question
A bilateral trade balance means
answer
the difference between the value of imports and exports between two trading nations
question
The bilateral trade balance:
answer
may overstate the gap in imports and exports between the United States and China because some of the manufacturing inputs used do not originate in China
question
What is the best measure of a country's openness to international trade?
answer
the ratio of its exports plus imports to its GDP
question
Which of the following statements refer to a vertical FDI?
answer
GM opens a plant in India
question
.
answer
.
question
The difference between the total value of a country's exports and the total value of its imports is defined as the nation's
answer
trade balance
question
Which of the following statements explain(s) why Asian countries trade?
1. they have low wages
2. in some Asian countries the workers are very productive
3. they have an abundant supply of raw materials
1. they have low wages
2. in some Asian countries the workers are very productive
3. they have an abundant supply of raw materials
answer
1. they have very low wages, &
2. in some Asian countries the workers are very productive
2. in some Asian countries the workers are very productive
question
The US trade-to-GDP ratio is
answer
smaller than that of Germany
question
..
answer
..
question
According to Ricardo,
answer
all countries can gain from trade if they export goods in which they have a comparative advantage
question
For a given domestic and foreign price level, an increase in the nominal exchange rate _________ the real exchange rate
answer
increases
question
For a given nominal exchange rate and foreign price level, a decrease in the domestic price level ______ the real exchange rate
answer
decreases
question
For a given nominal exchange rate and domestic price level, a decrease in the foreign price level ______ the real exchange rate
answer
increases
question
Based on the purchasing power parity theory, in the long run, currencies of countries with significant inflation will tend to:
answer
depreciate
question
The purchasing power parity theory is a reasonably good explanation for nominal exchange rate determination:
answer
in the long run
question
Net capital outflows equal
answer
capital outflows minus capital inflows
question
If the United States has a $300 billion net capital inflow, then there must be a
answer
trade deficit of $300 billion
question
An economy with a trade deficit must also have
answer
positive net capital inflows
question
holding constant risk and real returns available abroad, lower domestic real interest rates _______ capital inflows, ________ capital outflows, and ________ net capital inflows
answer
decrease; increase; decrease
question
At each value of the domestic interest rate, deceases in the riskiness of domestic assets _______ capital inflows, and ________ net capital inflows
answer
increase; decrease; increase
question
In an open economy with a given level of real interest rates and risk, an increase in real interest rates abroad will ______ capital inflows and _______ the equilibrium domestic real interest rate
answer
decrease; increase
question
In an open economy, an increase in the government's budget deficit will ________ the domestic real interest rate and _______ the level of capital investment int eh country, holding other factors constant.
answer
increase; decrease
question
In an open economy, if domestic citizens decide to save more, then the domestic real interest rate will _______ and the level of capital investment in the country will _______, holding other factors constant.
answer
decrease; increase
question
Net exports will tend to be low when the real exchange rate______.
answer
is high
question
For a given domestic and foreign price level, a decrease in the nominal exchange rate _______ the real exchange rate.
answer
decreases
question
For a given nominal exchange rate and foreign price level, an increase in the domestic price level ________ the real exchange rate
answer
increases
question
The purchasing power parity theory is not a good explanation of nominal exchange rate determination in the short-run because:
answer
many goods and services are not traded internationally and not all internationally-traded goods are standardized
question
The PPP theory would be most useful in predicting:
answer
long-run changes in the exchange rate for a country that mainly produces heavily-traded standardized goods
question
If the United States has a $300 billion trade deficit, then there must be:
answer
net capital inflows of $300 billion
question
An economy with a trade surplus must also have:
answer
positive net capital outflows
question
Holding constant risk and the real returns available abroad, higher domestic real interest rate _______ capital inflows, _______ capital outflows, and __________ net capital inflows
answer
increase; decrease; increase
question
At each value of the domestic interest rate, increases in the riskiness of domestic assets _______ capital inflows, _________ capital outflows, and ______ net capital inflows
answer
decrease; increase; decrease
question
In an open economy, an increase in capital inflows ______ the equilibrium domestic real interest rate and _______ the quantity of domestic investment
answer
decreases; increases
question
In an open economy with given level of real interest rates and risk, a decrease in real interest rates abroad will _________ capital inflows and _______ the equilibrium domestic real interest rate
answer
increase; decrease
question
In an open economy, a decrease in the government's budget will ________ the domestic real interest rate and _________ the level of capital investment in the country, holding other factors constant.
answer
decrease; increase
question
Which of the following equations is equivalent to the equation S - NX = I?
answer
S + KI = I
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