Open-Economy Macroeconomics: Basic Concepts 7613
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.
7614 Open-Economy Macroeconomics: Basic Concepts
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.
Open-Economy Macroeconomics: Basic Concepts 7615
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.
7616 Open-Economy Macroeconomics: Basic Concepts
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.
Open-Economy Macroeconomics: Basic Concepts 7617
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
7618 Open-Economy Macroeconomics: Basic Concepts
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.
Open-Economy Macroeconomics: Basic Concepts 7619
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.
7620 Open-Economy Macroeconomics: Basic Concepts
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
Open-Economy Macroeconomics: Basic Concepts 7621
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.
7622 Open-Economy Macroeconomics: Basic Concepts
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.
Open-Economy Macroeconomics: Basic Concepts 7623
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.
184. If Israel’s domestic investment exceeds its national saving, then Israel 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.
7624 Open-Economy Macroeconomics: Basic Concepts
185. In which of the following situations must national saving rise?
a. Both domestic investment and net capital outflow increase.
b. Domestic investment increases and net capital outflow decreases.
c. Domestic investment decreases and net capital outflow increases.
d. Both domestic investment and net capital outflow decrease.
186. Other things the same, if a country saves less, then
a. net capital outflow rises, so net exports rise.
b. net capital outflow rises, so net exports fall.
c. net capital outflow falls, so net exports rise.
d. net capital outflow falls, so net exports fall.
187. Other things the same, if a country saves more, then
a. net capital outflow rises, so net exports rise.
b. net capital outflow rises, so net exports fall.
c. net capital outflow falls, so net exports rise.
d. net capital outflow falls, so net exports fall.
Open-Economy Macroeconomics: Basic Concepts 7625
188. Other things the same, if a country’s domestic investment decreases, then
a. net capital outflow rises, so net exports rise.
b. net capital outflow rises, so net exports fall.
c. net capital outflow falls, so net exports rise.
d. net capital outflow falls, so net exports fall.
189. Other things the same, if a country has a trade deficit and saving rises,
a. net capital outflow rises, so the trade deficit increases.
b. net capital outflow rises, so the trade deficit decreases.
c. net capital outflow falls, so the trade deficit increases.
d. net capital outflow falls, so the trade deficit decreases.
190. Other things the same, a country could move from having a trade deficit to having a trade
surplus if either
a. saving rose or domestic investment rose.
b. saving rose or domestic investment fell.
c. saving fell or domestic investment rose.
d. saving fell or domestic investment fell.
7626 Open-Economy Macroeconomics: Basic Concepts
191. If a country were to save more, but its domestic investment remained the same, then which of
the following would rise?
a. both net capital outflow and net exports
b. net capital outflow but not net exports
c. net exports but not net exports
d. neither net exports nor net capital outflow
192. Other things the same, a country could move from having a trade surplus to having a trade
deficit if either
a. saving rose or domestic investment rose.
b. saving rose or domestic investment fell.
c. saving fell or domestic investment rose.
d. saving fell or domestic investment fell.
193. Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion
worth of foreign assets. What was the value of domestic assets purchased by foreigners?
a. $70 billion
b. $40 billion
c. $30 billion
d. $10 billion
Open-Economy Macroeconomics: Basic Concepts 7627
194. Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of
$40 billion. What was its saving last year?
a. $30 billion
b. $20 billion
c. $10 billion
d. –$10 billion
195. During some year a country had exports of $50 billion, imports of $70 billion, and domestic
investment of $100 billion. What was its saving during the year?
a. $80 billion
b. $100 billion
c. $120 billion
d. $150 billion
7628 Open-Economy Macroeconomics: Basic Concepts
196. If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of
assets to foreigners, how many foreign assets do domestic residents purchase?
a. 5 billion euros
b. 10 billion euros
c. 30 billion euros
d. None of the above are correct.
197. If a country has saving of $2 trillion and investment of $1.5 trillion, then it has
a. a trade surplus and its net capital outflow = $.5 trillion.
b. a trade surplus and its net capital outflow = –$.5 trillion.
c. a trade deficit and its net capital outflow = $.5 trillion.
d. a trade deficit and its net capital outflow = –$.5 trillion.
198. A country has $100 million of net exports and $170 million of saving. Net capital outflow is
a. $70 million and domestic investment is $170 million.
b. $70 million and domestic investment is $270 million.
c. $100 million and domestic investment is $70 million.
d. None of the above is correct.
Open-Economy Macroeconomics: Basic Concepts 7629
199. A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?
a. $1 billion
b. $2billion
c. $3 billion
d. $5 billion
200. A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?
a. –$1 billion
b. –$2 billion
c. $1 billion
d. $2 billion
201. A country has $60 million of saving and domestic investment of $40 million. Net exports are
a. $20 million.
b. –$20 million.
c. $100 million.
d. –$100 million.
7630 Open-Economy Macroeconomics: Basic Concepts
202. A country has $50 million of domestic investment and net capital outflow of $15 million. What is
saving?
a. $65 million
b. –$65 million
c. $35 million
d. –$35 million
203. A country has $45 million of domestic investment and net capital outflow of –$60 million. What
is its saving?
a. $15 million
b. –$15 million
c. $105 million
d. –$105 million
204. A country has $40 billion of domestic investment and net capital outflows of –$20 billion. What is
the country’s saving?
a. –$60 billion
b. –$20 billion
c. $20 billion
d. $60 billion
Open-Economy Macroeconomics: Basic Concepts 7631
205. A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is
saving?
a. $10 billion
b. $30 billion
c. –$20 billion
d. –$30 billion
206. A country has net capital outflow of –10 billion euros and domestic investment of 20 billion euros.
What is its national saving?
a. 30 billion euros
b. 10 billion euros
c. –10 billion euros
d. –30 billion euros
7632 Open-Economy Macroeconomics: Basic Concepts
207. A country has net capital outflow of $40 billion. Which of the following is consistent with this net
capital outflow?
a. It has –$40 billion of net exports.
b. Purchases of foreign assets by domestic residents exceed purchases of domestic assets by
foreign residents by $40 billion.
c. Its saving is $35 billion and its domestic investment is $5 billion.
d. All of the above are consistent with a net capital outflow of $40 billion.
208. Suppose the world had only two countries and domestic residents of country A purchased $50
billion of assets from country B and country B purchased $30 billion of assets from country A.
What would the net capital outflows of both countries be?
a. $50 billion for country A and $30 billion for country B
b. $30 billion for country A and $50 billion for country B
c. $20 billion for country A and –$20 billion for country B
d. –$20 billion for country A and $20 billion for country B