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economics

MacroEcon Exam 2 study (quiz #3)

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Posted on 
March 13th, 2023
Home economics MacroEcon Exam 2 study (quiz #3)
question
An "open" economy is one in which:
a. Level of output is fixed
b. Government spending exceeds revenue
c. The National Interest rate=world interest rate
d. There's trade in goods & services with the rest of the world
answer
D
question
Net Exports=GDP minus domestic spending on
a. all goods & services
b. all goods & services + foreign spending on domestic goods & services
c. domestic goods & services
d. domestic goods & services - foreign spending on domestic goods & services
answer
A
question
If domestic spending exceeds output, we _______ the differences--exports are ______
a. export; positive
b. import; negative
c. import; positive
d. export; negative
answer
B
question
In a small open economy, if exports equal $20 billion, imports equal $30 billion, and domestic national saving equals $25 billion, then net capital outflow equals
a. - $25 billion
b. - $10 billion
c. $10 billion
d. $25 billion
answer
B
question
In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion; then there's a ______ and net capital outflow equals ______
a. trade deficit; $100 billion
b. balanced trade; $0
c. trade surplus; $100 billion
d. balanced trade; $100 billion
answer
B
question
In a small open economy, if domestic investment exceeds domestic saving, then the extra investment will be financed by:
a. Borrowing from abroad
b. lending from abroad
c. the domestic government
d. the world bank
answer
A
question
The world interest rate:
a. is equal to the domestic interest rate
b. makes domestic saving = to domestic investment
c. is the interest rate charged on loans by the World Bank
d. is the interest rate prevailing in world financial markets
answer
D
question
A "small" economy is one in which the
a. level of output is fixed
b. price level is fixed
c. domestic interest rate equals the world interest rate
d. domestic saving is less than domestic investment
answer
C
question
Building an economic model based on the assumption of a small open economy is useful because:
a. it accurately describes the US economy
b. It's more complicated & realistic than a model base don assumption of a large open economy
c. this simplifying assumption can assist our understanding & intuition of open-economy macroeconomics
d. it's not possible to build models of large open economies
answer
C
question
In a small open economy, if the world interest rate is above the rate at which national savings equals domestic investment, then there will be a trade ____ and ____ net capital outflow.
a. surplus; negative
b. deficit; positive
c. surplus; positive
d. deficit; negative
answer
C
question
An increase in the trade surplus of a small open economy could be the result of:
a. a domestic tax cut
b. an increase in government spending
c. an increase in the world interest rate
d. implementation of an investment tax-credit provision
answer
C
question
Holding other factors constant, legislation to cut taxes in an open economy will:
a. increase national supply and lead to a trade surplus
b. increase national supply and lead to a trade deficit
c. reduce national saving and lead to a trade surplus
d. reduce national saving and lead to a trade deficit
answer
D
question
Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase:
a. investment in the small open economy
b. saving in the small open economy
c. exports by the small open economy
d. imports by the small open economy
answer
C
question
The nominal exchange rate between the US dollar & Japanese yen is the:
a. # of yen you can get for lending one dollar in Japan for one year
b. # of yen you can get for one dollar
c. price of US goods / price of Japanese goods
d. price of Japanese goods / price of US goods
answer
B
question
The real exchange rate:
a. measures how many Japanese yen one really gets for a US dollar
b. is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level
c. is equal to the nominal exchange rate multiplied by the foreign price level divided by domestic price level
d. price of a domestic car divided by the price of a foreign car
answer
B
question
If the real exchange rate is high, foreign goods:
a. & domestic goods are both relatively expensive
b. & domestic goods are both relatively cheap
c. are relatively expensive & domestic goods are relatively cheap
d. are relatively cheap & domestic goods are relatively expensive
answer
D
question
If 5 Swiss francs trade for $1, the US price level equals $1 per goods, & the Swiss price level equals 2 francs per good, then the real exchange rate between Swiss goods & US goods is _____ Swiss goods per US good
a. 0.5
b. 2.5
c. 5
d. 10
answer
B
question
When the real exchange rate rises:
a. exports will decrease but imports will be unaffected
b. imports will decrease but exports will be unaffected
c. exports will increase and imports will decrease
d. exports will decrease and imports will increase
answer
D
question
If a graph is drawn with net exports on the horizontal axis and the real exchange rate on the vertical axis, then the real exchange rate is determined by the intersection of the _____ net-exports schedule & the _____ line representing saving minus investment.
a. downward-sloping; vertical
b. upward-sloping; vertical
c. downward-sloping; upward-sloping
d. upward-sloping; downward-sloping
answer
A
question
In a small open economy, when the government reduces national saving, the equilibrium real-exchange rate:
a. rises and net exports fall
b. rises and net exports rise
c. fall and net exports rise
d. fall and net exports fall
answer
A
question
In a small open economy with perfect capital mobility, a reduction in the government's budget deficit ____ net exports & the real exchange rate _____.
a. increases; appreciates
b. increases; depreciates
c. decreases; appreciates
d. decreases; appreciates
answer
B
question
In small open economy, when foreign government's reduce national savings in their countries, the equilibrium real exchange rate:
a. rises & net exports fall
b. rise and net exports rise
c. falls and net exports fall
d. fall and net exports rise
answer
D
question
If the information technology boom increases investment demand in a small open economy, then net exports ___ & the real exchange rate ____
a. increases; appreciates
b. increases; depreciates
c. decreases; appreciates
d. decreases; depreciates
answer
C
question
In a small open economy, if the government adopts a policy that lowers import, then that policy
a. raises the real exchange rate & increases net exports
b. raises the real exchange rate & does NOT change net exports
c. raises the real exchange rate & decreases net exports
d. lowers the real exchange rate
answer
B
question
An effective policy to reduce a trade deficit in a small open economy would be to:
a. increase tariffs on imports
b. impose stricter quotas on imported goods
c. increase government spending
d. increase taxes
answer
D
question
The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate plus the
a. foreign inflation rate - domestic inflation rate
b. domestic inflation rate - foreign inflation rate
c. foreign exchange rate - domestic exchange rate
d. domestic interest rate - foreign interest rate
answer
A
question
If a country has a high rate of inflation relative to the US, the dollar will buy
a. less of the foreign currency over time
b. more of the foreign currency over time
c. the same amount of the foreign currency over time
d. an amount of foreign currency determined by the real exchange rate
answer
B
question
One consequence of high inflation is a(n)
a. appreciating nominal exchange rate
b. appreciating real exchange rate
c. depreciating nominal exchange rate
d. depreciating real exchange rate
answer
C
question
If the real exchange rate between the US and Japan remains unchanged, and the inflation rate in the US is 6% and the inflation rate in Japan is 3%, the:
a. dollar will appreciate by 3% against the yen
b. yen will appreciate by 3% against the dollar
c. yen will appreciate by 6% against the dollar
d. yen will appreciate by 9% against the dollar
answer
B
question
If the nominal exchange rate falls 10%, the domestic price level rises 4%, and the foreign price level rises 6%, the real exchange rate will fall:
a. 0%
b. 8%
c. 10%
d. 12%
answer
D
question
The currencies of countries w/ high inflation rates relative to the US have tended to ____, and the currencies of countries w/ low inflation rates relative to the US have tended to ____
a. appreciate; appreciate
b. appreciate; depreciate
c. depreciate; depreciate
d. depreciate; appreciate
answer
D
question
The idea that the amount of any currency that can buy a particular good in one country should be able to buy the same quantity of the same good anywhere in the world is called
a. the theory of the real exchange rate
b. equal currency conversion
c. Int'l monetary exchange
d. Purchasing-power parity
answer
D
question
According to the purchasing power-parity, if the dollar price of oil is higher in NY than in London, arbitrageurs will ____ oil in NY and ___ oil in London to drive ___ the price of oil in NY
a. buy; sell; up
b. buy; sell; down
c. sell; buy; up
d. sell; buy; down
answer
D
question
If purchasing-power parity held, if a Big Mac costs $2 in US and if 10 Mexican pesos trade for $1, then a Big Mac in Mexico should cost:
a. 2 pesos
b. 5 pesos
c. 10 pesos
d. 20 pesos
answer
D
question
In a large but open economy, when a fiscal expansion takes place, the interest rate goes up & some investment is crowded out, & the expansion also causes a trade:
a. surplus & a fall in the real exchange rate
b. deficit & a rise in the real exchange rate
c. surplus and a rise in the real exchange rate
d. deficit and a fall in the real exchange rate
answer
B
question
In a small open economy, if consumer confidence falls & consumers decide to save more, then the real exchange rate:
a. rise & net exports fall
b. & net exports both rise
c. falls & net exports rise
d. & net exports both fall
answer
C
question
Assume that a small open economy gets involved in a global war, in which its government purchases increase & the rest of the world's government purchases also increase. Then, for the small country, net exports:
a. will certainly decrease
b. will certainly increase
c. may increase or decrease
d. will remain the same
answer
C
question
Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit. Then a small country's real exchange rate:
a. will fall & its net exports will rise
b. will rise & its net exports will fall
c. & net exports will fall
d. & net exports will rise`
answer
A
question
If a dollar bought 1000 Chilean pesos 10 years ago and 1500 pesos now, and inflation for that period was 25% in the US and 100% in Chile, then:
a. the PPP was correct
b. traveling to Chile today costs about the same as it did 10 years ago
c. Traveling to Chile today is cheaper now than 10 years ago
d. traveling to Chile is more expensive now than 10 years ago
answer
D
question
If the nominal interest rates in the US and Canada are 8% and 12% respectively, real interest rates are the same, & real exchange rate is fixed, then the market's expectation about the # of CA dollars to be received for a US dollar a year from now will be that it will:
a. decrease 8%
b. decrease 4%
c. increase 4%
d. increase 5%
answer
C
1 of 40
question
An "open" economy is one in which:
a. Level of output is fixed
b. Government spending exceeds revenue
c. The National Interest rate=world interest rate
d. There's trade in goods & services with the rest of the world
answer
D
question
Net Exports=GDP minus domestic spending on
a. all goods & services
b. all goods & services + foreign spending on domestic goods & services
c. domestic goods & services
d. domestic goods & services - foreign spending on domestic goods & services
answer
A
question
If domestic spending exceeds output, we _______ the differences--exports are ______
a. export; positive
b. import; negative
c. import; positive
d. export; negative
answer
B
question
In a small open economy, if exports equal $20 billion, imports equal $30 billion, and domestic national saving equals $25 billion, then net capital outflow equals
a. - $25 billion
b. - $10 billion
c. $10 billion
d. $25 billion
answer
B
question
In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion; then there's a ______ and net capital outflow equals ______
a. trade deficit; $100 billion
b. balanced trade; $0
c. trade surplus; $100 billion
d. balanced trade; $100 billion
answer
B
question
In a small open economy, if domestic investment exceeds domestic saving, then the extra investment will be financed by:
a. Borrowing from abroad
b. lending from abroad
c. the domestic government
d. the world bank
answer
A
question
The world interest rate:
a. is equal to the domestic interest rate
b. makes domestic saving = to domestic investment
c. is the interest rate charged on loans by the World Bank
d. is the interest rate prevailing in world financial markets
answer
D
question
A "small" economy is one in which the
a. level of output is fixed
b. price level is fixed
c. domestic interest rate equals the world interest rate
d. domestic saving is less than domestic investment
answer
C
question
Building an economic model based on the assumption of a small open economy is useful because:
a. it accurately describes the US economy
b. It's more complicated & realistic than a model base don assumption of a large open economy
c. this simplifying assumption can assist our understanding & intuition of open-economy macroeconomics
d. it's not possible to build models of large open economies
answer
C
question
In a small open economy, if the world interest rate is above the rate at which national savings equals domestic investment, then there will be a trade ____ and ____ net capital outflow.
a. surplus; negative
b. deficit; positive
c. surplus; positive
d. deficit; negative
answer
C
question
An increase in the trade surplus of a small open economy could be the result of:
a. a domestic tax cut
b. an increase in government spending
c. an increase in the world interest rate
d. implementation of an investment tax-credit provision
answer
C
question
Holding other factors constant, legislation to cut taxes in an open economy will:
a. increase national supply and lead to a trade surplus
b. increase national supply and lead to a trade deficit
c. reduce national saving and lead to a trade surplus
d. reduce national saving and lead to a trade deficit
answer
D
question
Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase:
a. investment in the small open economy
b. saving in the small open economy
c. exports by the small open economy
d. imports by the small open economy
answer
C
question
The nominal exchange rate between the US dollar & Japanese yen is the:
a. # of yen you can get for lending one dollar in Japan for one year
b. # of yen you can get for one dollar
c. price of US goods / price of Japanese goods
d. price of Japanese goods / price of US goods
answer
B
question
The real exchange rate:
a. measures how many Japanese yen one really gets for a US dollar
b. is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level
c. is equal to the nominal exchange rate multiplied by the foreign price level divided by domestic price level
d. price of a domestic car divided by the price of a foreign car
answer
B
question
If the real exchange rate is high, foreign goods:
a. & domestic goods are both relatively expensive
b. & domestic goods are both relatively cheap
c. are relatively expensive & domestic goods are relatively cheap
d. are relatively cheap & domestic goods are relatively expensive
answer
D
question
If 5 Swiss francs trade for $1, the US price level equals $1 per goods, & the Swiss price level equals 2 francs per good, then the real exchange rate between Swiss goods & US goods is _____ Swiss goods per US good
a. 0.5
b. 2.5
c. 5
d. 10
answer
B
question
When the real exchange rate rises:
a. exports will decrease but imports will be unaffected
b. imports will decrease but exports will be unaffected
c. exports will increase and imports will decrease
d. exports will decrease and imports will increase
answer
D
question
If a graph is drawn with net exports on the horizontal axis and the real exchange rate on the vertical axis, then the real exchange rate is determined by the intersection of the _____ net-exports schedule & the _____ line representing saving minus investment.
a. downward-sloping; vertical
b. upward-sloping; vertical
c. downward-sloping; upward-sloping
d. upward-sloping; downward-sloping
answer
A
question
In a small open economy, when the government reduces national saving, the equilibrium real-exchange rate:
a. rises and net exports fall
b. rises and net exports rise
c. fall and net exports rise
d. fall and net exports fall
answer
A
question
In a small open economy with perfect capital mobility, a reduction in the government's budget deficit ____ net exports & the real exchange rate _____.
a. increases; appreciates
b. increases; depreciates
c. decreases; appreciates
d. decreases; appreciates
answer
B
question
In small open economy, when foreign government's reduce national savings in their countries, the equilibrium real exchange rate:
a. rises & net exports fall
b. rise and net exports rise
c. falls and net exports fall
d. fall and net exports rise
answer
D
question
If the information technology boom increases investment demand in a small open economy, then net exports ___ & the real exchange rate ____
a. increases; appreciates
b. increases; depreciates
c. decreases; appreciates
d. decreases; depreciates
answer
C
question
In a small open economy, if the government adopts a policy that lowers import, then that policy
a. raises the real exchange rate & increases net exports
b. raises the real exchange rate & does NOT change net exports
c. raises the real exchange rate & decreases net exports
d. lowers the real exchange rate
answer
B
question
An effective policy to reduce a trade deficit in a small open economy would be to:
a. increase tariffs on imports
b. impose stricter quotas on imported goods
c. increase government spending
d. increase taxes
answer
D
question
The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate plus the
a. foreign inflation rate - domestic inflation rate
b. domestic inflation rate - foreign inflation rate
c. foreign exchange rate - domestic exchange rate
d. domestic interest rate - foreign interest rate
answer
A
question
If a country has a high rate of inflation relative to the US, the dollar will buy
a. less of the foreign currency over time
b. more of the foreign currency over time
c. the same amount of the foreign currency over time
d. an amount of foreign currency determined by the real exchange rate
answer
B
question
One consequence of high inflation is a(n)
a. appreciating nominal exchange rate
b. appreciating real exchange rate
c. depreciating nominal exchange rate
d. depreciating real exchange rate
answer
C
question
If the real exchange rate between the US and Japan remains unchanged, and the inflation rate in the US is 6% and the inflation rate in Japan is 3%, the:
a. dollar will appreciate by 3% against the yen
b. yen will appreciate by 3% against the dollar
c. yen will appreciate by 6% against the dollar
d. yen will appreciate by 9% against the dollar
answer
B
question
If the nominal exchange rate falls 10%, the domestic price level rises 4%, and the foreign price level rises 6%, the real exchange rate will fall:
a. 0%
b. 8%
c. 10%
d. 12%
answer
D
question
The currencies of countries w/ high inflation rates relative to the US have tended to ____, and the currencies of countries w/ low inflation rates relative to the US have tended to ____
a. appreciate; appreciate
b. appreciate; depreciate
c. depreciate; depreciate
d. depreciate; appreciate
answer
D
question
The idea that the amount of any currency that can buy a particular good in one country should be able to buy the same quantity of the same good anywhere in the world is called
a. the theory of the real exchange rate
b. equal currency conversion
c. Int'l monetary exchange
d. Purchasing-power parity
answer
D
question
According to the purchasing power-parity, if the dollar price of oil is higher in NY than in London, arbitrageurs will ____ oil in NY and ___ oil in London to drive ___ the price of oil in NY
a. buy; sell; up
b. buy; sell; down
c. sell; buy; up
d. sell; buy; down
answer
D
question
If purchasing-power parity held, if a Big Mac costs $2 in US and if 10 Mexican pesos trade for $1, then a Big Mac in Mexico should cost:
a. 2 pesos
b. 5 pesos
c. 10 pesos
d. 20 pesos
answer
D
question
In a large but open economy, when a fiscal expansion takes place, the interest rate goes up & some investment is crowded out, & the expansion also causes a trade:
a. surplus & a fall in the real exchange rate
b. deficit & a rise in the real exchange rate
c. surplus and a rise in the real exchange rate
d. deficit and a fall in the real exchange rate
answer
B
question
In a small open economy, if consumer confidence falls & consumers decide to save more, then the real exchange rate:
a. rise & net exports fall
b. & net exports both rise
c. falls & net exports rise
d. & net exports both fall
answer
C
question
Assume that a small open economy gets involved in a global war, in which its government purchases increase & the rest of the world's government purchases also increase. Then, for the small country, net exports:
a. will certainly decrease
b. will certainly increase
c. may increase or decrease
d. will remain the same
answer
C
question
Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit. Then a small country's real exchange rate:
a. will fall & its net exports will rise
b. will rise & its net exports will fall
c. & net exports will fall
d. & net exports will rise`
answer
A
question
If a dollar bought 1000 Chilean pesos 10 years ago and 1500 pesos now, and inflation for that period was 25% in the US and 100% in Chile, then:
a. the PPP was correct
b. traveling to Chile today costs about the same as it did 10 years ago
c. Traveling to Chile today is cheaper now than 10 years ago
d. traveling to Chile is more expensive now than 10 years ago
answer
D
question
If the nominal interest rates in the US and Canada are 8% and 12% respectively, real interest rates are the same, & real exchange rate is fixed, then the market's expectation about the # of CA dollars to be received for a US dollar a year from now will be that it will:
a. decrease 8%
b. decrease 4%
c. increase 4%
d. increase 5%
answer
C

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