Test 9

If a nation’s currency doubles in value on foreign e xchange markets, the currency is said to ................, reflecting a change in the .................. exchange rate.

• appreciate, nominal

• appreciate, real

• depreciate, nominal

• depreciate, real

If a cup of Starbucks coffee costs 50,000 VND in Saigon and 2 USD in New York and purchasing-power parity holds, what is the nominal exchange rate?

• 1/25,000 VND per USD

• 50,000 VND per USD

• 25,000 VND per USD

• None

. The theory of purchasing-power parity says that higher inflation in a nation causes the nation’s currency to ……………, leaving t he ……………… exchange rate unchanged

• depreciate, nominal

• appreciate, real

• depreciate, real

• appreciate, nominal

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net e xports would now be

• $0

• $10 billion

• -$10 billion

• -$20 billion

If domestic residents of other countries purchase $40 billion of Vietnam assets and Vietnam residents purchase $5 billion of foreign assets, then Vietnam net capital outflow is

• -$35 billion and Vietnam has a trade deficit

• $35 billion and Vietnam has a trade surplus

• $35 billion and Vietnam has a trade deficit

• $35 billion and Vietnam has a trade deficit

Suppose that more British decide to vacation in Vietnam and that the British purchase more Vietnam Treasury bonds. Ignoring h ow payments are made for these purchases

• the first action by itself raises Vietnam’s net exports, the second action by itself raises Vietnam’s net capital outflow

• the first action by itself raises Vietnam’s net exports, the second action by itself lowers Vietnam’s net capital outflow

• the first action by itself lowers Vietnam’s net exports, the second action by itself raises Vietnam’s net capital outflow

• . the first action by itself lowers Vietnam’s net exports, the second action by itself lowers Vietnam’s net capital outflow

Suppose that real interest rates in Vietnam rise relative to real interest rates in other countries. This increase would make foreigners

• more willing to purchase Vietnam bonds, so Vietnam net capital outflow would fall

• more willing to purchase Vietnam bonds, so Vietnam net capital outflow would rise

• less willing to purchase Vietnam bonds, so Vietnam net capital outflow would fall

• less willing to purchase Vietnam bonds, so Vietnam net capital outflow would rise

Suppose that Vietnam citizens purchase more cars made in Japan, and Japanese purchase more bonds issued by Vietnam corporations. Other things the same, these actions

• raise both Vietnam net exports and Vietnam n et capital outflows

• raise Vietnam net exports and lower Vietnam net capital outflows

• lower both Vietnam net exports and Vietnam net capital outflows

• lower Vietnam net exports and raise Vietnam n et capital outflows

Which of the following equations is always c orrect in an open economy?

• NX = Y - C - G - I

• NX = S - I

• NX = NCO

• All

If saving is less than domestic investment, t hen

• there is a trade deficit and Y < C + I + G

• there is a trade surplus and Y > C + I + G

• there is a trade deficit and Y > C + I + G

• there is a trade surplus and Y < C + I + G