United States Dollar and Nominal Exchange Rate

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Chapter 31 Open-Economy Macroeconomics: Basic Concepts
1. Foreign-produced goods and services that are sold domestically are called a. imports.

2. One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports. d. its trade deficit rose

3. Suppose that a country imports $100 million of goods and services and exports $75 million of goods and services, what is the value of net exports? (SUBTRACT 75-100). d. -$25 million

4. When Dee, a U.S. citizen, purchases a designer dress made in Milan, the purchase is c. a U.S. import and an Italian export.

5. Net capital outflow refers to the purchase of a. foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.

6. Paul, a U.S. citizen, builds a telescope factory in Israel. His expenditures b. increase U.S. net capital outflow, but decrease Israeli net capital outflow.

7. Which of the following is correct? a. NCO = NX

8. A Japanese firm buys lumber from the United States and pays for it with yen. Other things the same, Japanese c. net exports decrease, and U.S. net capital outflow increases.

9. If a country has a trade surplus a. it has positive net exports and positive net capital outflow.

10. The nominal exchange rate is the b. rate at which a person can trade the currency of one country for the currency of another.

11. If you were told that the exchange rate was 1.2 Canadian dollars per U.S. dollar, a watch that costs $12 US dollars would cost

a. $8.5 Canadian dollars.
b. $10 Canadian dollars.
c. $12.20 Canadian dollars.
d. $14.40 Canadian dollars.
ANS: D
12. Other things the same, if the exchange rate changes from 115 yen per dollar to 125 yen per dollar, the dollar has a. appreciated and so buys more Japanese goods.

13. Other things the same, if the exchange rate changes from 41 Thai bhat per dollar to 35 Thai bhat per dollar, the dollar has d....
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