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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. 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
2. 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
3. Who is worse-off when countries trade?
4. Which of the following does purchasing-power parity imply?
5. A depreciation of the U.S. real exchange rate induces U.S. consumers to buy
6. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
7. Suppose the dollar depreciates relative to the British pound. We know that:
8. 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.
9. If a resident of the United States buys stock in a Japanese corporation, this is an example of U.S.
10. In 1999 Morocco exported $5.9 billion of goods and services and imported $8.4 billion. Morocco had a trade balance of about
11. Which of the following is true?
12. Which of the following is incorrect?
13. 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.
14. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
15. If a country has business opportunities that are relatively attractive compared to other countries, we would expect it to have
16. 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
17. Net exports of a country are the value of goods
18. 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,
19. Which of the following would be inconsistent with purchasing-power parity?
20. Which of the following is correct?
21. The difference between savings in an open and closed economy equals
22. 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?
23. If the exchange rate changes from 30 Thai bhat per dollar to 45 Thai bhat per dollar, the dollar has
24. When a country’s central bank increases the money supply, a unit of money
25. Suppose that the dollar buys more coffee in Kenya than in Brazil. Traders could make a profit by buying coffee in

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