Question 1

If US goods cost one dollar for each euro German goods costs, the real exchange rate would be computed as how many German goods per U.S. goods?
A) one
B) the price of the U.S. goods
C) the amount of euros that can be bought with one U.S. dollar
D) None of the above is correct.

Accepted Answer

The answer of If US goods cost one dollar for...

Question 2

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?
A) one
B) the number of dollars needed to buy U.S. goods divided by the number of rupees needed to buy Indian goods
C) the number of rupees needed to buy Indian goods divided by the number of dollars needed to buy U.S. goods
D) None of the above is correct.

Accepted Answer

The answer of If it took as many dollars to...

Question 3

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports
A) increase and U.S. net capital outflow decreases.
B) decrease and U.S. net capital outflow increases.
C) and U.S. net capital outflow both increase.
D) and U.S. net capital outflow both decrease.

Accepted Answer

The answer of Other things the same, if the U.S....

Question 4

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?
A) .64 Canadian dollars per U.S. dollar
B) 1 Canadian dollar per U.S. dollar
C) 1.56 Canadian dollars per U.S. dollar
D) None of the above is correct.

Accepted Answer

The real exchange rate is determined by the relative price of goods in different countries, while the nominal exchange rate is the price of one currency in terms of another. We are given that the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook, which can be rewritten as 4/5 of a U.S. textbook per Canadian textbook. Therefore, the relative price of a U.S. textbook in terms of a Canadian textbook is 4/5. To find the nominal exchange rate, we divide the price of a Canadian textbook by the relative price of a U.S. textbook in Canadian dollars:

Nominal exchange rate = (Price of Canadian textbook) / (Relative price of U.S. textbook in Canadian dollars)
Nominal exchange rate = 120 / (4/5 × 150) = 1 Canadian dollar per U.S. dollar.

Therefore, the best choice is B.

Question 5

When the yen gets "stronger" relative to the dollar,
A) the U.S. trade deficit with Japan will rise.
B) the U.S. trade deficit with Japan will fall.
C) the U.S. trade deficit with Japan will be unchanged.
D) None of the above necessarily happens.

Accepted Answer

When the yen gets stronger relative to the dollar, it means that it takes fewer yen to purchase one dollar. This makes Japanese goods and services relatively more expensive for American consumers, which tends to lower American imports from Japan and increase American exports to Japan, resulting in a decline in the U.S. trade deficit with Japan.

Question 6

If the U.S. real exchange rate appreciates, U.S. exports to Europe
A) and European exports to the U.S. both rise.
B) and European exports to the U.S. both fall.
C) rise, and European exports to the U.S. fall.
D) fall, and European exports to the U.S. rise.

Accepted Answer

The answer of If the U.S. real exchange rate appreciates,...

Question 7

Consider an identical basket of goods in both the U.S. and India. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with India falls?
A) the price of the basket of goods rises in the U.S. and India.
B) the price of the basket of goods rises in the U.S. and falls in India.
C) the price of the basket of goods falls in the U.S. and rises in India.
D) the price of the basket of goods falls in both India and the U.S..

Accepted Answer

The real exchange rate between two countries is calculated as the ratio of the price level of a basket of goods in the two countries. Therefore, if the price of the basket of goods falls in the U.S. and rises in India, the U.S. real exchange rate with India will fall. This is because a decrease in the U.S. price level relative to the Indian price level means that U.S. goods have become relatively cheaper, leading to an increase in U.S. exports to India and a decrease in U.S. imports from India, which in turn causes the U.S. real exchange rate to fall.

Question 8

If US goods cost 1/5 of one dollar for every kroner Danish goods cost, the real exchange rate would be computed as how many Danish goods per U.S. goods?
A) five
B) one fifth the price of the U.S. goods
C) the amount of kroner that can be bought with 1/5 of one dollar.
D) None of the above is correct.

Accepted Answer

The answer of If US goods cost 1/5 of one...

Question 9

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $5.00 U.S., and a gallon of Canadian gas costs 8 Canadian dollars. What is the nominal exchange rate?
A) .80 Canadian dollars per U.S. dollar
B) 1.25 Canadian dollars per U.S. dollar
C) 1.60 Canadian dollars per U.S. dollar
D) None of the above is correct.

Accepted Answer

The answer of Suppose the real exchange rate is 1/2...

Question 10

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?
A) 15/4
B) 5/3
C) 3/5
D) 4/15

Accepted Answer

The answer of If the real exchange rate for coal...

Question 11

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs
A) 1,250 pesos per pound.
B) 800 pesos per pound
C) 250 pesos per pound.
D) None of the above is correct.

Accepted Answer

First, we need to calculate the real exchange rate:

Real exchange rate = (nominal exchange rate * U.S. price) / Chilean price
Real exchange rate = (500 pesos/$ * $2/lb) / (5/4 lbs of Chilean beef/$1/lb) = 1000/5 = 200

This means that 1 pound of Chilean beef has the same purchasing power as 200/100 = 2 pounds of U.S. beef.

If 1 pound of U.S. beef costs $2, then 2 pounds of U.S. beef would cost $4.

To find the price of 1 pound of Chilean beef, we need to convert $4 into pesos using the nominal exchange rate:

4 USD * 500 pesos/USD = 2000 pesos

Finally, we need to divide the price in pesos by the real exchange rate:

2000 pesos / 2 = 1000 pesos per pound of Chilean beef

Therefore, the correct answer is B) 800 pesos per pound.

Question 12

Suppose that the real exchange rate between the United States and Vietnam is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Vietnamese goods a basket of U.S. goods buys)?
A) an increase in the quantity of Vietnamese currency that can be purchased with a dollar
B) an increase in the price of U.S. baskets of goods
C) a decrease in the price in Vietnamese currency of Vietnamese goods
D) All of the above are correct.

Accepted Answer

The answer of Suppose that the real exchange rate between...

Question 13

Which of the following could be a consequence of a depreciation of the U.S. real exchange rate?
A) John, a French citizen, decides that Iowa pork has become too expensive and cancels his order.
B) Nick, a U.S. citizen, decides that the trip to Nepal he's been thinking about is now made affordable by the depreciation.
C) Roberta, a U.S. citizen, decides to import fewer windshield wipers for her auto parts company.
D) All of the above are correct.

Accepted Answer

The answer of Which of the following could be a...

Question 14

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate
A) depreciates which causes U.S. net exports to increase.
B) depreciates which causes U.S. net exports to decrease.
C) appreciates which causes U.S. net exports to increase.
D) appreciates, which causes U.S. net exports to decrease.

Accepted Answer

The answer of If the number of Japanese yen a...

Question 15

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy
A) fewer domestic goods and fewer foreign goods.
B) more domestic goods and fewer foreign goods.
C) fewer domestic goods and more foreign goods.
D) more domestic goods and more foreign goods.

Accepted Answer

When the U.S. real exchange rate appreciates, foreign goods become relatively cheaper compared to domestic goods. Thus, U.S. consumers are more likely to buy more foreign goods and fewer domestic goods leading to a decrease in the demand for domestic goods and an increase in the demand for foreign goods.

Question 16

If the U.S. real exchange rate appreciates, U.S. exports
A) increase and U.S. imports decrease.
B) decrease and U.S. imports increase.
C) and U.S. imports both increase.
D) and U.S. imports both decrease.

Accepted Answer

The answer of If the U.S. real exchange rate appreciates,...

Question 17

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys)?
A) an increase in the number of Kenyan shillings that can be purchased with a dollar
B) an increase in the price of U.S. baskets of goods
C) a decrease in the price in Kenyan shillings of Kenyan goods
D) All of the above are correct.

Accepted Answer

The answer of Suppose that the real exchange rate between...

Question 18

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate?
A) a decrease in the quantity of Kenyan currency that can be purchased with a dollar
B) a decrease in the price of U.S. baskets of goods
C) a decrease in the price in Kenyan currency of Kenyan goods.
D) None of the above is correct.

Accepted Answer

A decrease in the price of Kenyan goods means that Kenyan goods have become relatively less expensive compared to U.S. goods. Thus, the demand for Kenyan goods will increase, leading to an increase in the demand for Kenyan currency to buy those goods. As a result, the value of the Kenyan currency will appreciate, increasing the real exchange rate.

Question 19

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would
A) appreciate which by itself would make U.S. net exports fall.
B) appreciate which by itself would make U.S. net exports rise.
C) depreciate which by itself would make U.S. net exports fall.
D) depreciate which by itself would make U.S. net exports rise.

Accepted Answer

The answer of Suppose that the nominal exchange rate is...

Question 20

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy
A) fewer domestic goods and fewer foreign goods.
B) more domestic goods and fewer foreign goods.
C) fewer domestic goods and more foreign goods.
D) more domestic goods and more foreign goods.

Accepted Answer

A depreciation of the U.S. real exchange rate makes foreign goods more expensive relative to domestic goods, leading U.S. consumers to buy more domestic goods and fewer foreign goods.

Quiz 13: Open-Economy Macroeconomic Models

If US goods cost one dollar for each euro German goods costs, the real exchange rate would be computed as how many German goods per U.S. goods?

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

When the yen gets "stronger" relative to the dollar,

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Consider an identical basket of goods in both the U.S. and India. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with India falls?

If US goods cost 1/5 of one dollar for every kroner Danish goods cost, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $5.00 U.S., and a gallon of Canadian gas costs 8 Canadian dollars. What is the nominal exchange rate?

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs

Suppose that the real exchange rate between the United States and Vietnam is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Vietnamese goods a basket of U.S. goods buys) ?

Which of the following could be a consequence of a depreciation of the U.S. real exchange rate?

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

If the U.S. real exchange rate appreciates, U.S. exports

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys) ?

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate?

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy