Final Exam (2)

Final Exam (2) - Name: _ Fall 2008 Macroeconomics Final...

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Name: _________________________________ Fall 2008 Macroeconomics Final Exam Circle the best answer. There is exactly one correct answer for each question. 1. When InBev (an Belgian company) buys shares of Anheuser-Busch stock (an American company), U.S. net capital outflow a. increases because a Belgian company makes a portfolio investment in America. b. declines because a Belgian company makes a portfolio investment in America. c. increases because a Belgian company makes a direct investment in America. d. declines because a Belgian company makes a direct investment in America. 2. S = I + NCO, where S is national saving, I is investment, and NCO is net capital outflow. Which of the following statements best summarizes this equation? a. A nation can save money or invest it. If it invests it, some of the capital flows overseas. b. A nation's saving can be used either to finance domestic investment or to buy foreign assets. c. A country that has a positive capital outflow will not save as much as it invests. d. The value of assets purchased abroad equals the sum of a nation's saving and investment. 3. Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area. Suppose a McDonald’s Big Mac costs $3.50 in the United States and 2.45 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing power parity? a. Both the tall-latte and the Big Mac. b. Neither the tall-latte nor the Big Mac. c. The tall-latte but not the Big Mac. d. The Big Mac but not the tall-latte.
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4. When a country's central bank increases the money supply, its a. price level rises and its currency appreciates relative to other currencies in the world. b. price level rises and its currency depreciates relative to other currencies in the world. c. price level falls and its currency appreciates relative to other currencies in the world. d. price level falls and its currency depreciates relative to other currencies in the world. 5. Net capital outflow measures a. foreign assets held by domestic residents minus domestic assets held by foreign residents. b. the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. c. the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. d. None of the above is correct. 6. Foreign citizens would be more likely to engage in foreign portfolio investment in the U.S. if, compared to their country's assets, U.S. assets had a. a higher interest rate and a higher default risk. b. a higher interest rate and a lower default risk. c. a lower interest rate and higher default risk.
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Final Exam (2) - Name: _ Fall 2008 Macroeconomics Final...

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