's imports?

A) $60 billion
B) $35 billion
C) $40 billion
D) None of the above are correct.

Question 25

If Norway sold more goods and services abroad than it purchased from abroad, then it had

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

Question 26

Peru has exports of $31.5 million and imports of $30 million. Peru

A) sells more overseas then it buys from overseas; it has a trade deficit.
B) sells more overseas then it buys from overseas; it has a trade surplus.
C) buys more from overseas then it sells overseas; it has a trade deficit.
D) buys more from overseas then it sells overseas; it has a trade surplus.

Question 27

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

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.

Question 28

If U.S. exports are $150 billion and U.S. imports are $100 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 29

Egypt has exports of $500 million and imports of $750 million. Egypt

A) sells more overseas then it buys from overseas; it has a trade deficit.
B) sells more overseas then it buys from overseas; it has a trade surplus.
C) buys more from overseas then it sells overseas; it has a trade deficit.
D) buys more from overseas then it sells overseas; it has a trade surplus.

Question 30

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

A) $170 million
B) $80 million
C) $10 million
D) -$10 million

Question 31

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

A) $48 billion of imports and $40 billion of exports.
B) $48 billion of exports and $40 billion of imports.
C) $40 billion of imports and $32 billion of exports.
D) $40 billion of exports and $32 billion of imports.

Question 32

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

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

Question 33

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

A) The U.S. has a trade surplus of $350 billion.
B) The U.S. has a trade surplus of $50 billion.
C) The U.S. has a trade deficit of $350 billion.
D) The U.S. has a trade deficit of $50 billion.

Question 34

Table 31-1

Refer to Table 31-1. What are Bolivia's exports?

A) $60 billion
B) $35 billion
C) $10 billion
D) None of the above are correct.

Question 35

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

A) increases U.S. imports and decreases U.S. net exports.
B) increases U.S. imports and increases U.S. net exports.
C) increases U.S. exports and decreases U.S. net exports.
D) increases U.S. exports and increases U.S. net exports.

Question 36

Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales

A) are an export of the U.S. and increase U.S. net exports.
B) are an export of the U.S. and decrease U.S. net exports.
C) are an import of the U.S. and increase U.S. net exports.
D) are an import of the U.S. and decrease U.S. net exports.

Question 37

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

A) sells more overseas then it buys from overseas; it has a trade deficit.
B) sells more overseas then it buys from overseas; it has a trade surplus.
C) buys more from overseas then it sells overseas; it has a trade deficit.
D) buys more from overseas then it sells overseas; it has a trade surplus.

Question 38

Table 31-1

Refer to Table 31-1. What are Bolivia's net exports?

A) $30 billion
B) $5 billion
C) -$5 billion
D) -$25 billion

Question 39

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

A) exports of $3 billion and a trade surplus of $1 billion.
B) exports of $3 billion and a trade deficit of $1 billion.
C) exports of $2 billion and a trade surplus of $1 billion.
D) exports of $2 billion and a trade deficit of $1 billion.

Question 40

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

A) $80 and $100
B) $-20 and $20
C) $20 and -$20
D) None of the above is correct.

Question 41

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 42

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

Question 43

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

A) exports and net exports fall.
B) exports fall and net exports rise.
C) imports and net exports fall.
D) imports fall and net exports rise.

Question 44

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

A) $0 billion.
B) $20 billion.
C) $40 billion.
D) $60 billion.

Question 45

U.S. international trade has

A) decreased because of a decrease in the trade of goods with a high value per pound.
B) decreased because of an increase in the trade of goods with a high value per pound.
C) increased because of a decrease in trade of goods with a high value per pound.
D) increased because of an increase in trade of goods with a high value per pound.

Question 46

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

A) $37 billion
B) $3 billion
C) -$3 billion
D) -$37 billion

Question 47

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

A) $0
B) $10 billion.
C) -$10 billion.
D) -$20 billion.

Question 48

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

A) decrease U.S. net export and Swiss net exports.
B) decrease U.S. net exports and increase Swiss net exports.
C) increase U.S. and Swiss net exports.
D) increase U.S. net exports and decrease Swiss net exports.

Question 49

Net capital outflow equals

A) the value of domestic assets purchased by foreigners.
B) the value of foreign assets purchased by domestic residents.
C) the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents.
D) the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Question 50

Which of the following is correct? Since 1950

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 51

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 52

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

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

Question 53

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

A) increases U.S. exports and so increases the U.S. trade balance.
B) increases U.S. exports and so decreases the U.S. trade balance.
C) increases U.S. imports and so increases the U.S. trade balance.
D) increases U.S. imports and so decreases the U.S. trade balance.

Question 54

An increase in U.S. sales of movies to other countries raises U.S.

A) exports and so raises the U.S. trade balance.
B) exports and so reduces the U.S. trade balance.
C) imports and so raises the U.S. trade balance.
D) imports and so reduces the U.S. trade balance.

Question 55

Which of the following is correct?

A) U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade deficit.
B) U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade surplus.
C) U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade deficit.
D) U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade surplus.

Question 56

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

A) imports and net exports rise.
B) imports rise and net exports fall.
C) exports and net exports rise.
D) exports rise and net exports fall.

Question 57

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 58

Lydia, a citizen of Italy, produces scarves and purses 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 Italian net exports.
B) decrease U.S. net exports and have no effect on Italian net exports.
C) increase U.S. net exports and decrease Italian net exports.
D) decrease U.S. net exports and increase Italian net exports.

Question 59

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

A) $110 billion
B) $90 billion.
C) $70 billion.
D) $60 billion.

Question 60

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

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 61

Net capital outflow equals the purchase of

A) foreign assets by domestic residents.
B) domestic assets by foreign residents.
C) domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D) foreign assets by domestic residents - the purchase of domestic assets by foreign residents

Question 62

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

A) -.3 trillion euros, so it must have a trade deficit.
B) -.3 trillion euros, so it must have a trade surplus.
C) .3 trillion euros, so it must have a trade deficit.
D) .3 trillion euros, so it must have a trade surplus.

Question 63

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

A) A Greek company opens a cheese factory in the U.S.
B) A German mutual fund buys stock issued by a U.S. corporation.
C) A U.S. beverage company opens a bottling plant in Russia.
D) A U.S. bank buys bonds issued by an Argentinean company.

Question 64

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) Nancy, a U.S. citizen, buys bonds issued by a Japanese bank.
D) Dustin, a U.S. citizen, opens a country-western tavern in New Zealand.

Question 65

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign 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.

Question 66

The purchase of U.S. government bonds by Egyptians is an example of

A) U.S. imports.
B) U.S. exports.
C) foreign portfolio investment by Egyptians.
D) foreign direct investment by Egyptians.

Question 67

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

A) A U.S. legal office opens a branch office in Holland.
B) Erica, a U.S. resident, buys bonds issued by the Swiss government.
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 68

Net capital outflow measures the imbalance between the amount of

A) foreign assets held by domestic residents and domestic assets held by foreign residents.
B) foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C) 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 69

Net capital outflow is defined as 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 70

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 71

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

A) $100 billion and the U.S. has a trade surplus.
B) $100 billion and the U.S has a trade deficit.
C) -$100 billion and the U.S. has a trade surplus.
D) -$100 billion and the U.S. has a trade deficit.

Question 72

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

A) Carl's
B) Carly's
C) both Carl's and Carly's
D) neither Carl's nor Carly's

Question 73

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

A) A U.S. based mutual fund buys stock in Eastern European companies.
B) A U.S. citizen builds and operates a coffee shop in the Netherlands.
C) A Swiss bank buys a U.S. government bond.
D) A German tractor factory opens a plant in Waterloo, Iowa.

Question 74

Suppose that more British decide to vacation in the U.S. and that the British 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 75

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

A) A Chinese company opens a restaurant in the U.S.
B) An Australian bank buys stocks issued by a U.S. corporation.
C) A U.S. bank buys bonds issued by an Australian corporation.
D) A U.S. company opens an auto parts factory in Canada.

Question 76

Which of the following is an example of 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 restaurant chain opens new restaurants in India.
D) A U.S. citizen buys stock in companies located in Japan.

Question 77

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

A) Disney builds a new amusement park near Barcelona, Spain.
B) A U.S. citizen buys bonds issued by the British government.
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 78

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

A) U.S. net capital outflow is $300 billion; capital is flowing into the U.S.
B) U.S. net capital outflow is $300 billion; capital is flowing out of the U.S.
C) U.S. net capital outflow is -$300 billion; capital is flowing into the U.S.
D) U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Question 79

Net capital outflow equals the difference between a country's

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

Question 80

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

A) Jen's and Alica's
B) Jen's but not Alicia's
C) Alicia's but not Jen's
D) Neither Anthony's nor Tom's.