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124. Which of the following is always correct?
a.
Y - I = NCO
b.
NCO = NX
c.
NX = I
d.
All of the above are correct.
125. Which of the following equations is correct?
a.
Y = C + I + G + NCO
b.
NX = NCO
c.
NCO = S - I
d.
All of the above are correct.
126. If saving is greater than domestic investment, then
a.
there is a trade deficit and Y > C + I + G.
b.
there is a trade deficit and Y < C + I + G.
c.
there is a trade surplus and Y > C + I + G.
d.
there is a trade surplus and Y < C + I + G.
127. If a country has a trade surplus then
a.
S > I and Y > C + I + G.
b.
S > I and Y < C + I + G.
c.
S < I and Y > C + I + G.
d.
S < I and Y < C + I + G.
128. If a country has a trade deficit then
a.
S > I and Y > C + I + G.
b.
S > I and Y < C + I + G.
c.
S < I and Y > C + I + G.
d.
S < I and Y < C + I + G.
129. If a country has Y > C + I + G, then it has
a.
positive net capital outflow and positive net exports.
b.
positive net capital outflow and negative net exports.
c.
negative net capital outflow and positive net exports.
d.
negative net capital outflow and negative net exports.
130. If a country has Y > C + I + G, then
a.
S > I and it has a trade surplus.
b.
S > I and it has a trade deficit.
c.
S < I and it has a trade surplus.
d.
S < I and it has a trade deficit.
131. Domestic saving must equal domestic investment in
a.
both closed and open economies.
b.
closed, but not open economies.
c.
open, but not closed economies.
d.
neither closed nor open economies.
132. If saving is less than domestic investment, then
a.
there is a trade deficit and Y > C + I + G.
b.
there is a trade deficit and Y < C + I + G.
c.
there is a trade surplus and Y > C + I + G.
d.
there is a trade surplus and Y < C + I + G.
133. 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.
134. If a country has a trade deficit
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.
135. If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a
a.
positive net capital outflow and a trade surplus.
b.
positive net capital outflow and a trade deficit.
c.
negative net capital outflow and a trade surplus.
d.
negative net capital outflow and a trade deficit.
136. If a country exports more than it imports, then it has
a.
positive net exports and positive net capital outflows.
b.
positive net exports and negative net capital outflows.
c.
negative net exports and positive net capital outflows.
d.
negative net exports and negative net capital outflows.
137. If a country’s purchases of foreign assets exceeds foreign purchases of domestic assets, that country has
a.
positive net exports and positive net capital outflows.
b.
positive net exports and negative net capital outflows.
c.
negative net exports and positive net capital outflows.
d.
negative net exports and negative net capital outflows.
138. If a country has negative net capital outflows, then its net exports are
a.
positive and its saving is larger than its domestic investment.
b.
positive and its saving is smaller than its domestic investment.
c.
negative and its saving is larger than its domestic investment.
d.
negative and its saving is smaller than its domestic investment.
139. Which of the following statements is correct for an open economy with a trade surplus?
a.
The trade surplus cannot last for very many years.
b.
The trade surplus must be offset by negative net capital outflow.
c.
The trade surplus implies that the country's national saving is greater than domestic investment.
d.
None of the above is correct.
140. Which of the following statements is incorrect for an open economy?
a.
A country can have a trade deficit, trade surplus, or balanced trade.
b.
A country that has a trade deficit has positive net capital outflow.
c.
Net exports must equal net capital outflow.
d.
National saving equals domestic investment plus net capital outflow.
141. U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of
net exports?
a.
The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign countries
purchase $600 billion worth of U.S. assets.
b.
The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets and foreign countries
purchase $800 billion worth of U.S. assets.
c.
The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets and foreign countries
purchase $600 billion worth of U.S. assets.
d.
The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets and foreign countries
purchase $800 billion worth of U.S. asset.
142. When Ghana sells chocolate to the United States, U.S. net exports
a.
increase, and U.S. net capital outflow increases.
b.
increase, and U.S. net capital outflow decreases.
c.
decrease, and U.S. net capital outflow increases.
d.
decrease, and U.S. net capital outflow decreases.
143. If a U.S. textbook publishing company sells texts overseas, U.S. net exports
a.
increase, and U.S. net capital outflow increases.
b.
increase, and U.S. net capital outflow decreases.
c.
decrease, and U.S. net capital outflow increases.
d.
decrease, and U.S. net capital outflow decreases.
144. If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports
a.
increase, and U.S. net capital outflow increases.
b.
increase, and U.S. net capital outflow decreases.
c.
decrease, and U.S. net capital outflow increases.
d.
decrease, and U.S. net capital outflow decreases.
145. A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net
exports
a.
increase, and U.S. net capital outflow increases.
b.
increase, and U.S. net capital outflow decreases.
c.
decrease, and U.S. net capital outflow increases.
d.
decrease, and U.S. net capital outflow decreases.
146. A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal
from a U.S. company. As a result of these transactions, Chinese
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.
147. A Japanese flour mill buys wheat from the United States and pays for it with yen. Other things the same, Japanese
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.
148. A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This
transaction
a.
increases British net capital outflow, and increases U.S. net exports.
b.
increases British net capital outflow, and decreases U.S. net exports.
c.
decreases British net capital outflow, and increases U.S. net exports.
d.
decreases British net capital outflow, and decreases U.S. net exports.
149. An American brewery sells dollars to obtain euros. It then uses the euros to buy brewing equipment from a German
company. These transactions
a.
increase U.S. net capital outflow because Germans obtain U.S. assets.
b.
decrease U.S. net capital outflow because Germans obtain U.S. assets.
c.
increase U.S. net capital outflow because the U.S. buys capital goods.
d.
decrease U.S. net capital outflow because the U.S. buys capital goods.
150. U.S.-based John Deere sells machinery to residents of South Africa who pay 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.
151. U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This
exchange
a.
increases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
b.
decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
c.
increases U.S. net capital outflow because the U.S. sells capital goods.
d.
decreases U.S. net capital outflow because the U.S. sells capital goods.
152. An American retailer sells dollars to obtain euros. It then uses the euros to buy ready-to-assemble furniture from
Sweden. These transactions
a.
increase U.S. net capital outflow because foreigners obtain U.S. assets.
b.
decrease U.S. net capital outflow because foreigners obtain U.S. assets.
c.
increase U.S. net capital outflow because the U.S. buys capital goods.
d.
decrease U.S. net capital outflow because the U.S. buys capital goods.
153. A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these
transactions
a.
both U.S. net capital outflow and U.S. net exports rise.
b.
both U.S. net capital outflow and U.S. net exports fall.
c.
U.S. net capital outflow rises and U.S. net exports fall.
d.
U.S. net capital outflow falls and U.S. net exports rise.
154. A U.S. grocery chain buys bananas from Honduras and pays for them with U.S. dollars.
a.
The purchase of the bananas increases U.S. net exports and the payment with dollars increases U.S. net capital
outflow.
b.
The purchase of bananas increases U.S. net exports and the payment with dollars decreases U.S. net capital
outflow.
c.
The purchase of bananas decreases U.S. net exports and the payment with dollars increases U.S. net capital
outflow.
d.
The purchase of bananas decreases U.S. net exports and the payment with dollars decreases U.S. net capital
outflow.
155. A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction
a.
increases Canadian net exports, and increases U.S. net capital outflow.
b.
increases Canadian net exports, and decreases U.S. net capital outflow.
c.
decreases Canadian net exports, and increases U.S. net capital outflow.
d.
decreases Canadian net exports, and decreases U.S. net capital outflow.
156. A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef.
Which of the following do these transactions increase?
a.
Argentinean net capital outflow and Argentinean net exports
b.
only Argentinean net exports
c.
only Argentinean net capital outflow
d.
neither Argentinean net exports nor Argentinean capital outflow
157. A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from
the U.S. These transactions
a.
increase both U.S. net exports and U.S. net capital outflow.
b.
decrease both U.S. net exports and U.S. net capital outflow.
c.
increase U.S. net exports and do not affect U.S. net capital outflow.
d.
None of the above is correct.
158. A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with
previously obtained dollars. By itself, this exchange
a.
increases both U.S. net exports and U.S. net capital outflow.
b.
decreases both U.S. net exports and U.S. net capital outflow.
c.
increases U.S. net exports and does not affect U.S. net capital outflow.
d.
None of the above is correct.
159. A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then uses the dollars to purchase
construction equipment from a U.S. company. These transactions
a.
increase Guatemalan net capital outflow, and increases U.S. net exports.
b.
increase Guatemalan capital outflow, and decreases U.S. net exports.
c.
decrease Guatemalan net capital outflow, and increases U.S. net exports.
d.
decrease Guatemalan net capital outflow, and decreases U.S. net exports.
160. A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S.
company. These transactions
a.
increase U.S. net exports, and increase Turkish net capital outflow.
b.
increase U.S. net exports, and decrease Turkish net capital outflow.
c.
decrease U.S. net exports, and increase Turkish net capital outflow.
d.
decrease U.S. net exports, and decrease Turkish net capital outflow.
161. Jill, a U.S. citizen, uses some euros to purchase a bond issued by a French vineyard. This exchange
a.
decreases U.S. net capital outflow.
b.
increases U.S. net capital outflow by more than the value of the bond.
c.
increases U.S. net capital outflow by the value of the bond.
d.
does not change U.S. net capital outflow.
162. Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This
transaction
a.
increases U.S. net capital outflow by more than the value of the bond.
b.
increases U.S. net capital outflow by the value of the bond.
c.
does not change U.S. net capital outflow.
d.
decreases U.S. net capital outflow.
163. Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company.
This transaction
a.
decreases U.S. net capital outflow.
b.
does not change U.S. net capital outflow.
c.
increases U.S. net capital outflow by more than the value of the bond.
d.
increases U.S. net capital outflow by the value of the bond.
164. A Japanese bank buys bonds sold by Minnesota Manufacturing. Minnesota Manufacturing then uses these funds to
buy machinery from Canada. Which of the following decreases?
a.
U.S. net exports but not US net capital outflow
b.
U.S. net capital outflow but not U.S. net exports
c.
U.S. net exports and U.S. net capital outflow
d.
neither U.S. net exports nor U.S. net capital outflow
165. A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a
bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net
capital outflow?
a.
It fell by $40,000.
b.
It fell by $20,000.
c.
It was unchanged.
d.
It rose by $20,000.
166. A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to
purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone
a.
both U.S. net capital outflow and U.S. net exports rise.
b.
U.S. net capital outflow rose and U.S. net exports fall.
c.
U.S. net capital outflow fell and U.S. net exports rise.
d.
both U.S. net capital and U.S. net exports fall.
167. Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital
outflow?
a.
A Swedish bank buys a bond issued by the U.S. government.
b.
A German company builds a car factory in the U.S.
c.
A U.S. mutual fund purchases stock issued by a corporation in Bolivia.
d.
A U.S. grocery chain builds and operates a new warehouse in Honduras.
168. Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital
outflow?
a.
A U.S. electronics company opens and operates a new factory in India.
b.
A Swiss bank buys bonds issued by a U.S. company.
c.
A U.S. pension fund buys bonds issued by the Japanese government.
d.
A French restaurant opens and operates a restaurant in New York.
169. If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which
of the following increases?
a.
Saudi Arabian net exports but not Saudi Arabian net capital outflow
b.
Saudi Arabian net capital outflow but not Saudi Arabian net exports
c.
both Saudi Arabian net exports and net capital outflow
d.
neither Saudi Arabian net exports nor net capital outflow
170. If a country’s government reduced corruption and reformed its tax system so that businesses found operating there
less risky, it’s likely that this country’s
a.
net exports and net capital outflows would increase.
b.
net exports would increase and its net capital outflows would decrease.
c.
net exports and net capital outflow would decrease.
d.
net exports would decrease and its net capital outflow would increase.
171. If a country has business opportunities that are relatively attractive to other countries, we would expect it to have
a.
both positive net exports and positive net capital outflow.
b.
both negative net exports and negative net capital outflow.
c.
positive net exports and negative net capital outflow.
d.
negative net exports and positive net capital outflow.
172. If business opportunities in a country become relatively less attractive relative to those of other countries, then
a.
both its net exports and net capital outflows fall.
b.
both its net exports and net capital outflows rise.
c.
its net exports fall and its net capital outflows fall.
d.
its net exports rise and its net capital outflows fall
173. 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.
174. A country’s trade balance will fall if
a.
either investment or saving rise.
b.
either investment falls or saving rises.
c.
either saving falls or investment rises.
d.
either investment or saving fall.
175. A country has a trade deficit. Its
a.
net capital outflow must be positive, and saving is larger than investment.
b.
net capital outflow must be positive and saving is smaller than investment.
c.
net capital outflow must be negative and saving is larger than investment.
d.
net capital outflow must be negative and saving is smaller than investment.
176. A country has a trade deficit. Which of the following must also be true?
a.
net capital outflow is positive and domestic investment is larger than saving
b.
net capital outflow is positive and saving is larger than domestic investment
c.
net capital outflow is negative and domestic investment is larger than saving
d.
net capital outflow is negative and saving is larger than domestic investment
177. If Spain has a trade deficit, then
a.
foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving
greater than Spanish domestic investment.
b.
foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving
smaller then Spanish domestic investment.
c.
foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving
greater than Spanish domestic investment.
d.
foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving
greater than Spanish domestic investment.
178. If a country has positive net capital outflows, then its net exports are
a.
positive, and its saving is larger than its domestic investment.
b.
positive, and its saving is smaller than its domestic investment.
c.
negative, and its saving is larger than its domestic investment.
d.
negative, and its saving is smaller than its domestic investment.
179. Which of the following is inconsistent with the others?
a.
Y - C - G > I
b.
this country had a trade surplus
c.
the purchase of foreign assets by this country’s residents exceed foreigner’s purchases of this country’s assets
d.
this country’s investment exceeded its domestic saving
180. A nation has a positive net capital outflow. Which of the following is correct?
a.
Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners
b.
It has positive net exports.
c.
Its savings exceeds its domestic investment.
d.
All of the above are correct.
181. A country’s saving is greater than its domestic investment. This difference means that its
a.
net capital outflow and net exports are positive.
b.
net capital outflow and net exports are negative.
c.
net capital outflow is positive and net exports are negative.
d.
net capital outflow is negative and net exports are positive.
182. If Canada’s national saving exceeds its domestic investment, then Canada has
a.
positive net capital outflows and negative net exports.
b.
positive net capital outflows and positive net exports.
c.
negative net capital outflows and negative net exports.
d.
negative net capital outflows and positive net exports.
183. A nation’s domestic investment is greater than its savings. Which of the following is correct?
a.
This nation has a negative net capital outflow.
b.
This nation has a trade surplus.
c.
Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners.
d.
All of the above are correct.
