Quiz 12: Open Macro

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then the net capital outflow of that country

• and the net capital outflow of other countries rise.

• rises and the net capital outflow of other countries fall

• falls and the net capital outflow of other countries rise

• None of the above are correct

An Italian company builds and operates a pasta factory in the United States. This is an example of Italian

• foreign portfolio investment that increases Italian net capital outflow.

• foreign direct investment that decreases Italian net capital outflow.

• foreign portfolio investment that decreases Italian net capital outflow.

• foreign direct investment that increases Italian net capital outflow

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

• True

• False

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

• investment for Mark and U.S. foreign direct investment.

• investment for Mark and U.S. foreign portfolio investment.

• saving for Mark and U.S. foreign direct investment.

• saving for Mark and U.S. foreign portfolio investment.

Other things the same, a higher real exchange rate raises net exports

• True

• False

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

• True

• False

If a country has a trade deficit

• it has positive net exports and negative net capital outflow.

• it has positive net exports and positive net capital outflow.

• it has negative net exports and negative net capital outflow.

• it has negative net exports and positive net capital outflow.

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

• True

• False

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has

• exports of $3 billion and a trade surplus of $1 billion.

• exports of $3 billion and a trade deficit of $1 billion.

• exports of $2 billion and a trade surplus of $1 billion.

• exports of $2 billion and a trade deficit of $1 billion.

Net capital outflow

• is always equal to net exports.

• could be any of the above.

• is always less than net exports.

• is always greater than net exports.