Question 1

Macroeconomic variables that describe an open economy's interactions in world markets include exchange rates, the trade balance and imports.

Accepted Answer

A) True 
 B)False

Question 2

When the money supply decreases:

Accepted Answer

A)  the nominal exchange rate appreciates
B)  the nominal exchange rate depreciates
C)  the real exchange rate appreciates
D)  the nominal exchange rate is unaffectedE) None of the above
F) A) and B)

Question 3

Purchasing power parity is the theory that nominal exchange rates are determined as necessary for the law of one price to hold.

Accepted Answer

A) True 
 B)False

Question 4

An economy with a current account deficit must also have

Accepted Answer

A)  a current account deficit
B)  a budget surplus
C)  a budget deficit
D)  positive net capital inflowsE) A) and C)
F) B) and C)

Question 5

Net exports of a country are:

Accepted Answer

A)  the same as exports
B)  balanced on merchandise trade
C)  the trade gap
D)  an international equilibriumE) None of the above
F) All of the above

Question 6

The law which states that the price of identical goods should be the same across national boundaries when converted to a common currency value through the exchange rate is called the::

Accepted Answer

A)  law of one price
B)  law of demand
C)  law of supply
D)  law of pegged currenciesE) All of the above
F) A) and D)

Question 7

Factors that might influence a country's exports, imports and net exports include the cost of transporting goods from country to country, and government international trade policies.

Accepted Answer

A) True 
 B)False

Question 8

The nominal exchange rate is the:

Accepted Answer

A)  nominal interest rate in one country divided by the nominal interest rate in the other country
B)  price of a good in one country divided by the price of the same good in another country
C)  rate at which a person can trade the currency of one country for the currency of another
D)  all of the aboveE) A) and B)
F) None of the above

Question 9

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners is known as net foreign investment.

Accepted Answer

A) True 
 B)False

Question 10

How can one derive the identity that saving equals the sum of domestic investment and net foreign investment from the national income accounting identity?

Accepted Answer

Starting from the national income accoun...

Question 11

Appreciation of a currency will lead to:

Accepted Answer

A)  an increase in net exports
B)  a reduction in net exports
C)  no change in net exports
D)  any of the above is equally likelyE) B) and D)
F) A) and B)

Question 12

Ceteris paribus, an increase in the level of imports desired by a nation's households leads to a decrease in GDP.

Accepted Answer

A) True 
 B)False

Question 13

Saving in the Australian economy shows up as investment in the Australian economy or as the Australian net foreign investment.

Accepted Answer

A) True 
 B)False

Question 14

Group the following according to whether they may affect the demand, supply or both the demand and supply of $A in the foreign exchange market?
a.a fall in the incomes of Australians
b.a fall in the inflation rate in Australia relative to the rates in other countries with which Australia trades
c.a fall in interest rates in Australia
d.an increase in the income of citizens of the United Kingdom

Accepted Answer

a.supply increases
b.both dema...

Question 15

The nominal exchange rate is the real exchange rate adjusted for the:

Accepted Answer

A)  price level in the domestic country
B)  price levels in the two countries
C)  income level in the domestic country
D)  income levels in the two countries
E)  price level in the foreign countryF) B) and D)
G) All of the above

Question 16

A trade surplus occurs when:

Accepted Answer

A)  exports exceed imports
B)  imports exceed exports
C)  tariffs exceed quotas
D)  quotas exceed tariffsE) A) and B)
F) All of the above

Question 17

The real exchange rate depends on the nominal exchange rate and on the price difference between two countries measured in the local currencies.

Accepted Answer

A) True 
 B)False

Question 18

Purchasing-power parity describes the forces that determine:

Accepted Answer

A)  exchange rates in the short run
B)  exchange rates in the long run
C)  prices in the long run
D)  prices in the short runE) All of the above
F) C) and D)

Question 19

The real exchange rate is the:

Accepted Answer

A)  domestic price of goods
B)  value of net exports
C)  rate at which a person can trade the currency of one country for the currency of another
D)  rate at which domestic goods are traded for foreign goodsE) C) and D)
F) All of the above

Question 20

International trade is based on the:

Accepted Answer

A)  theory of absolute advantage
B)  theory of resource advantage
C)  theory of comparative advantage
D)  theory of military advantageE) A) and B)
F) B) and C)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

The nominal exchange rate is the real exchange rate adjusted for the:

Correct Answer
verified

Factors that might influence a country's exports, imports and net exports include the cost of transporting goods from country to country, and government international trade policies.

Correct Answer
verified

How can one derive the identity that saving equals the sum of domestic investment and net foreign investment from the national income accounting identity?

Correct Answer
verified
Starting from the national income accoun...
View Answer

When the money supply decreases:

Correct Answer
verified

The law which states that the price of identical goods should be the same across national boundaries when converted to a common currency value through the exchange rate is called the::

Correct Answer
verified

Purchasing-power parity describes the forces that determine:

Correct Answer
verified

The nominal exchange rate is the:

Correct Answer
verified

Appreciation of a currency will lead to:

Correct Answer
verified

International trade is based on the:

Correct Answer
verified

Correct Answer
verified
a.supply increases
b.both dema...
View Answer

The real exchange rate depends on the nominal exchange rate and on the price difference between two countries measured in the local currencies.

Correct Answer
verified

Purchasing power parity is the theory that nominal exchange rates are determined as necessary for the law of one price to hold.

Correct Answer
verified

Saving in the Australian economy shows up as investment in the Australian economy or as the Australian net foreign investment.

Correct Answer
verified

Macroeconomic variables that describe an open economy's interactions in world markets include exchange rates, the trade balance and imports.

Correct Answer
verified

The real exchange rate is the:

Correct Answer
verified

An economy with a current account deficit must also have

Correct Answer
verified

Ceteris paribus, an increase in the level of imports desired by a nation's households leads to a decrease in GDP.

Correct Answer
verified

A trade surplus occurs when:

Correct Answer
verified

Net exports of a country are:

Correct Answer
verified

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners is known as net foreign investment.

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

The nominal exchange rate is the real exchange rate adjusted for the:

Correct AnswerverifiedShow Answer

Factors that might influence a country's exports, imports and net exports include the cost of transporting goods from country to country, and government international trade policies.

Correct AnswerverifiedShow Answer

How can one derive the identity that saving equals the sum of domestic investment and net foreign investment from the national income accounting identity?

Correct AnswerverifiedStarting from the national income accoun...View AnswerShow Answer

When the money supply decreases:

Correct AnswerverifiedShow Answer

The law which states that the price of identical goods should be the same across national boundaries when converted to a common currency value through the exchange rate is called the::

Correct AnswerverifiedShow Answer

Purchasing-power parity describes the forces that determine:

Correct AnswerverifiedShow Answer

The nominal exchange rate is the:

Correct AnswerverifiedShow Answer

Appreciation of a currency will lead to:

Correct AnswerverifiedShow Answer

International trade is based on the:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.supply increasesb.both dema...View AnswerShow Answer

The real exchange rate depends on the nominal exchange rate and on the price difference between two countries measured in the local currencies.

Correct AnswerverifiedShow Answer

Purchasing power parity is the theory that nominal exchange rates are determined as necessary for the law of one price to hold.

Correct AnswerverifiedShow Answer

Saving in the Australian economy shows up as investment in the Australian economy or as the Australian net foreign investment.

Correct AnswerverifiedShow Answer

Macroeconomic variables that describe an open economy's interactions in world markets include exchange rates, the trade balance and imports.

Correct AnswerverifiedShow Answer

The real exchange rate is the:

Correct AnswerverifiedShow Answer

An economy with a current account deficit must also have

Correct AnswerverifiedShow Answer

Ceteris paribus, an increase in the level of imports desired by a nation's households leads to a decrease in GDP.

Correct AnswerverifiedShow Answer

A trade surplus occurs when:

Correct AnswerverifiedShow Answer

Net exports of a country are:

Correct AnswerverifiedShow Answer

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners is known as net foreign investment.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Starting from the national income accoun...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.supply increases
b.both dema...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified