Question 1

The amount of money in an economy that people can invest is equal to:

Accepted Answer

A)   their income.
B)   the value of their output.
C)   the value of consumption after gains from trade have been made.
D)   their savings.E) A) and D)
F) All of the above

Question 2

IBM buys treasury bonds from the UK as part of its investment portfolio. This is an example of:

Accepted Answer

A)   foreign direct investment.
B)   foreign portfolio investment.
C)   importing.
D)   exporting.E) A) and D)
F) B) and C)

Question 3

When the value of a currency experiences exchange-rate appreciation, its value:

Accepted Answer

A)   increases relative to the value of another currency.
B)   can buy more goods and services in its own country.
C)   decreases relative to the value of another currency.
D)   has experienced inflation relative to other currency.E) A) and D)
F) C) and D)

Question 4

Which of the following is foreign portfolio investment sometimes called?

Accepted Answer

A)   Hot investment
B)   Quick sale
C)   Hot money
D)   Wasteful investmentE) None of the above
F) B) and D)

Question 5

In the forex, the demand for dollars will decrease if:

Accepted Answer

A)   foreigners wish to buy U.S. goods.
B)   foreigners wish to buy U.S. financial assets.
C)   interest rates are lower in the U.S. relative to interest rates abroad.
D)   interest rates are higher in the U.S. relative to interest rates abroad.E) B) and C)
F) None of the above

Question 6

If Bob in Texas buys bonbons made in France for $25, and the French chocolatier buys stock in IBM for $25, then the French net exports:

Accepted Answer

A)   and net capital outflow are both zero.
B)   and net capital outflow both equal $25.
C)   is zero and net capital outflow is $25.
D)   equals $25 and net capital outflow is zero.E) A) and B)
F) None of the above

Question 7

For nearly every year since 1970, the United States has:

Accepted Answer

A)   imported more than it exported.
B)   exported more than it imported.
C)   imported about the same as it has exported.
D)   held to very isolationist trade policy.E) A) and B)
F) A) and C) A

Question 8

If $1 is worth .8 Canadian dollars, then 1 Canadian dollar is worth:

Accepted Answer

A)   $1.25.
B)   $1.80.
C)   $0.20.
D)   $0.80.E) C) and D)
F) A) and B) A

Question 9

The real exchange rate:

Accepted Answer

A)   expresses the value of goods in one country in terms of the same goods in another country.
B)   is the nominal exchange rate adjusted for purchasing power parity.
C)   uses the price level in each country to convert the exchange rate into a value that is in "real" terms.
D)   All of these statements are true.E) A) and D)
F) A) and C)

Question 10

Champlain College in Vermont runs a satellite campus in Dublin, Ireland. This is an example of:

Accepted Answer

A)   foreign portfolio investment.
B)   foreign direct investment.
C)   importing.
D)   exporting.E) A) and C)
F) A) and B)

Question 11

When Sam in San Francisco buys stock in Fuji Film, he is contributing to:

Accepted Answer

A)   capital outflow from Japan.
B)   capital inflow to the U.S.
C)   domestic investment in the U.S.
D)   capital outflow from the U.S.E) B) and C)
F) A) and D)

Question 12

In an economy with a fixed exchange rate, an increased demand for foreign goods would increase the supply of local currency, and the government would have to buy:

Accepted Answer

A)   foreign currency in the foreign exchange market to prevent the domestic currency from depreciating.
B)   local currency in the foreign-exchange market to prevent the currency from depreciating.
C)   local currency in the foreign-exchange market to prevent the currency from appreciating.
D)   foreign currency in the foreign exchange market to prevent the domestic currency from appreciating.E) B) and D)
F) A) and B)

Question 13

In order to maintain a fixed exchange rate:

Accepted Answer

A)   a country cannot change its money supply.
B)   a country must constantly increase its money supply.
C)   a country must constantly decrease its money supply.
D)   Maintaining a fixed exchange rate is unrelated to the money supply.E) A) and C)
F) All of the above

Question 14

The demand for dollars will increase in foreign-exchange markets if:

Accepted Answer

A)   U.S. interest rates are high relative to those overseas.
B)   the U.S. is perceived to be a riskier place for investment relative to other nations.
C)   foreigners want to buy less U.S. goods.
D)   US consumers decide to buy more foreign goods than before.E) A) and D)
F) B) and C)

Question 15

One reason the Chinese buy a great deal of U.S. government debt is because:

Accepted Answer

A)   they have dollars left over from the sale of their goods to the U.S. and want to buy something dollar denominated.
B)   the risk involved is lower for U.S. government bonds than for any other government bond in the world.
C)   the rate of return for U.S. government bonds is higher than any other investment.
D)   owning US debt is a sign of economic prosperity for China.E) A) and B)
F) A) and C)

Question 16

Portfolio investment can generally travel across borders quickly because it usually involves:

Accepted Answer

A)   transfers between two bank accounts.
B)   the shipment of equipment from one place to another.
C)   the hiring or firing of foreign workers.
D)   two governments agreeing on trade.E) A) and D)
F) None of the above

Question 17

Foreign direct investment is when:

Accepted Answer

A)   a firm runs part of its operation abroad or invests in another company abroad.
B)   investors buy foreign financial assets like stocks, bonds, or government securities.
C)   investment is funded by foreign sources but operated domestically.
D)   when a foreign government directly invests into a firm.E) B) and D)
F) C) and D)

Question 18

The contagion that spread to South Korea, Indonesia, and other countries during the Asian financial crisis was:

Accepted Answer

A)   speculative attacks forcing them to abandon their fixed exchange rates.
B)   competitive devaluation that led to plummeting exchange rates for all.
C)   competitive revaluation that led to severe overvaluation and collapse for all but South Korea.
D)   a result of employing a fixed exchange rate by China.E) B) and D)
F) None of the above A

Question 19

Net capital outflow (NCO)  is:

Accepted Answer

A)   capital inflow − capital outflow.
B)   capital outflow − capital inflow.
C)   foreign dollars invested domestically.
D)   domestic dollars invested internationally.E) All of the above
F) C) and D)

Question 20

Which of the following countries fell victim to contagion during the Asian financial crisis?

Accepted Answer

A)   Indonesia, Malaysia, and the Philippines
B)   Malaysia, South Korea, and Taiwan
C)   Malaysia, the Philippines, and Taiwan
D)   All of these countries were hurt during the crisis.E) B) and C)
F) All of the above

Exam 18: Open-Market Macroeconomics

The amount of money in an economy that people can invest is equal to:

Correct AnswerverifiedShow Answer

IBM buys treasury bonds from the UK as part of its investment portfolio. This is an example of:

Correct AnswerverifiedShow Answer

When the value of a currency experiences exchange-rate appreciation, its value:

Correct AnswerverifiedShow Answer

Which of the following is foreign portfolio investment sometimes called?

Correct AnswerverifiedShow Answer

In the forex, the demand for dollars will decrease if:

Correct AnswerverifiedShow Answer

If Bob in Texas buys bonbons made in France for $25, and the French chocolatier buys stock in IBM for $25, then the French net exports:

Correct AnswerverifiedShow Answer

For nearly every year since 1970, the United States has:

Correct AnswerverifiedA

If $1 is worth .8 Canadian dollars, then 1 Canadian dollar is worth:

Correct AnswerverifiedA

The real exchange rate:

Correct AnswerverifiedShow Answer

Champlain College in Vermont runs a satellite campus in Dublin, Ireland. This is an example of:

Correct AnswerverifiedShow Answer

When Sam in San Francisco buys stock in Fuji Film, he is contributing to:

Correct AnswerverifiedShow Answer

In an economy with a fixed exchange rate, an increased demand for foreign goods would increase the supply of local currency, and the government would have to buy:

Correct AnswerverifiedShow Answer

In order to maintain a fixed exchange rate:

Correct AnswerverifiedShow Answer

The demand for dollars will increase in foreign-exchange markets if:

Correct AnswerverifiedShow Answer

One reason the Chinese buy a great deal of U.S. government debt is because:

Correct AnswerverifiedShow Answer

Portfolio investment can generally travel across borders quickly because it usually involves:

Correct AnswerverifiedShow Answer

Foreign direct investment is when:

Correct AnswerverifiedShow Answer

The contagion that spread to South Korea, Indonesia, and other countries during the Asian financial crisis was:

Correct AnswerverifiedA

Net capital outflow (NCO) is:

Correct AnswerverifiedShow Answer

Which of the following countries fell victim to contagion during the Asian financial crisis?

Correct AnswerverifiedShow Answer

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