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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. 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
2. 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.
3. If the U.S. real exchange rate appreciates relative to the French franc, U.S. exports to France
4. Which of the following is incorrect?
5. U.S. imports account for about what percentage of GDP?
6. Brazil buys railroad engines from a U.S. firm and pays for them with bolivianos (Bolivian currency). By itself this transaction
7. While making investment decisions, investors
8. Brad, a U.S. resident, builds and operates a boxing gym in Thailand. The purchase represents
9. Which of the following is a true statement?
10. Net exports of a country are the value of goods
11. 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
12. Which of the following would be inconsistent with purchasing-power parity?
13. If a country has business opportunities that are relatively attractive compared to other countries, we would expect it to have
14. A U.S. firm opens a factory that produces camping equipment in Albania, by itself
15. 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
16. 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
17. 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
18. 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:
19. Suppose the dollar depreciates relative to the British pound. We know that:
20. Suppose that the dollar buys more coffee in Kenya than in Brazil. Traders could make a profit by buying coffee in
21. Which of the following is true?
22. Which of the following equations is correct?
23. If P = domestic prices, P* = foreign prices, and e is the exchange rate, which of the following is implied by purchasing-power parity?
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. The difference between savings in an open and closed economy equals

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