chapter 13 practice problem with answer.pdf

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Name: ________________________ Class: ___________________ Date: __________ ID: A Problem Set 13 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1.Internationtarlade a. raises the standard of living in all trading countries. b. lowers the standard of living in all trading countries. c. leaves the standard of living unchanged. d. raises the standard of living for importing countries and lowers it for exporting countries. ____ 2. Net exports of a country are the value of a. goods and services imported minus the value of goods and services exported. b. goods and services exported minus the value of goods and services imported. c. goods exported minus the value of goods imported. d. goods imported minus the value of goods exported. ____ 3. One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports. a. its trade surplus fell. b. its trade surplus rose. c. its trade deficit fell. d. its trade deficit rose ____ 4. Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order? a. $140 and $140 b. $100 and $40 c. $60 and -$60 d. None of the above is correct. ____ 5. A firm in China sells jackets to a U.S. department store chain. Other things the same, these sales a. increases U.S. and Chinese net exports. b. decrease U.S. and Chinese net exports. c. increase U.S. net exports and decrease Chinese net exports. d. decreases U.S. net exports and increase Chinese net exports. ____ 6. Suppose a country had net exports of $8.3 billion and sold $52.4 billion of goods and services abroad. This country had a. $60.7 billion of imports and $52.4 billion of imports. b. $60.7 billion of exports and $52.4 of imports. c. $52.4 billion of imports and $44.1 billion of exports. d. $52.4 billion of exports and $44.1 billion of imports. ____ 7. Over the past five decades, the U.S. economy has become a. more closed. b. more open. c. less trade-oriented. d. more self-sufficient. ____ 8. About what percentage of GDP are U.S. imports? a. less than 1 percent b. about 4 percent c. about 7 percent d. over 10 percent 1 Name: ________________________ ID: A ____ 9. Suppose that more Chinese decide to vacation in the U.S. and that the Chinese purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases, a. the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. b. the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. c. the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. d. the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow. ____ 10. Which of the following would be U.S. foreign direct investment? a. A Swedish car manufacturer opens a plant in Tennessee. b. A Dutch citizen buys shares of stock in a U.S. company. c. A U.S. based hotel chain opens a new hotel in Brazil. d. A U.S. citizen buys stock in companies located in Japan. ____ 11. Which of the following is an example of U.S. foreign portfolio investment? a. Albert, a German citizen, buys stock in a U.S. computer company. b. Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States. c. Ruth, a U.S. citizen, buys bonds issued by a German corporation. d. Dustin, a U.S. citizen, opens a country-western tavern in New Zealand. ____ 12. Sue, a U.S. citizen, buys stock in an Italian automobile corporation. Her purchase counts as a. investment for Sue and U.S. foreign direct investment. b. investment for Sue and U.S. foreign portfolio investment. c. saving for Sue and U.S. foreign direct investment. d. saving for Sue and U.S. foreign portfolio investment. ____ 13. An Italian citizen opens and operates a spaghetti factory in the United States. This is Italian a. foreign direct investment that increases Italian net capital outflow. b. foreign direct investment that decreases Italian net capital outflow. c. foreign portfolio investment that increases Italian net capital outflow. d. foreign portfolio investment that decreases Italian net capital outflow. ____ 14. When making investment decisions, investors a. compare the real interest rates offered on different bonds. b. compare the nominal, but not the real, interest rates offered on different bonds. c. purchase the highest-priced bond available. d. All of the above are correct. ____ 15. When Microsoft establishes a distribution center in France, U.S. net capital outflow a. increases because Microsoft makes a portfolio investment in France. b. decreases because Microsoft makes a portfolio investment in France. c. increases because Microsoft makes a direct investment in capital in France. d. decreases because Microsoft makes a direct investment in capital France. ____ 16. A Mexican flour mill buys wheat from the United States and pays for it with pesos. Other things the same, Mexican a. net exports increase, and U.S. net capital outflow increases. b. net exports increase, and U.S. net capital outflow decreases. c. net exports decrease, and U.S. net capital outflow increases. d. net exports decrease, and U.S. net capital outflow decreases. ____ 17. U.S. based John Deere sells machinery to a South African country that pays with South African currency (the rand). a. This increases U.S. net capital outflow because the U.S. acquires foreign assets. b. This decreases U.S. net capital outflow because the U.S. acquires foreign assets. c. This increases U.S. net capital outflow because the U.S. sells capital goods. d. This decreases U.S. net capital outflow because the U.S. sells capital goods. 2 Name: ________________________ ID: A ____ 18. A U.S. firm buys cement mixers from China and pays for them with U.S. dollars. a. The purchase of the cement mixers increases U.S. net exports and the payment with dollars increases U.S. net capital outflow. b. The purchase of cement mixers increases U.S. net exports and the payment with dollars decreases U.S. net capital outflow. c. The purchase of cement mixers decreases U.S. net exports and the payment with dollars increases U.S. net capital outflow. d. The purchase of cement mixers decreases U.S. net exports and the payment with dollars decreases U.S. net capital outflow. ____ 19. If a country has a trade surplus a. it has positive net exports and positive net capital outflow. b. it has positive net exports and negative net capital outflow. c. it has negative net exports and positive net capital outflow. d. it has negative net exports and negative net capital outflow. ____ 20. If there is a trade deficit, then a. saving is greater than domestic investment and Y > C + I + G. b. saving is greater than domestic investment and Y < C + I + G. c. saving is less than domestic investment and Y > C +I + G. d. saving is less than domestic investment and Y < C + I + G. ____ 21. The country of Freedonia has a GDP of $2,100, consumption of $1,200, and government purchases of $400. This implies that it has a. domestic investment of $500. b. domestic investment plus net capital outflow of $500. c. domestic investment - net capital outflow of $500. d. None of the above is correct. ____ 22. A country has $100 million of net exports and $170 million of saving. Net capital outflow is a. $70 million and domestic investment is $170 million. b. $70 million and domestic investment is $270 million. c. $100 million and domestic investment is $70 million. d. None of the above is correct. ____ 23. In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure? a. $250 billion b. $300 billion c. $550 billion d. $850 billion ____ 24. In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving? a. $225 billion b. $510 billion c. $735 billion d. $1,390 billion ____ 25. All saving in the U.S. economy shows up as a. investment in the U.S. economy. b. U.S. net capital outflow. c. either investment in the U.S. economy or U.S. net capital outflow. d. None of the above is correct. 3 Name: ________________________ ID: A ____ 26. After 1980 in the United States, a. national saving fell below investment and net capital outflow was a large positive number. b. national saving fell below investment and net capital outflow was a large negative number. c. investment fell below saving and net capital outflow was a large positive number. d. investment fell below saving, so net capital outflow was a large negative number. ____ 27. After the 1980s, U.S. net capital outflow was a. negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. b. negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. c. positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. d. positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. ____ 28. Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n) a. decrease in U.S. investment. b. decrease in U.S. national saving. c. increase in U.S. investment. d. increase in U.S. national saving. ____ 29. Given the fact that citizens of a country are not saving much, it is better to a. force citizens to save. b. reduce investment. c. have foreigners invest in the domestic economy than no one at all. d. to prevent opportunities for citizens to buy capital assets abroad. ____ 30. If you were told that the exchange rate was 1.2 Canadian dollars per U.S. dollar, a watch that costs $12 US dollars would cost a. $8.5 Canadian dollars. b. $10 Canadian dollars. c. $12.20 Canadian dollars. d. $14.40 Canadian dollars. ____ 31. You are the CEO of a firm considering opening a factory in Peru. If the dollar appreciated relative to the Peruvian peso, then other things the same a. you'd find it took fewer dollars to build the factory. The building of the factory increases U.S. net capital outflow. b. you'd find it took fewer dollars to build the factory. The building of the factory decreases U.S. net capital outflow. c. you'd find it took more dollars to build the factory. If you still build the factory anyway, it will increase U.S. net capital outflow. d. you'd find it took more dollars to build the factory. If you still build the factory anyway, it will decrease U.S. net capital outflow. ____ 32. Other things the same, if the exchange rate changes from 115 yen per dollar to 125 yen per dollar, the dollar has a. appreciated and so buys more Japanese goods. b. appreciated and so buys fewer Japanese goods. c. depreciated and so buys more Japanese goods. d. depreciated and so buys fewer Japanese goods. 4 Name: ________________________ ID: A ____ 33. In late 2000, you could purchase about 400 drachma for a dollar. In late 2005 you could purchase about 280 drachma for a dollar. These exchange rates are given in a. real terms and over this period the dollar appreciated. b. real terms and over this period the dollar depreciated. c. nominal terms and over this period the dollar appreciated. d. nominal terms and over this period the dollar depreciated. ____ 34. Other things the same, the real exchange rate between American and British goods would be higher if a. prices of British goods were higher, or the number of pounds a dollar purchased was higher. b. prices of British goods were higher, or the number of pounds a dollar purchased was lower. c. p
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