ECO 302 Week 11 Quiz - Strayer
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Chapter 17 and 18
TRUE/FALSE
1. With an international sector real GNP is consumption plus gross investment plus government purchases plus net real asset income from abroad.
2. The balance of trade is net exports or imports less exports.
3. A higher current account deficit is caused by a declining domestic economy.
4. The real current account balance is real national saving less net domestic investment.
5. Tariffs and quotas lead to a higher real GDP growth rate in the country imposing them.
6. The law of one price says that there must be a unique price for a good in each location where it is sold.
7. If the home country has a real GNP which is greater than real domestic expenditure, then the home country has a current-account deficit.
8. Foreign direct investment occurs when the home country acquires additional ownership of capital located in the rest of the world.
9. If the home country has negative trade balance, then its real GDP is less than real domestic expenditure.
10. The equilibrium business-cycle model predicts that the real current-account balance will be countercyclical.
MULTIPLE CHOICE
1. The law of one price:
a. prohibits price discrimination. c. is a tax on imports.
b. is that markets work to ensure that the same good has the same price in all locations. d. prohibits price increases unless firms can show their are unusual circumstances.
2. The difference between real GDP in a closed economy and real GNP in a open economy is:
a. net real asset income from abroad. c. net international investment position.
b. net imports. d. the trade balance.
3. Real GNP in an open economy is:
a. the closed economy real output less net real asset income from abroad. c. the closed economy real output less gross real asset income from abroad.
b. the closed economy real output plus gross real asset income from abroad. d. the closed economy real output plus net real asset income from abroad.
4. Net real asset income from abroad is:
a. rt-1•Bft-1/P. c. (Bft - Bft-1)/P.
b. Yt - (Ct +It +Gt ). d. ((Bft - Bft-1)/P) - (rt-1•Bft-1/P).
5. Net real foreign investment is:
a. rt-1•Bft-1/P. c. (Bft - Bft-1)/P.
b. Yt - (Ct +It +Gt ). d. ((Bft - Bft-1)/P) - (rt-1•Bft-1/P).
6. The trade balance is:
a. rt-1•Bft-1/P. c. (Bft - Bft-1)/P.
b. Yt - (Ct +It +Gt ). d. ((Bft - Bft-1)/P) - (rt-1•Bft-1/P).
7. The balance on the current account:
a. rt-1•Bft-1/P. c. (rt-1•Bft-1/P) + ((Bft - Bft-1)/P).
b. Yt + (rt-1•Bft-1/P) - (Ct +It +Gt ). d. ((Bft - Bft-1)/P) - (rt-1•Bft-1/P).
8. The balance on the current account is:
a. real GNP less net foreign investment income. c. real GNP less the net international investment position.
b. real GNP less net foreign investment. d. real GNP less real domestic expenditure.
9. The real current-account balance is:
a. net real asset income from abroad less trade balance c. trade balance times the net real asset income from abroad.
b. trade balance plus the net real asset income from abroad. d. trade balance less the net real income from abroad.
10. The real current account balance equals:
a. net foreign investments. c. the trade balance plus net real asset income from abroad.
b. real GNP less real domestic expenditure. d. all of the above.
11. The real current account balance equals:
a. net foreign investments. c. the trade balance.
b. the net international investment position. d. all of the above.
12. The real current account balance equals:
a. the trade balance. c. the net international investment position.
b. real GNP less real domestic expenditure. d. all of the above.
13. The real current account balance equals
a. the net international investment position. c. the trade balance plus net real asset income from abroad.
b. the trade balance. d. all of the above.
14. The trade balance is:
a. the difference between exports and imports. c. the real current-account balance less net real asset income from abroad.
b. real GDP less real domestic expenditure. d. all of the above.
15. The trade balance is:
a. the difference between exports and imports. c. net foreign investment.
b. real asset income from abroad. d. all of the above.
16. The trade balance is:
a. the balance on the current account. c. net foreign investment.
b. real GDP less real domestic expenditure. d. all of the above.
17. The trade balance is:
a. net foreign investment. c. the real current-account balance less net real asset income from abroad.
b. the net international investment position. d. all of the above.
18. In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:
a. an increase in the MPK. c. an increase in borrowing from foreigners.
b. an increase in home country gross domestic investment. d. all of the above.
19. In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:
a. an increase in the MPK. c. an increase in lending to foreigners.
b. an decrease in home country gross domestic investment. d. all of the above.
20. In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:
a. an decrease in the MPK. c. an increase in lending to foreigners.
b. an increase in home country gross domestic investment. d. all of the above.
21. In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:
a. a decrease in the MPK. c. an increase in borrowing from foreigners.
b. a decrease in gross domestic investment. d. all of the above.
22. In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:
a. a larger current account deficit. c. a lower MPK.
b. a smaller current account deficit. d. lower domestic gross investment.
23. In the market clearing model with world markets for goods and credit, a decrease in technology, A, in the home country causes:
a. a larger current account deficit. c. a higher MPK.
b. a smaller current account deficit. d. higher domestic gross investment.
24. The open economy equilibrium business-cycle model predicts that the real current account balance will be:
a. acyclical. c. countercyclical.
b. procyclical. d. exogenous.
25. The open economy equilibrium business-cycle model predicts that the real current account balance will be:
a. the same in expansions and recession. c. high in expansions and low in recessions.
b. low in expansions and high in recessions. d. invariant with the business cycle.
26. In US data the real current account balance is:
a. procyclical when the model predicts it will be countercyclical. c. countercyclical when the model predicts it will be procyclical.
b. procyclical as the model predicts. d. countercyclical as the model predicts.
27. In US data the real current account balance is:
a. procyclical. c. countercyclical.
b. weakly procyclical. d. weakly countercyclical.
28. While according to the model the current account balance will be countercyclical, the balance can also decline due to:
a. a temporary negative shock like a harvest failure. c. a temporary increase in government purchases as in war time.
b. a less developed country having a low capital stock. d. all of the above.
29. While according to the model the current account balance will be countercyclical, the balance can also decline due to:
a. a temporary negative shock like a harvest failure. c. a permanent decrease in government purchases.
b. a less developed country having poor institutions for growth. d. all of the above.
30. While according to the model the current account balance will be countercyclical, the balance can also decline due to:
a. a temporary positive shock like a good harvest. c. a permanent decrease in government purchases.
b. a less developed country having a low capital stock. d. all of the above.
31. While according to the model the current account balance will be countercyclical, the balance can also decline due to:
a. a temporary positive shock like a positive harvest c. a temporary increase in government purchases as in war time.
b. a less developed country having a high capital stock. d. all of the above.
32. In the Ricardian case, if the government budget deficit is increased, then the trade balance:
a. moves toward a deficit too. c. is unaffected.
b. moves toward a surplus. d. is exogenous.
33. The terms of trade are:
a. ($ per home good)/($ per foreign good). c. foreign good per home good.
b. the number of units of foreign goods that can be imported for each unit of home goods exported. d. all of the above.
34. The terms of trade are:
a. ($ per home good)/($ per foreign good). c. home good per foreign good.
b. the number of units of home goods that can be exported for each unit of foreign goods imported. d. all of the above.
35. The terms of trade are:
a. ($ per foreign good)/($ per home good). c. home good per foreign good.
b. the number of units of foreign goods that can be imported for each unit of home goods exported. d. all of the above.
36. The terms of trade are:
a. ($ per home foreign/($ per home good). c. foreign good per home good.
b. the number of units of home goods that can be exported for each unit of foreign goods imported. d. all of the above.
37. An increase in the terms of trade:
a. raises real GDP. c. increases real national saving if the change in terms of trade is less than fully permanent.
b. increases consum
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