Question 1

When the value of one currency decreases relative to the value of another currency, the currency with decreasing value has experienced:

Accepted Answer

A)   exchange-rate appreciation.
B)   exchange-rate depreciation.
C)   interest-rate appreciation.
D)   interest-rate depreciation.E) B) and C)
F) A) and C)

Question 2

In the forex market, the demand for dollars will decrease if:

Accepted Answer

A)   foreigners wish to buy U.S. goods.
B)   foreigners wish to buy U.S. financial assets.
C)   interest rates are lower in the United States relative to interest rates abroad.
D)   interest rates are higher in the United States relative to interest rates abroad.E) B) and D)
F) B) and C)

Question 3

The gap between savings and investment is almost exactly:

Accepted Answer

A)   the government deficit.
B)   the balance of payments.
C)   direct foreign investment.
D)   the trade balance.E) A) and B)
F) A) and C)

Question 4

In the market for loanable funds in an open economy, the demand for loanable funds comes from:

Accepted Answer

A)   domestic investment and international investment.
B)   consumption of major assets.
C)   domestic savings.
D)   export purchases.E) A) and B)
F) B) and C)

Question 5

When the U.S. dollar appreciates against a foreign currency, U.S. goods become _______ expensive for people abroad and U.S. net exports _______.

Accepted Answer

A)   more; decrease
B)   less; increase
C)   more; increase
D)   less; decreaseE) A) and B)
F) None of the above

Question 6

When Diego, who lives in Michigan, buys stock in Ford Motor Company, U.S. net capital outflow:

Accepted Answer

A)   increases.
B)   is unaffected.
C)   decreases.
D)   becomes zero.E) None of the above
F) A) and C)

Question 7

When interest rates in the United States decline, we can expect capital inflows to _______ and capital outflows to _______.

Accepted Answer

A)   decrease; decrease
B)   increase; increase
C)   decrease; increase
D)   increase; decreaseE) A) and D)
F) C) and D)

Question 8

Suppose the cost of a typical basket of goods is 100dollar in the United States and 800 pesos in Mexico. If the nominal exchange rate is 25 pesos per dollar, what is the real exchange rate?

Accepted Answer

A)   0.33
B)   1.33
C)   1.50
D)   3.13E) A) and C)
F) B) and D)

Question 9

In the market for loanable funds in an open economy, the supply of loanable funds:

Accepted Answer

A)   can come from domestic or foreign savers.
B)   is equal to national savings.
C)   is equal to private savings.
D)   is equal to public savings.E) B) and C)
F) A) and D)

Question 10

When the dollar appreciates against the euro, the euro has:

Accepted Answer

A)   appreciated against the dollar.
B)   depreciated against the dollar.
C)   increased in value relative to all other currencies.
D)   decreased in value relative to all other currencies.E) A) and C)
F) None of the above

Question 11

If a government with a fixed exchange rate chooses to increase the rate, its currency:

Accepted Answer

A)   will be revalued.
B)   will be devalued.
C)   will depreciate.
D)   will appreciate.E) A) and B)
F) None of the above

Question 12

If confidence in the open economy of the United States suddenly increases, and more people want to invest in U.S. assets, the _______ curve for loanable funds will shift to the _______.

Accepted Answer

A)   demand; left
B)   demand; right
C)   supply; left
D)   supply; rightE) A) and C)
F) A) and D)

Question 13

When multiple countries attempt to boost their economies by lowering the value of their currencies, _______ occurs.

Accepted Answer

A)   a financial crisis
B)   competitive devaluation
C)   a speculative attack
D)   a fixed floatE) All of the above
F) A) and B)

Question 14

Foreign direct investment can help businesses:

Accepted Answer

A)   cut costs of production.
B)   reduce overall risk relative to financial investments available at home.
C)   increase profit without having to pay taxes on the earnings.
D)   improve a country's trade deficit.E) None of the above
F) All of the above

Question 15

Who is most likely to benefit when the dollar appreciates against the euro?

Accepted Answer

A)   U.S. buyers of foreign goods
B)   Foreign buyers of U.S. goods
C)   U.S. buyers of U.S. goods
D)   Foreign buyers of foreign goodsE) A) and B)
F) A) and C)

Question 16

The 1997 Asian financial crisis was brought about by:

Accepted Answer

A)   debt crisis.
B)   exchange rate crisis.
C)   excessive loss of national resources.
D)   None of these are true.E) A) and B)
F) A) and C)

Question 17

A fixed exchange rate:

Accepted Answer

A)   has a value that is set by the government.
B)   allows for more predictability and stability.
C)   helps attract foreign investment and gives businesses that depend on overseas trade more confidence to invest.
D)   All of these are true.E) B) and C)
F) All of the above

Question 18

Champlain College, which is based in Vermont, runs a satellite campus in Dublin, Ireland. This is an example of:

Accepted Answer

A)   foreign portfolio investment.
B)   foreign direct investment.
C)   foreign import investment.
D)   foreign export investment.E) A) and B)
F) All of the above

Question 19

Foreign direct investment occurs when:

Accepted Answer

A)   a firm runs part of its operation abroad or invests in a foreign company.
B)   investors buy foreign financial assets like stocks, bonds, or government securities.
C)   foreign sources purchase domestic government debt.
D)   a foreign government directly invests in a firm.E) A) and C)
F) All of the above

Question 20

What is the equation for total expenditure in an open economy?

Accepted Answer

A)   Im − Ex = C + I
B)   Y = C + I + G
C)   Y = C + I + G + NX
D)   Y + G = C + I − NXE) A) and B)
F) All of the above

Exam 18: Open-Marketmacroeconomics

When interest rates in the United States decline, we can expect capital inflows to _______ and capital outflows to _______.

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Suppose the cost of a typical basket of goods is 100dollar in the United States and 800 pesos in Mexico. If the nominal exchange rate is 25 pesos per dollar, what is the real exchange rate?

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Foreign direct investment occurs when:

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If confidence in the open economy of the United States suddenly increases, and more people want to invest in U.S. assets, the _______ curve for loanable funds will shift to the _______.

Correct AnswerverifiedShow Answer

When multiple countries attempt to boost their economies by lowering the value of their currencies, _______ occurs.

Correct AnswerverifiedShow Answer

In the market for loanable funds in an open economy, the supply of loanable funds:

Correct AnswerverifiedShow Answer

In the forex market, the demand for dollars will decrease if:

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A fixed exchange rate:

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When the dollar appreciates against the euro, the euro has:

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In the market for loanable funds in an open economy, the demand for loanable funds comes from:

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What is the equation for total expenditure in an open economy?

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Foreign direct investment can help businesses:

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Champlain College, which is based in Vermont, runs a satellite campus in Dublin, Ireland. This is an example of:

Correct AnswerverifiedShow Answer

If a government with a fixed exchange rate chooses to increase the rate, its currency:

Correct AnswerverifiedShow Answer

When the value of one currency decreases relative to the value of another currency, the currency with decreasing value has experienced:

Correct AnswerverifiedShow Answer

The gap between savings and investment is almost exactly:

Correct AnswerverifiedShow Answer

When Diego, who lives in Michigan, buys stock in Ford Motor Company, U.S. net capital outflow:

Correct AnswerverifiedShow Answer

When the U.S. dollar appreciates against a foreign currency, U.S. goods become _______ expensive for people abroad and U.S. net exports _______.

Correct AnswerverifiedShow Answer

Who is most likely to benefit when the dollar appreciates against the euro?

Correct AnswerverifiedShow Answer

The 1997 Asian financial crisis was brought about by:

Correct AnswerverifiedShow Answer

When interest rates in the United States decline, we can expect capital inflows to _ and capital outflows to _.

Correct Answer
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If confidence in the open economy of the United States suddenly increases, and more people want to invest in U.S. assets, the _ curve for loanable funds will shift to the _.

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When the U.S. dollar appreciates against a foreign currency, U.S. goods become _ expensive for people abroad and U.S. net exports _.

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