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Chapter 31 Open-Economy Macroeconomics: Basic Concepts TRUE/FALSE 1. A country with negative net exports has a trade surplus. ANS: F DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Net exports MSC: Definitional 2. If a countrys imports exceed its exports it has a trade surplus. ANS: F DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Trade balance MSC: Definitional 3. If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus. ANS: T DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Net exports MSC: Definitional 4. Movies are a major export of the U.S. ANS: T DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: U.S. trade statistics MSC: Definitional 5. Perhaps the most dramatic change in the U.S. economy over the past four decades has been the increasing relative importance of international trade and finance. ANS: T DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: U.S. trade MSC: Definitional 6. Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950. ANS: T DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: U.S. trade MSC: Definitional 7. U.S. exports make up less than 20 percent of GDP. ANS: T DIF: 2 REF: 31-3 NAT: Analytic LOC: International trade and finance TOP: U.S. trade MSC: Definitional 8. Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents. ANS: F DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Net capital outflow MSC: Definitional 9. When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents. ANS: T DIF: 2 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Net capital outflow MSC: Definitional 10. A rational investor will always purchase the bond that pays the highest real interest rate. ANS: F DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Foreign portfolio investment MSC: Applicative 20 21 Chapter 31 /Open-Economy Macroeconomics: Basic Concepts 11. When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment. ANS: T DIF: 1 REF: 31-1 NAT: Analytic LOC: International trade and finance TOP: Foreign direct investment MSC: Definitional 12. Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.... View Full Document

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