Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

What terms refers to the process of taking advantage of different prices for a good in different markets?

Accepted Answer

A)   arbitrage
B)   currency exchange
C)   capitalism
D)   the law of one priceE) A) and B)
F) B) and C)

Question 3

A country with no imports necessarily has zero net exports.

Accepted Answer

A) True 
 B)False

Question 4

Consider this statement: "Canada is characterized by perfect capital mobility." Which of the following best explains what this statement means?

Accepted Answer

A)   that labour can easily move across Canada's borders
B)   that purchasing-power parity holds in Canada
C)   that Canada's net foreign investment is zero
D)   that investors' funds can easily move across Canada's bordersE) A) and B)
F) C) and D)

Question 5

Which of the following would be Canadian foreign direct investment?

Accepted Answer

A)   A Polish company opens a shipbuilding plant in Halifax.
B)   A Bolivian bank buys Canadian corporate bonds.
C)   A Canadian bank buys Peruvian corporate bonds.
D)   A Canadian canning company opens a plant in Ecuador.E) A) and D)
F) A) and C)

Question 6

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

Accepted Answer

The nominal exchange rate is the rate at...

Question 7

When the central bank prints large quantities of money, that money loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 8

If the Canadian dollar gets weaker relative to the Chinese yuan, what might happen?

Accepted Answer

A)   Canadian trade surplus will fall.
B)   Canadian trade deficit will fall.
C)   Chinese trade surplus will rise.
D)   Chinese trade deficit will fall.E) A) and B)
F) None of the above

Question 9

What are foreign-produced goods and services that are sold domestically called?

Accepted Answer

A)   imports
B)   exports
C)   net imports
D)   net exportsE) A) and B)
F) A) and C)

Question 10

If the real exchange rate of the Canadian dollar falls, Canadian net exports will fall.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that Colby, a resident of Canada, buys video games from a company in Japan. Explain why and in what directions this changes Canadian net exports and Canadian net capital outflow.

Accepted Answer

The purchase of a foreign good by a Cana...

Question 12

Assume Canada is a small open economy with perfect capital mobility. If the interest rate is 7 percent in Canada and 5 percent in Japan, and if the exchange rate is stable at 80 Japanese yen for one Canadian dollar, what would happen?

Accepted Answer

A)   Canadian investors want to invest in Japan, and Japanese investors want to invest in Canada.
B)   Both Canadian and Japanese investors want to invest in Canada.
C)   Canadian investors want to invest in Canada, and Japanese investors want to invest in Japan.
D)   Both Canadian and Japanese investors want to invest in Japan.E) All of the above
F) A) and D)

Question 13

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a Canadian hotel chain. Which statement best identifies the effects of this transaction?

Accepted Answer

A)   It increases Canadian net exports and has no effect on Russian net exports.
B)   It increases Canadian net exports and decreases Russian net exports.
C)   It decreases Canadian net exports and has no effect on Russian net exports.
D)   It decreases Canadian net exports and increases Russian net exports.E) None of the above
F) A) and B)

Question 14

A citizen of Saudi Arabia uses previously obtained Canadian dollars to purchase lamb from Canada. What are the effects of this transaction?

Accepted Answer

A)   It increases Saudi net capital outflow and increases Canadian net exports.
B)   It increases Saudi net capital outflow and decreases Canadian net exports.
C)   It decreases Saudi net capital outflow and increases Canadian net exports.
D)   It decreases Saudi net capital outflow and decreases Canadian net exports.E) A) and B)
F) None of the above

Question 15

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Accepted Answer

A)   -4.5 percent
B)   -2.5 percent
C)   2.5 percent
D)   4.5 percentE) All of the above
F) B) and D)

Question 16

Between 1981 and 1988, what caused most of the change in Canadian net capital outflow as a percent of GDP?

Accepted Answer

A)   decline in public saving
B)   decline in private saving
C)   increase in public saving
D)   increase in private savingE) A) and B)
F) None of the above

Question 17

Suppose Judy, a Canadian citizen, opens an ice cream store in Bermuda. What would her expenditures be?

Accepted Answer

A)   Canadian foreign portfolio investment that would increase Canadian net capital outflow
B)   Canadian foreign portfolio investment that would decrease Canadian net capital outflow
C)   Canadian foreign direct investment that would increase Canadian net capital outflow
D)   Canadian foreign direct investment that would decrease Canadian net capital outflowE) B) and D)
F) A) and D)

Question 18

When Larissa, a Canadian living in Canada, purchases a Louis Vuitton suit case made in Paris, what is this purchase?

Accepted Answer

A)   both a Canadian and a French import
B)   a Canadian export and a French import
C)   a Canadian import and a French export
D)   both a Canadian and a French exportE) A) and C)
F) A) and B)

Question 19

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 20

In Ireland, a pint of beer costs 5 euros. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.6 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A)   0.5 pints of Irish beer per pint of Australian beer
B)   0.72 pints of Irish beer per pint of Australian beer
C)   1.39 pints of Irish beer per pint of Australian beer
D)   2 pints of Irish beer per pint of Australian beerE) B) and C)
F) None of the above

Exam 12: Open-Economy Macroeconomics: Basic Concepts

A country with no imports necessarily has zero net exports.

Correct AnswerverifiedShow Answer

A citizen of Saudi Arabia uses previously obtained Canadian dollars to purchase lamb from Canada. What are the effects of this transaction?

Correct AnswerverifiedShow Answer

What are foreign-produced goods and services that are sold domestically called?

Correct AnswerverifiedShow Answer

Assume Canada is a small open economy with perfect capital mobility. If the interest rate is 7 percent in Canada and 5 percent in Japan, and if the exchange rate is stable at 80 Japanese yen for one Canadian dollar, what would happen?

Correct AnswerverifiedShow Answer

Suppose Judy, a Canadian citizen, opens an ice cream store in Bermuda. What would her expenditures be?

Correct AnswerverifiedShow Answer

What terms refers to the process of taking advantage of different prices for a good in different markets?

Correct AnswerverifiedShow Answer

Consider this statement: "Canada is characterized by perfect capital mobility." Which of the following best explains what this statement means?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe nominal exchange rate is the rate at...View AnswerShow Answer

When Larissa, a Canadian living in Canada, purchases a Louis Vuitton suit case made in Paris, what is this purchase?

Correct AnswerverifiedShow Answer

Which of the following would be Canadian foreign direct investment?

Correct AnswerverifiedShow Answer

In Ireland, a pint of beer costs 5 euros. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.6 euros per Australian dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

If the Canadian dollar gets weaker relative to the Chinese yuan, what might happen?

Correct AnswerverifiedShow Answer

If the real exchange rate of the Canadian dollar falls, Canadian net exports will fall.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Between 1981 and 1988, what caused most of the change in Canadian net capital outflow as a percent of GDP?

Correct AnswerverifiedShow Answer

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Correct AnswerverifiedShow Answer

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a Canadian hotel chain. Which statement best identifies the effects of this transaction?

Correct AnswerverifiedShow Answer

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Correct AnswerverifiedShow Answer

When the central bank prints large quantities of money, that money loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Correct AnswerverifiedShow Answer

Suppose that Colby, a resident of Canada, buys video games from a company in Japan. Explain why and in what directions this changes Canadian net exports and Canadian net capital outflow.

Correct AnswerverifiedThe purchase of a foreign good by a Cana...View AnswerShow Answer

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The nominal exchange rate is the rate at...
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The purchase of a foreign good by a Cana...
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