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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 real return from operating factories in Ghana decreases relative to the real rate of return in the United States. Other things the same,
2. Brad, a U.S. resident, builds and operates a boxing gym in Thailand. The purchase represents
3. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
4. Which of the following does purchasing-power parity imply?
5. 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.
6. 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
7. 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
8. Which of the following equations is correct?
9. Suppose the dollar depreciates relative to the British pound. We know that:
10. If the exchange rate changes from 30 Thai bhat per dollar to 45 Thai bhat per dollar, the dollar has
11. 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
12. Who is worse-off when countries trade?
13. U.S. imports account for about what percentage of GDP?
14. While making investment decisions, investors
15. Net exports of a country are the value of goods
16. 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?
17. 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
18. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
19. International trade is of major importance for understanding
20. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
21. Which of the following would be inconsistent with purchasing-power parity?
22. When a country’s central bank increases the money supply, a unit of money
23. 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?
24. In which of the following situations must national saving rise?
25. Which of the following is a true statement?

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