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Open-Economy Macroeconomics: Basic Concepts
Multiple Choice – Section 00: Introduction
1. Which type(s) of economies interact with other economies?
a. only closed economies
b. only open economies
c. closed economies and open economies
d. neither closed nor open economies
2. International trade
a. raises the standard of living in all trading countries.
b. lowers the standard of living in all trading countries.
c. leaves the standard of living unchanged.
d. raises the standard of living for importing countries and lowers it for exporting countries.
7554 Open-Economy Macroeconomics: Basic Concepts
Multiple Choice – Section 01: The International Flows of Goods and Capital
1. Foreign-produced goods and services that are purchased domestically are called
a. imports.
b. exports.
c. net imports.
d. net exports.
2. Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country’s
exports increase?
a. Spain’s
b. the U.S.’s
c. Spain’s and the U.S.’s
d. neither Spain’s nor the U.S.’s
Open-Economy Macroeconomics: Basic Concepts 7555
3. When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is
a. both a U.S. and Irish import.
b. a U.S. import and an Irish export.
c. a U.S. export and an Irish import.
d. neither an export nor an import for either country.
4. Dave, a U.S. citizen buys a bicycle manufactured in China. Dave’s purchase is
a. both a U.S. and Chinese export.
b. both a U.S. and Chinese import.
c. a U.S. import and a Chinese export.
d. a U.S. export and a Chinese import.
7556 Open-Economy Macroeconomics: Basic Concepts
5. Eric, a resident of Sweden, purchases a book printed in the U.S. Which country’s exports
increase?
a. Sweden’s
b. the U.S.’s
c. Sweden’s and the U.S.’s
d. neither Sweden’s nor the U.S.’s
6. Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of
a. a U.S. import and a Canadian export
b. a U.S. export and a Canadian import
c. an export for both the U.S. and Canada
d. an import for both Canada and the U.S.
Open-Economy Macroeconomics: Basic Concepts 7557
7. A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of
a. a U.S. import and a Mexican export
b. a U.S. export and a Mexican import
c. an export for both the U.S. and Mexico
d. an import for both Mexico and the U.S.
8. Net exports of a country are the value of
a. goods and services imported minus the value of goods and services exported.
b. goods and services exported minus the value of goods and services imported.
c. goods exported minus the value of goods imported.
d. goods imported minus the value of goods exported.
7558 Open-Economy Macroeconomics: Basic Concepts
9. A country sells more to foreign countries than it buys from them. It has
a. a trade surplus and positive net exports.
b. a trade surplus and negative net exports.
c. a trade deficit and positive net exports.
d. a trade deficit and negative net exports.
10. A country purchases more goods and services from residents of foreign countries than residents
of foreign countries purchase from it. This country has
a. a trade surplus and positive net exports.
b. a trade surplus and negative net exports.
c. a trade deficit and positive net exports.
d. a trade deficit and negative net exports.
Open-Economy Macroeconomics: Basic Concepts 7559
11. The value of the goods and services Australia purchases from the U.S. are less than the value of
goods and services the U.S. purchases from Australia. The U.S. has
a. positive net exports with Australia and a trade surplus with Australia.
b. positive net exports with Australia and a trade deficit with Australia.
c. negative net exports with Australia and a trade surplus with Australia.
d. negative net exports with Australia and a trade deficit with Australia.
12. Which of the following both reduce net exports?
a. exports rise, imports rise
b. exports rise, imports fall
c. exports fall, imports rise
d. exports fall, imports fall
7560 Open-Economy Macroeconomics: Basic Concepts
13. One year a country has negative net exports. The next year it still has negative net exports and
imports have risen more than exports.
a. its trade surplus fell.
b. its trade surplus rose.
c. its trade deficit fell.
d. its trade deficit rose
14. One year a country has positive net exports. The next year it still has positive but larger net
exports
a. its trade surplus fell.
b. its trade surplus rose.
c. its trade deficit fell.
d. its trade deficit rose
15. A country's trade balance
a. must be zero.
b. must be greater than zero.
c. is greater than zero only if exports are greater than imports.
d. is greater than zero only if imports are greater than exports.
Open-Economy Macroeconomics: Basic Concepts 7561
16. The value of Austria's exports minus the value of Austria’s imports is called
a. Austria's net exports.
b. Austria’s net imports.
c. Austria's foreign portfolio investment
d. Austria's foreign direct investment.
17. If Saudi Arabia had negative net exports last year, then it
a. sold more abroad than it purchased abroad and had a trade surplus.
b. sold more abroad than it purchased abroad and had a trade deficit.
c. bought more abroad than it sold abroad and had a trade surplus.
d. bought more abroad than it sold abroad and had a trade deficit.
18. If France had positive net exports last year, then it
a. sold more abroad than it purchased abroad and had a trade surplus.
b. sold more abroad than it purchased abroad and had a trade deficit.
c. bought more abroad than it sold abroad and had a trade surplus.
d. bought more abroad than it sold abroad and had a trade deficit.
7562 Open-Economy Macroeconomics: Basic Concepts
19. If Germany purchased more goods and services abroad than it sold abroad last year, then it had
a. positive net exports which is a trade surplus.
b. positive net exports which is a trade deficit.
c. negative net exports which is a trade surplus.
d. negative net exports which is a trade deficit.
20. If Norway sold more goods and services abroad than it purchased from abroad, then it had
a. positive net exports which is a trade surplus.
b. positive net exports which is a trade deficit.
c. negative net exports which is a trade surplus.
d. negative net exports which is a trade deficit.
21. Suppose that a country imports $90 million worth of goods and services and exports $80 million
worth of goods and services. What is the value of net exports?
a. $170 million
b. $80 million
c. $10 million
d. -$10 million
Open-Economy Macroeconomics: Basic Concepts 7563
22. 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
a. exports of $3 billion and a trade surplus of $1 billion.
b. exports of $3 billion and a trade deficit of $1 billion.
c. exports of $2 billion and a trade surplus of $1 billion.
d. exports of $2 billion and a trade deficit of $1 billion.
23. Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose
this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in
that order?
a. $80 and $100
b. $-20 and $20
c. $20 and -$20
d. None of the above is correct.
7564 Open-Economy Macroeconomics: Basic Concepts
24. If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.
a. sells more overseas then it buys from overseas; it has a trade deficit.
b. sells more overseas then it buys from overseas; it has a trade surplus.
c. buys more from overseas then it sells overseas; it has a trade deficit.
d. buys more from overseas then it sells overseas; it has a trade surplus.
25. If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is
correct?
a. The U.S. has a trade surplus of $100 billion.
b. The U.S. has a trade surplus of $50 billion.
c. The U.S. has a trade deficit of $100 billion.
d. The U.S. has a trade deficit of $50 billion.
26. If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is
correct?
a. The U.S. has a trade surplus of $350 billion.
b. The U.S. has a trade surplus of $50 billion.
c. The U.S. has a trade deficit of $350 billion.
d. The U.S. has a trade deficit of $50 billion.
Open-Economy Macroeconomics: Basic Concepts 7565
27. If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from
foreign countries, then it has
a. $7.2 billion of exports and $4.8 billion of imports.
b. $7.2 billion of imports and $4.8 billion of exports.
c. $4.8 billion of exports and $2.4 billion of imports.
d. $4.8 billion of imports and $2.4 billion of exports.
28. Peru has exports of $31.5 million and imports of $30 million. Peru
a. sells more overseas then it buys from overseas; it has a trade deficit.
b. sells more overseas then it buys from overseas; it has a trade surplus.
c. buys more from overseas then it sells overseas; it has a trade deficit.
d. buys more from overseas then it sells overseas; it has a trade surplus.
29. Egypt has exports of $500 million and imports of $750 million. Egypt
a. sells more overseas then it buys from overseas; it has a trade deficit.
b. sells more overseas then it buys from overseas; it has a trade surplus.
c. buys more from overseas then it sells overseas; it has a trade deficit.
d. buys more from overseas then it sells overseas; it has a trade surplus.
7566 Open-Economy Macroeconomics: Basic Concepts
30. If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it
has
a. $48 billion of imports and $40 billion of exports.
b. $48 billion of exports and $40 billion of imports.
c. $40 billion of imports and $32 billion of exports.
d. $40 billion of exports and $32 billion of imports.
Table 31-1
Bolivian Trade Flows
Goods
Services
Purchased
Abroad
$40 billion
Purchased
Abroad
$20 billion
Sold Abroad
$10 billion
Sold Abroad
$25 billion
31. Refer to Table 31-1. What are Bolivia’s exports?
a. $60 billion
b. $35 billion
c. $10 billion
d. None of the above are correct.
Open-Economy Macroeconomics: Basic Concepts 7567
32. Refer to Table 31-1. What are Bolivia’s imports?
a. $60 billion
b. $35 billion
c. $40 billion
d. None of the above are correct.
33. Refer to Table 31-1. What are Bolivia’s net exports?
a. $30 billion
b. $5 billion
c. -$5 billion
d. -$25 billion
34. Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
a. are an export of the U.S. and increase U.S. net exports.
b. are an export of the U.S. and decrease U.S. net exports.
c. are an import of the U.S. and increase U.S. net exports.
d. are an import of the U.S. and decrease U.S. net exports.
7568 Open-Economy Macroeconomics: Basic Concepts
35. Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same,
these sales
a. increase U.S. net exports and have no effect on Mexican net exports.
b. increase U.S. net exports and decrease Mexican net exports.
c. decrease U.S. net exports and have no effect on Mexican net exports.
d. decrease U.S. net exports and increase Mexican net exports.
36. A U.S. firm sells diesel locomotives to a German railroad. Other things the same, this sale
a. increases U.S. net exports and decreases German net exports.
b. decreases U.S. net exports and increases German net exports.
c. increases U.S. and German net exports.
d. decreases U.S. and German net exports.
37. A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales
a. decrease U.S. exports but increase U.S. net exports.
b. decrease both U.S. exports and U.S. net exports.
c. increase both U.S. exports and U.S. net exports.
d. increase U.S. exports but decrease U.S. net exports.
Open-Economy Macroeconomics: Basic Concepts 7569
38. A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this
transaction
a. increases U.S. imports and decreases U.S. net exports.
b. increases U.S. imports and increases U.S. net exports.
c. increases U.S. exports and decreases U.S. net exports.
d. increases U.S. exports and increases U.S. net exports.
39. Lydia, a citizen of Italy, produces scarves and purses that she sells to department stores in the
United States. Other things the same, these sales
a. increase U.S. net exports and have no effect on Italian net exports.
b. decrease U.S. net exports and have no effect on Italian net exports.
c. increase U.S. net exports and decrease Italian net exports.
d. decrease U.S. net exports and increase Italian net exports.
40. A firm in China sells toys to a U.S. department store chain. Other things the same, these sales
a. increase U.S. net exports and decrease Chinese net exports.
b. decrease U.S. net exports and increase Chinese net exports.
c. increase U.S. and Chinese net exports.
d. decrease U.S. and Chinese net exports.
7570 Open-Economy Macroeconomics: Basic Concepts
41. Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United
States. By itself, this sale
a. increases U.S. net exports and decreases Russian net exports.
b. increases U.S. net exports and has no effect on Russian net exports.
c. decreases U.S. net exports and increases Russian net exports.
d. decreases U.S. net exports and has no effect on Russian net exports.
42. A Swiss company sells chocolates to a retailer in the United States. These sales by themselves
a. decrease U.S. net export and Swiss net exports.
b. decrease U.S. net exports and increase Swiss net exports.
c. increase U.S. and Swiss net exports.
d. increase U.S. net exports and decrease Swiss net exports.
43. You buy a new car built in Sweden. Other things the same, your purchase by itself
a. raises both U.S. exports and U.S. net exports.
b. raises U.S. exports and lowers U.S. net exports.
c. raises both U.S. imports and U.S. net exports.
d. raises U.S. imports and lowers U.S. net exports.
Open-Economy Macroeconomics: Basic Concepts 7571
44. An increase in U.S. sales of movies to other countries raises U.S.
a. exports and so raises the U.S. trade balance.
b. exports and so reduces the U.S. trade balance.
c. imports and so raises the U.S. trade balance.
d. imports and so reduces the U.S. trade balance.
45. A company in Panama pays for a U.S. architect to design a factory building. By itself this
transaction
a. increases U.S. exports and so increases the U.S. trade balance.
b. increases U.S. exports and so decreases the U.S. trade balance.
c. increases U.S. imports and so increases the U.S. trade balance.
d. increases U.S. imports and so decreases the U.S. trade balance.
46. If U.S. consumers increase their demand for apples from New Zealand, then other things the
same New Zealand’s
a. imports and net exports rise.
b. imports rise and net exports fall.
c. exports and net exports rise.
d. exports rise and net exports fall.
7572 Open-Economy Macroeconomics: Basic Concepts
47. If U.S. consumers decrease their demand for cell phones from Finland, then other things the same
Finland’s
a. exports and net exports fall.
b. exports fall and net exports rise.
c. imports and net exports fall.
d. imports fall and net exports rise.
48. Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase
a. increases U.S. imports by $1,000 and increases U.S. net exports by $1,000.
b. increases U.S. imports by $1,000 and decreases U.S. net exports by $1,000.
c. increases U.S. exports by $1,000 and increases U.S. net exports by $1,000.
d. increases U.S. exports by $1,000 and decreases U.S. net exports by $1,000.
49. If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its
imports rose by $20 billion, its net exports would now be
a. $0 billion.
b. $20 billion.
c. $40 billion.
d. $60 billion.
