Chapter 31 Study Guide

Multiple Choice
1. International trade 2. Net exports of a country are the value of 3. A country sells more to foreign countries than it buys from them. It has 4. Refer to Table 31-1. What are Argentina’s exports?
 * a. raises the standard of living in all trading countries.
 * b. lowers the standard of living in all trading countries.
 * c. leaves the standard of living unchanged.
 * d. raises the standard of living for importing countries and lowers it for exporting countries.
 * e. raises the standard of living for exporting countries and lowers it for importing countries.
 * a. goods and services imported minus the value of goods and services exported.
 * b. goods and services exported minus the value of goods and services imported.
 * c. goods exported minus the value of goods imported.
 * d. goods imported minus the value of goods exported.
 * e. goods exported minus services exported.
 * a. a trade surplus and positive net exports.
 * b. a trade surplus and negative net exports.
 * c. a trade deficit and positive net exports.
 * d. a trade deficit and negative net exports.
 * e. a trade balance but negative net exports.


 * a. $60 billion
 * b. $40 billion
 * c. $35 billion
 * d. $25 billion
 * e. $10 billion

5. Refer to Table 31-1. What are Argentina’s imports? 6. Refer to Table 31-1. What are Argentina’s net exports? 7. Net capital outflow is defined as the purchase of 8. Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures 9. If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has 10. You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same, 11. If the exchange rate were 0.8 Canadian dollars per U.S. dollar, a watch that costs 8 U.S. dollars would cost 12. If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by
 * a. $60 billion
 * b. $40 billion
 * c. $35 billion
 * d. $25 billion
 * e. $10 billion
 * a. $30 billion
 * b. $5 billion
 * c. -$5 billion
 * d. -$25 billion
 * e. -$60 billion
 * a. foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
 * b. foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
 * c. domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
 * d. domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
 * e. domestic and foreign assets by domestic residents minus the purchase of domestic and foreign assets by foreign residents.
 * a. increase U.S. net capital outflow and have no impact on Greek net capital outflow.
 * b. increase U.S. net capital outflow and increase Greek net capital outflow.
 * c. increase U.S. net capital outflow, but decrease Greek net capital outflow.
 * d. decrease U.S. net capital outflow, but increase Greek net capital outflow.
 * e. decrease U.S. net capital outflow and have no impact on Greek net capital outflow.
 * a. appreciated. Other things the same, the appreciation would make Americans less likely to travel to Mexico.
 * b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Mexico.
 * c. depreciated. Other things the same, the depreciation would make Americans less likely to travel to Mexico.
 * d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Mexico.
 * e. devalued. Other things the same, this would have no effect on travel to Mexico.
 * a. the dollar would buy more pounds. The depreciation would discourage you from buying as many British goods and services.
 * b. the dollar would buy more pounds. The depreciation would encourage you to buy more British goods and services.
 * c. the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.
 * d. the dollar would buy fewer pounds. The depreciation would encourage you to buy more British goods and services.
 * e. the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services.
 * a. 6.4 Canadian dollars.
 * b. 10 Canadian dollars.
 * c. 12.50 Canadian dollars.
 * d. 8 Canadian dollars.
 * e. 16 Canadian dollars.
 * a. buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Honduras.
 * b. buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Guatemala.
 * c. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Guatemala.
 * d. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Honduras.
 * e. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in both countries.

Answers

 * A
 * B
 * A
 * C
 * A
 * D
 * A
 * D
 * B
 * A
 * A
 * A

Free Response
1. Define an exchange rate. What would happen to exports from a country that experienced a decline in its exchange rate? 2. In a world with two countries, Upper Sparta and Lower Sparta, and with flexible exchange rates, how would each of the following influence the value of the Upper Sparta Peso?
 * a. In Upper Sparta, goods from Lower Sparta become less popular with consumers.
 * b. The real interest rate in Lower Sparta increases, but not in Upper Sparta.