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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. Suppose the dollar depreciates relative to the British pound. We know that:
2. If a U.S. shirtmaker purchases cotton from Egypt, U.S. net exports
3. 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.
4. A U.S. firm opens a factory that produces camping equipment in Albania, by itself
5. 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
6. Brad, a U.S. resident, builds and operates a boxing gym in Thailand. The purchase represents
7. Suppose that the dollar buys more coffee in Kenya than in Brazil. Traders could make a profit by buying coffee in
8. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
9. 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.
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. 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:
12. 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
13. Which of the following is incorrect?
14. 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
15. 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
16. Which of the following would be consistent with a trade balance of $5 billion?
17. If a resident of the United States buys stock in a Japanese corporation, this is an example of U.S.
18. U.S. imports account for about what percentage of GDP?
19. Who is worse-off when countries trade?
20. 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,
21. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
22. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
23. 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
24. 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
25. If a country has business opportunities that are relatively attractive compared to other countries, we would expect it to have

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