Question 1

A U.S.firm called EcoWind produces windmills for households to generate electricity.It uses 25,000 recently obtained pesos to buy copper from a mining company in Argentina.As a result of this exchange,by how much,if at all,and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?

Accepted Answer

The answer of A U.S.firm called EcoWind produces windmills for...

Question 2

A country recently had a trade deficit of 350 billion euros.Its residents also purchased 400 billion euros of foreign assets.What was the value of this country's assets purchased by foreigners?

Accepted Answer

The answer of A country recently had a trade deficit...

Question 3

Last year a country had $700 billion of saving and $900 of investment.This year it had $1000 of saving and $800 of investment.By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

Accepted Answer

The answer of Last year a country had $700 billion...

Question 4

While vacationing in Agra,India,the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees.If the exchange rate was previously 55 rupees per dollar,what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

Accepted Answer

The answer of While vacationing in Agra,India,the price of one...

Question 5

In 2011 the U.S.began with a trade deficit.During the year exports rose by more than imports.What should have happened to the U.S.trade deficit?

Accepted Answer

The answer of In 2011 the U.S.began with a trade...

Question 6

If a country's exports were 500 billion pesos and its imports were 300 billion pesos,what would its trade balance be?

Accepted Answer

The answer of If a country's exports were 500 billion...

Question 7

A pair of jeans cost $25 in the U.S.and 1600 dinar in Algeria.If the nominal exchange rate is 75 dinar per U.S.dollar,then the real exchange rate is
A) more than 1,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
B) more than 1,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.
C) less than 1,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
D) less than 1,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.

Accepted Answer

The real exchange rate is the price of a good in one country relative to the price of the same good in another country, adjusted for the exchange rate. In this case, the real exchange rate is the price of a pair of jeans in Algeria relative to the price of a pair of jeans in the U.S., adjusted for the exchange rate.The price of a pair of jeans in Algeria is 1600 dinar. The price of a pair of jeans in the U.S. is $25. The nominal exchange rate is 75 dinar per U.S. dollar.The real exchange rate is:```Real exchange rate = (Price of jeans in Algeria / Price of jeans in U.S.) * (Nominal exchange rate)``````Real exchange rate = (1600 dinar / $25) * (75 dinar / $1)``````Real exchange rate = 4.8```The real exchange rate is more than 1, so a profit could be made by buying jeans in Algeria and selling them in the U.S.

Question 8

Other things the same,according to purchasing power parity,if over the next few years Mexico has a higher money supply growth rate than the U.S. ,then
A) prices in Mexico will rise by a larger percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
B) prices in Mexico will rise by larger percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.
C) prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will appreciate against the Mexican peso.
D) prices in Mexico will rise by a smaller percentage than in the U.S.So,the dollar will depreciate against the Mexican peso.

Accepted Answer

The answer of Other things the same,according to purchasing power...

Question 9

In the U.S.a delivery van costs $30,000.In Uruguay the same delivery van costs 720,000 pesos.The nominal exchange rate is 20 pesos per dollar.
A.Find the real exchange rate.Show your work.
B.In terms of dollars where is the television cheaper?

Accepted Answer

The answer of In the U.S.a delivery van costs $30,000.In...

Question 10

In the U.S.a television costs $400.In South Africa the same television costs 3000 rand (the currency of South Africa).The nominal exchange rate is 8 rand per dollar.
A.Find the real exchange rate.Show your work.
B.In terms of dollars where is the television cheapest?

Accepted Answer

The answer of In the U.S.a television costs $400.In South...

Question 11

Last year residents of Country A purchased $600 billion of foreign assets.Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A.What was the value of Country A's imports?

Accepted Answer

The answer of Last year residents of Country A purchased...

Question 12

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of Azerbaijan)for $300,000 a bank in Azerbaijan was holding.It uses the $300,000 to buy farm equipment from a U.S.company.The U.S.company deposits half of these funds in a U.S.bank and exchanges the other half for euros from a bank in London.
As a result of these transactions,by how much,if at all,and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?

Accepted Answer

The answer of A farm equipment retailer in Azerbaijan exchanges...

Question 13

A U.S.mutual fund uses $1 million to buy yen from a Japanese bank.It then uses these yen to buy stocks in a Japanese electronics firm.The Japanese electronic firm then exchanges the $1 million dollars of yen for dollars from a U.S.bank.It uses these dollars to buy equipment manufactured by a company located in the U.S.
As a result of these exchanges,by how much,if at all,and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?

Accepted Answer

The answer of A U.S.mutual fund uses $1 million to...

Question 14

While on vacation in Europe you notice that a tablet computer is selling for 600 euros in France and for 533 pounds in Britain.You also know that the exchange rates are .75 euros per dollar and .65 British pounds per dollar.Where is the number of dollars you would pay for the tablet lower? How many dollars would you have to pay to buy it there?

Accepted Answer

The answer of While on vacation in Europe you notice...

Question 15

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods.Foreigners purchased $300 billion dollars of country A's assets.What was the value of country A's exports?

Accepted Answer

The answer of Last year residents of country A purchased...

Question 16

As measured by the amount of trade it does,has the U.S.economy become more internationalized? Provide two reasons for this change.

Accepted Answer

The answer of As measured by the amount of trade...

Question 17

Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

The answer of Last year a country had $700 billion...

Question 18

The Norwegian government uses $500,000 of previously obtained U.S.dollars to buy $500,000 of police cars from a U.S.company.
As a result of this exchange,by how much,if at all,and in which direction did:
A.U.S.net exports change?
B.U.S.net capital outflow change?

Accepted Answer

The answer of The Norwegian government uses $500,000 of previously...

Question 19

During 2011,the price level in the U.S.rose at a faster rate than the price level in Japan.Other things the same,according to purchasing power parity,this difference in inflation rates should have caused
A) the nominal exchange rate of the dollar to appreciate relative to the yen.
B) the real exchange rate of the dollar to appreciate relative to the yen.
C) the nominal exchange rate of the dollar to depreciate relative to the yen.
D) the real exchange rate of the dollar to depreciate relative to the yen.

Accepted Answer

According to the purchasing-power parity theory, inflation rates affect exchange rates. When the price level increases, the currency of the country with higher inflation becomes less valuable, causing the nominal exchange rate to depreciate. Therefore, the nominal exchange rate of the dollar should depreciate relative to the yen in this scenario.

Question 20

A U.S.mutual fund buys stock issued by a corporation in Colombia.A U.S.grocery store chain builds and manages a new warehouse in Honduras.Which one(s)of these is foreign direct investment? Which one(s)would be taken into account when computing U.S.net capital outflows?

Accepted Answer

The answer of A U.S.mutual fund buys stock issued by...

Quiz 31: Open-Economy Macroeconomic Models

A country recently had a trade deficit of 350 billion euros.Its residents also purchased 400 billion euros of foreign assets.What was the value of this country's assets purchased by foreigners?

Last year a country had $700 billion of saving and $900 of investment.This year it had $1000 of saving and $800 of investment.By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

In 2011 the U.S.began with a trade deficit.During the year exports rose by more than imports.What should have happened to the U.S.trade deficit?

If a country's exports were 500 billion pesos and its imports were 300 billion pesos,what would its trade balance be?

A pair of jeans cost $25 in the U.S.and 1600 dinar in Algeria.If the nominal exchange rate is 75 dinar per U.S.dollar,then the real exchange rate is

Other things the same,according to purchasing power parity,if over the next few years Mexico has a higher money supply growth rate than the U.S. ,then

In the U.S.a delivery van costs $30,000.In Uruguay the same delivery van costs 720,000 pesos.The nominal exchange rate is 20 pesos per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the television cheaper?

In the U.S.a television costs $400.In South Africa the same television costs 3000 rand (the currency of South Africa).The nominal exchange rate is 8 rand per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the television cheapest?

Last year residents of Country A purchased $600 billion of foreign assets.Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A.What was the value of Country A's imports?

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods.Foreigners purchased $300 billion dollars of country A's assets.What was the value of country A's exports?

As measured by the amount of trade it does,has the U.S.economy become more internationalized? Provide two reasons for this change.

Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

The Norwegian government uses $500,000 of previously obtained U.S.dollars to buy $500,000 of police cars from a U.S.company. As a result of this exchange,by how much,if at all,and in which direction did: A.U.S.net exports change? B.U.S.net capital outflow change?

During 2011,the price level in the U.S.rose at a faster rate than the price level in Japan.Other things the same,according to purchasing power parity,this difference in inflation rates should have caused

A U.S.mutual fund buys stock issued by a corporation in Colombia.A U.S.grocery store chain builds and manages a new warehouse in Honduras.Which one(s)of these is foreign direct investment? Which one(s)would be taken into account when computing U.S.net capital outflows?