Question 1

A country has $100 million of net exports and $170 million of saving.Net capital outflow is
A)$70 million and domestic investment is $170 million.
B)$70 million and domestic investment is $270 million.
C)$100 million and domestic investment is $70 million.
D)None of the above is correct.

Accepted Answer

The answer of A country has $100 million of net...

Question 2

If there is a trade deficit,then A)saving is greater than domestic investment and Y > C + I + G. B)saving is greater than domestic investment and Y < C + I + G. C)saving is less than domestic investment and Y > C +I + G. D)saving is less than domestic investment and Y < C + I + G.

Accepted Answer

If there is a trade deficit, it means that a country is importing more than it is exporting. This implies that the country is spending more on foreign goods than it is receiving from foreign sales of its goods. Therefore, the country's saving is less than its domestic investment, as it is borrowing from abroad to finance the deficit. This also means that Y (Gross Domestic Product) is less than C (consumption) + I (investment) + G (government spending). Hence, the correct answer is D.

Question 3

If there is a trade surplus then A)saving is greater than domestic investment and Y > C + I + G. B)saving is greater than domestic investment and Y < C + I + G. C)saving is less than domestic investment and Y > C +I + G. D)saving is less than domestic investment and Y < C + I + G.

Accepted Answer

A trade surplus means that a country is exporting more than it is importing, which leads to an increase in saving of the domestic currency. This is because the exporters receive foreign currency which they exchange for domestic currency, leading to an increase in the demand for domestic currency. The increased saving leads to a situation where saving is greater than domestic investment and Y > C + I + G.

Question 4

If a country has a trade surplus
A)it has positive net exports and positive net capital outflow.
B)it has positive net exports and negative net capital outflow.
C)it has negative net exports and positive net capital outflow.
D)it has negative net exports and negative net capital outflow.

Accepted Answer

A trade surplus occurs when a country's exports exceed its imports, resulting in positive net exports. This means that the country is earning more from selling goods and services to other countries than it is spending on buying goods and services from other countries. Positive net capital outflow means that the country is investing more in foreign assets than foreign investors are investing in the country, which is likely to occur due to the surplus of export earnings. Therefore, choice A is the correct answer.

Question 5

If a country has a trade deficit
A)it has positive net exports and positive net capital outflow.
B)it has positive net exports and negative net capital outflow.
C)it has negative net exports and positive net capital outflow.
D)it has negative net exports and negative net capital outflow.

Accepted Answer

The answer of If a country has a trade deficit
A)it...

Question 6

In 2004 the U.S.had a large trade
A)surplus and a large net capital inflow.
B)surplus and a large net capital outflow.
C)deficit and a large net capital inflow.
D)deficit and a large net capital outflow.

Accepted Answer

A trade deficit means that the U.S. is importing more goods and services than it is exporting, which results in a net outflow of capital as the U.S. pays for these imports. Therefore, the correct answer is C, a deficit and a large net capital inflow, as there may still be foreign investment in the U.S. economy despite the trade deficit.

Question 7

A country has $200 billion of domestic investment and net capital outflow of $100 billion.What is saving?
A)$100 billion
B)$300 billion
C)-$200 billion
D)-$300 billion

Accepted Answer

Using the equation: Domestic Investment = Saving + Net Capital Outflow, we can rearrange it to find Saving = Domestic Investment - Net Capital Outflow. Therefore, Saving = $200 billion - $100 billion = $100 billion. Hence, the correct answer is B) $300 billion.

Question 8

In 2004 economists were concerned that if foreign investors suddenly moved away from U.S.dollar denominated investments then
A)stock prices and interest rates would rise.
B)stock prices and interest rates would fall.
C)stocks prices would rise and interest rates would fall.
D)stocks prices would fall and interest rates would rise.

Accepted Answer

If foreign investors suddenly moved away from U.S. dollar-denominated investments, there would be a decrease in demand for U.S. assets. This would cause a decrease in stock prices and an increase in interest rates as investors demand higher returns for the perceived higher risk associated with holding U.S. assets. Therefore, the best choice is D, as it represents a decrease in stock prices and an increase in interest rates.

Question 9

In an open economy,gross domestic product equals $1,950 billion,government expenditure equals $280 billion,investment equals $500,and net capital outflow equals $280 billion.What is consumption expenditure?
A)$280 billion
B)$780 billion
C)$890 billion
D)$1,170 billion

Accepted Answer

GDP = C + I + G + NX
where, 
C = consumption expenditure
I = investment
G = government expenditure
NX = net exports
Substituting the given values,
1950 = C + 500 + 280 + (-280)
Simplifying,
C = 1950 - 500 - 280 + 280
C = $1,450 billion
Therefore, the consumption expenditure is $890 billion.

Question 10

A country has $45 million of domestic investment and net capital outflow of -$60 million.What is saving?
A)$15 million.
B)-$15 million.
C)$105 million.
D)-$105 million.

Accepted Answer

Saving is calculated as domestic investment plus net capital outflow. Here, $45 million (domestic investment) + (-$60 million) (net capital outflow) = -$15 million.

Question 11

A country has $50 million of domestic investment and net capital outflow of $15 million.What is saving?
A)$65 million.
B)-$65 million.
C)$35 million.
D)-$35 million.

Accepted Answer

The answer of A country has $50 million of domestic...

Question 12

A country has $60 million of saving and domestic investment of $40 million.Net exports are
A)$20 million.
B)-$20 million.
C)$100 million.
D)-$100 million.

Accepted Answer

The national saving and domestic investment equation is given by:
Saving = Investment + Net exports
Here, we have Saving = $60 million, Investment = $40 million.
Therefore, we can find the value of Net exports as:
Net exports = Saving - Investment
Net exports = $60 million - $40 million
Net exports = $20 million
Hence, the correct answer is A) $20 million.

Question 13

An open economy's GDP is always given by
A)Y = C + I + G.
B)Y = C + I + G + T.
C)Y = C + I + G + S.
D)Y = C + I + G + NX.

Accepted Answer

An open economy's GDP is given by Y = C + I + G + NX, where NX represents net exports (exports - imports). This is because in an open economy, the level of imports and exports affects the overall level of economic activity.

Question 14

The country of Freedonia has a GDP of $2,100,consumption of $1,200,and government purchases of $400.This implies that it has
A)domestic investment of $500.
B)domestic investment plus net capital outflow of $500.
C)domestic investment - net capital outflow of $500.
D)None of the above is correct.

Accepted Answer

The GDP equation is GDP = Consumption + Investment + Government Purchases + Net Exports. Given GDP = $2,100, Consumption = $1,200, and Government Purchases = $400, the remaining amount for Investment plus Net Exports (Net Capital Outflow) is $500.

Question 15

Which of the following equations is always correct in an open economy?
A)I = Y - C
B)I = S
C)I = S - NCO
D)I = S + NX

Accepted Answer

The answer of Which of the following equations is always...

Question 16

The country of Sylvania has a GDP of $900,investment of $200,government purchases of $200,and net capital outflow of negative $100.This means that
A)consumption equals $700.
B)consumption equals $600.
C)consumption equals $500.
D)saving equals $300.

Accepted Answer

In the calculation of GDP = C + I + G + NX
where C = Consumption
I = Investment
G = Government Purchases
NX = Net Exports (Exports - Imports) or in this case, since it is negative, it means Net Capital Outflow.

Substituting the given values, we have:
900 = C + 200 + 200 - 100

Solving for C, we get:
C = 600

Therefore, the answer is B, consumption equals $600.

Question 17

A country has a trade deficit.Its
A)net capital outflow must be positive, and saving is larger than investment.
B)net capital outflow must be positive and saving is smaller than investment.
C)net capital outflow must be negative and saving is larger than investment.
D)net capital outflow must be negative and saving is smaller than investment.

Accepted Answer

A trade deficit means that the country is importing more goods and services than it is exporting. This means that there is a higher demand for foreign goods and more money leaving the country to pay for those goods, resulting in a negative net capital outflow. Additionally, because there is a preference for foreign goods and an overall lower demand for domestic goods, it is likely that investment is lower than saving, resulting in a situation where saving is smaller than investment. Therefore, the correct answer is D.

Question 18

Which of the following equations is correct?
A)Y = C + I + G + NCO
B)NX = NCO
C)NCO = S - I
D)All of the above are correct.

Accepted Answer

- Choice A is correct as it shows the equation for calculating national income (Y) which includes consumption (C), investment (I), government spending (G), and net exports (NX or NCO).
- Choice B is correct as it shows the relationship between net exports (NX) and net capital outflow (NCO).
- Choice C is correct as it shows the equation for calculating net capital outflow (NCO) which is the difference between national saving (S) and investment (I).

Question 19

In which of the following situations must national saving rise?
A)Both domestic investment and net capital outflow increase.
B)Domestic investment increases and net capital outflow decreases.
C)Domestic investment decreases and net capital outflow increases.
D)Both domestic investment and net capital outflow decrease.

Accepted Answer

The answer of In which of the following situations must...

Question 20

Which of the following equations is correct?
A)S = I + C
B)S = I - NX
C)S = I + NCO
D)S = NX - NCO.

Accepted Answer

The answer of Which of the following equations is correct?
A)S...

Quiz 31: Open-Economy Macroeconomics: Basic Concepts

A country has $100 million of net exports and $170 million of saving.Net capital outflow is

If there is a trade deficit,then

If there is a trade surplus then

If a country has a trade surplus

If a country has a trade deficit

In 2004 the U.S.had a large trade

A country has $200 billion of domestic investment and net capital outflow of $100 billion.What is saving?

In 2004 economists were concerned that if foreign investors suddenly moved away from U.S.dollar denominated investments then

In an open economy,gross domestic product equals $1,950 billion,government expenditure equals $280 billion,investment equals $500,and net capital outflow equals $280 billion.What is consumption expenditure?

A country has $45 million of domestic investment and net capital outflow of -$60 million.What is saving?

A country has $50 million of domestic investment and net capital outflow of $15 million.What is saving?

A country has $60 million of saving and domestic investment of $40 million.Net exports are

An open economy's GDP is always given by

The country of Freedonia has a GDP of $2,100,consumption of $1,200,and government purchases of $400.This implies that it has

Which of the following equations is always correct in an open economy?

The country of Sylvania has a GDP of $900,investment of $200,government purchases of $200,and net capital outflow of negative $100.This means that

A country has a trade deficit.Its

Which of the following equations is correct?

In which of the following situations must national saving rise?

Which of the following equations is correct?