1.If the United States imposes an import quota on clothing, then U.S. exports:
a. increase, U.S. imports increase, and U.S. net exports will not change.
b. increase, U.S. imports decrease, and U.S. net exports will increase.
c. decrease, U.S. imports increase, and U.S. net exports decrease.
d. decrease, U.S. imports decrease, and U.S. net exports will not change.
2.In the open-economy macroeconomic model, with other things remaining the same, when a U.S. resident imports a foreign good, our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.
a. True
b. False
3.In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange:
a. depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
b. depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
c. and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate.
d. and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.
4.Trade policies:
a. alter the trade balance because they alter imports of the country that implemented them.
b. alter the trade balance because they alter net capital outflow of the country that implemented them.
c. do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
d. do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.
5.Clear Brooke Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. Its sales:
a. decrease U.S. exports, but increase U.S. net exports.
b. decrease both U.S. exports and U.S. net exports.
c. increase both U.S. exports and U.S. net exports.
d. increase U.S. exports, but decrease U.S. net exports.
6.Jason plans to buy shrimp in Florida and sell them in Ames, Iowa where the price is higher. Jason plans to engage in arbitrage.
a. True
b. False
7.If interest rates rose more in Germany than in the U.S. and other things remained the same, then:
a. U.S. citizens would buy more German bonds and German citizens would buy more U.S. bonds.
b. U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds.
c. U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds.
d. U.S. citizens would buy fewer German bonds and German citizens would buy fewer U.S. bonds.
8.When a country imposes an import quota, its:
a. net exports rise and its real exchange rate appreciates.
b. net exports rise and its real exchange rate depreciates.
c. net exports fall and its real exchange rate depreciates.
d. None of the choices apply.
9.If the government of Kenya implemented a policy that decreased national saving, its real exchange rate would:
a. depreciate and Kenyan net exports would rise.
b. depreciate and Kenyan net exports would fall.
c. appreciate and Kenyan net exports would rise.
d. appreciate and Kenyan net exports would fall.
10.According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.
a. True
b. False
11.Which of the following is correct?
a. NCO + C = NX
b. NCO = NX
c. NX - NCO = C
d. NX + NCO = C
12.If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be buying assets abroad.
a. True
b. False
13.When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.
a. True
b. False
14.When making investment decisions, investors:
a. compare the real interest rates offered on different bonds.
b. compare the nominal, but not the real, interest rates offered on different bonds.
c. purchase the highest-priced bond available.
d. All of the choices apply.
15.Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases:
a. the first action by itself raises U.S. net exports; the second action by itself raises U.S. net capital outflow.
b. the first action by itself raises U.S. net exports; the second action by itself lowers U.S. net capital outflow.
c. the first action by itself lowers U.S. net exports; the second action by itself raises U.S. net capital outflow.
d. the first action by itself lowers U.S. net exports; the second action by itself lowers U.S. net capital outflow.
16.An increase in the budget deficit causes domestic interest rates:
a. and net capital outflow to rise.
b. to rise and net capital outflow to fall.
c. to fall and net capital outflow to rise.
d. and net capital outflow to fall.
17.In which of the following situations must national saving rise?
a. Both domestic investment and net capital outflow increase.
b. Domestic investment increases and net capital outflow decreases.
c. Domestic investment decreases and net capital outflow increases.
d. Both domestic investment and net capital outflow decrease.
18.If saving is greater than domestic investment, then:
a. there is a trade deficit and Y > C + I + G.
b. there is a trade deficit and Y c. there is a trade surplus and Y > C + I + G.
d. there is a trade surplus and Y 19.If Japan's national saving exceeds its domestic investment, then Japan has:
a. positive net capital outflows and negative net exports.
b. positive net capital outflows and positive exports.
c. negative net capital outflows and negative net exports.
d. negative net capital outflows and positive net exports.
20.An import quote imposed by Egypt would reduce Egyptian imports, but have no impact on Egyptian exports.
a. True
b. False