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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 the exchange rate is 50 Bangladesh taka per dollar, that a bushel of rice costs 200 taka in Bangladesh and $3 in the United States. Then the real exchange rate is
2. Which of the following is a true statement?
3. A Swiss firm opens a watch factory in the United States.
4. If a country has business opportunities that are relatively attractive compared to other countries, we would expect it to have
5. Which of the following would be inconsistent with purchasing-power parity?
6. Peter, a Canadian citizen, sells several hundred cases of smoked salmon to a restaurant chain in the United States. By itself this sale
7. During the twenty years or so before this text was written the United States had
8. A U.S. firm opens a factory that produces camping equipment in Albania, by itself
9. 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?
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. In which of the following situations must national saving rise?
12. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
13. The difference between savings in an open and closed economy equals
14. Brad, a U.S. resident, builds and operates a boxing gym in Thailand. The purchase represents
15. Which of the following is incorrect?
16. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
17. Paul, a U.S. citizen, opens a textbook company in Brazil. His expenditures
18. When a country’s central bank increases the money supply, a unit of money
19. If a U.S. shirtmaker purchases cotton from Egypt, U.S. net exports
20. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
21. 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?
22. If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, the real exchange rate is defined as
23. International trade is of major importance for understanding
24. In 1999 Morocco exported $5.9 billion of goods and services and imported $8.4 billion. Morocco had a trade balance of about
25. While making investment decisions, investors

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