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Economics 101 Practice Test: Open-Economy Macroeconomics
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Open-economy macroeconomics is the study of an economy that interacts with other countries through various methods.  In an open economy, trading activity takes place between all countries. This means that it allows the buying and selling of goods and securities from neighboring countries.  Here are some things that an open economy can do: Trade in commodities and services, Purchase financial assets, Pick where to locate manufacturing plants, and Pick where to work.  An open economy interacts with other countries in two ways: It buys and sells goods and services in world product... Show more
Economics 101 Practice Test: Open-Economy Macroeconomics
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25 Questions

1. Consider the following two actions. 1. Kohl’s, a U.S. department store chain, builds new stores in Sweden. 2. Rudy, a U.S. citizen, buys newly issued bonds from Campmore.com who uses the money to build additional warehouse space in the United States.
2. Which of the following is true?
3. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
4. Who is worse-off when countries trade?
5. Which of the following is a true statement?
6. Which of the following would be consistent with a trade balance of $5 billion?
7. Paul, a U.S. citizen, opens a textbook company in Brazil. His expenditures
8. Suppose the nominal exchange rate is 100, the domestic price index is 50, and the foreign price index is 10. The real exchange rate is:
9. Suppose the dollar depreciates relative to the British pound. We know that:
10. The exchange rate is about 200 Kazakhstan tenge per dollar. According to purchasing power parity this exchange rate would rise if the price level in
11. In the United States a three-pound can of coffee costs about $6. Suppose the exchange rate is about 50 Belgian francs per dollar and that a three-pound can of coffee in Belgium costs about 400 francs. What is the real exchange rate?
12. A Swiss firm opens a watch factory in the United States.
13. After 1980, U.S. Net Foreign Investment fell dramatically, but the U.S. economy did not experience a similar fall in domestic investment. Hence, saving in the United States must
14. International trade is of major importance for understanding
15. Suppose that the real return from operating factories in Ghana decreases relative to the real rate of return in the United States. Other things the same,
16. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
17. When a country’s central bank decreases the money supply, its price level
18. If a resident of the United States buys stock in a Japanese corporation, this is an example of U.S.
19. In which of the following situations must national saving rise?
20. Which of the following is incorrect?
21. When a country’s central bank increases the money supply, a unit of money
22. In 1999 Morocco exported $5.9 billion of goods and services and imported $8.4 billion. Morocco had a trade balance of about
23. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
24. Suppose that the dollar buys more coffee in Kenya than in Brazil. Traders could make a profit by buying coffee in
25. A U.S. computer maker sells computers to a German firm. The U.S. company uses all of the revenues from this sale to purchase automobiles from German firms. These transactions

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