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Economics 101 Practice Test: Open-Economy Macroeconomics
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Avg score: 37% • Most missed: “The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of go…”
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. Who is worse-off when countries trade?
2. Suppose the dollar depreciates relative to the British pound. We know that:
3. The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?
4. If inflation in other countries is higher than inflation in the United States over the next few months and exchange rates are given in terms of how much foreign currency a dollar buys and how many foreign goods U.S. goods buy, according to purchasing-power parity we should expect to see
5. When a country’s central bank decreases the money supply, its price level
6. While making investment decisions, investors
7. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
8. If a resident of the United States buys stock in a Japanese corporation, this is an example of U.S.
9. Brad, a U.S. resident, builds and operates a boxing gym in Thailand. The purchase represents
10. In late 1999 you could purchase about 325 Greek drachma (Greek currency) for a dollar. In late 2000 you could purchase about 400 drachma for a dollar. These exchange rates are given in
11. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
12. Which of the following is true?
13. Suppose that a ton of coal costs 1500 British pounds in the UK and $2000 in the United States. If the nominal exchange rate is .75 British pounds per dollar, the real exchange rate is
14. In January 2000 the exchange rate was 5.6 new kwanza (Angolan currency) per dollar. In January 2001 it was 6 new kwanza per dollar.
15. In 1999 Morocco exported $5.9 billion of goods and services and imported $8.4 billion. Morocco had a trade balance of about
16. If a U.S. shirtmaker purchases cotton from Egypt, U.S. net exports
17. Which of the following would be consistent with a trade balance of $5 billion?
18. U.S. imports account for about what percentage of GDP?
19. 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?
20. Paul, a U.S. citizen, opens a textbook company in Brazil. His expenditures
21. If a country has business opportunities that are relatively attractive compared to other countries, we would expect it to have
22. Which of the following is a true statement?
23. On behalf of your firm, you make frequent trips to Liberia. You notice that you always have to pay fewer dollars to get the local currency to have your hair styled than you have to pay for similar styling in the United States. This is
24. 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
25. A Swiss firm opens a watch factory in the United States.

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