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Exam 12: Open-Economy Macroeconomics: Basic Concepts

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Question 61

Multiple Choice

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If citizens of a country are not saving much,which of the following actions should that country's government take?

A) force citizens to save
B) reduce investment
C) have foreigners invest in the domestic economy
D) prevent opportunities for citizens to buy capital assets abroad

E) All of the above
F) B) and C)

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Question 62

True/False

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Negative net exports are the same as a trade surplus.

A) True
B) False

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Question 63

Multiple Choice

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Which of the following might part of Canadian savings be counted as?

What concept implies that the real interest rate in Canada should equal that in the rest of the world?

A country has $60 million of domestic investment and net capital outflow of -$20 million.What is saving?

How can one derive the identity that saving equals the sum of domestic investment and net capital outflow from the national income accounting identity?

Exchange rates are 0.98 U.S.dollars per Canadian dollar,150 yen per Canadian dollar,0.8 euro per Canadian dollar,and 20 pesos per Canadian dollar.A bottle of beer in New York costs 6 U.S.dollars,1200 yen in Tokyo,7 euros in Munich,and 100 pesos in Cancun.Which of the following indicates the most expensive beer?

When Canada increases its net capital outflow,it causes Canadian national saving to decrease.

Suppose Judy,a Canadian citizen,opens an ice cream store in Bermuda.Which of the following would her expenditures be?

A German company sells cameras to a retailer in Canada.Which of the following correctly identifies the effects of these transactions?

Canada sells machinery to a South African company,which pays Canada with South African currency (the rand) .What happens to Canadian net capital outflow from this transaction?

A rational investor will always purchase the bond that pays the highest real interest rate.

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment.Is this possible? Where did the other $40 billion of national saving go?

How do the nominal exchange rate and the real exchange rate differ?

In 2005,Canada had positive net exports.Which of the following does this fact imply?

About what percentage of GDP are Canadian imports?

Suppose Canadian wheat sells for $100 per bushel and Russian wheat sells for 1600 rubles per bushel. a. If you believe that the purchasing-power parity theory holds, and if the current exchange rate is 12 rubles per dollar, would you expect the exchange rate to change? In what direction would it change? b. If the current exchange rate is 12 rubles per dollar, how much is the real exchange rate, based on the prices of wheat? c. If the exchange rate is 12, how could you make profit in this situation? How much profit per bushel could you make?

From 1970 to 1998,the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

If the exchange rate is 10 pesos per dollar,it is also 0.10 dollars per peso.

If goods in Canada cost the same number of dollars as German goods cost in euros,the real exchange rate would be computed as how many German goods per Canadian goods?