Question 1

The purchase of U.S.government bonds by Egyptians is an example of
A)U.S.imports.
B)U.S.exports.
C)foreign portfolio investment by Egyptians.
D)foreign direct investment by Egyptians.

Accepted Answer

The purchase of U.S. government bonds by Egyptians is an example of foreign portfolio investment, as it involves the purchase of financial assets (bonds) without an ownership stake or control over the issuing entity (the U.S. government). It is not an example of imports, exports or foreign direct investment.

Question 2

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets,then France's net capital outflow is
A)-.3 trillion euros,so it must have a trade deficit.
B)-.3 trillion euros,so it must have a trade surplus.
C).3 trillion euros,so it must have a trade deficit.
D).3 trillion euros,so it must have a trade surplus.

Accepted Answer

Net capital outflow is calculated as the difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners. Here, it is 1.2 trillion - 1.5 trillion = -0.3 trillion euros, indicating a net capital inflow, which corresponds to a trade deficit.

Question 3

Suppose that more British decide to vacation in the U.S.and that the British purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,
A)the first action by itself raises U.S.net exports,the second action by itself raises U.S.net capital outflow.
B)the first action by itself raises U.S.net exports,the second action by itself lowers U.S.net capital outflow.
C)the first action by itself lowers U.S.net exports,the second action by itself raises U.S.net capital outflow.
D)the first action by itself lowers U.S.net exports,the second action by itself lowers U.S.net capital outflow.

Accepted Answer

When more British vacation in the U.S., it increases U.S. exports of services, raising U.S. net exports. When the British purchase more U.S. Treasury bonds, it represents a capital inflow to the U.S., which lowers U.S. net capital outflow.

Question 4

Which of the following is an example of U.S.foreign portfolio investment?
A)Disney builds a new amusement park near Barcelona,Spain.
B)A U.S.citizen buys bonds issued by the British government.
C)A Dutch hotel chain opens a new hotel in the United States.
D)A citizen of Singapore buys a bond issued by a U.S.corporation.

Accepted Answer

Foreign portfolio investment refers to investments in foreign financial assets such as stocks, bonds, and other tradable securities. Option B describes a U.S. citizen investing in British government bonds, which qualifies as a U.S. foreign portfolio investment. Options A, C, and D describe foreign direct investment activities, which involve owning or controlling a physical asset, such as building an amusement park, opening a hotel or buying a bond issued by a U.S. corporation, respectively.

Question 5

John,a U.S.citizen,opens up a Sports bar in Tokyo.This is an example of U.S.
A)exports.
B)imports.
C)foreign portfolio investment.
D)foreign direct investment.

Accepted Answer

This is an example of foreign direct investment because John has made a long-term investment in a physical business in a foreign country.

Question 6

Which of the following is an example of U.S.foreign direct investment?
A)A Greek company opens a cheese factory in the U.S.
B)A German mutual fund buys stock issued by a U.S.corporation.
C)A U.S.beverage company opens a bottling plant in Russia.
D)A U.S.bank buys bonds issued by an Argentinean company.

Accepted Answer

U.S. foreign direct investment refers to U.S. companies investing in and establishing operations in foreign countries. Option C is the only example where a U.S. company is opening a plant in another country. Options A, B, and D involve foreign entities investing in U.S. companies or government bonds.

Question 7

Which of the following is an example of U.S.foreign direct investment?
A)A U.S.based mutual fund buys stock in Eastern European companies.
B)A U.S.citizen builds and operates a coffee shop in the Netherlands.
C)A Swiss bank buys a U.S.government bond.
D)A German tractor factory opens a plant in Waterloo,Iowa.

Accepted Answer

Foreign direct investment (FDI) involves a U.S. citizen or company investing in and having control over a business in another country, such as building and operating a coffee shop in the Netherlands.

Question 8

Susan,a U.S.citizen,builds and operates a kennel in France.This action is an example of
A)investment for Susan and U.S.foreign direct investment.
B)investment for Susan and U.S.foreign portfolio investment.
C)U.S.foreign direct investment and U.S.domestic investment.
D)U.S.foreign portfolio investment and U.S.domestic investment.

Accepted Answer

Susan's investment in a business in France is an example of U.S. foreign direct investment because she is building and operating a physical business in a foreign country. This is different from foreign portfolio investment, which typically involves investing in stocks or other financial assets in a foreign country without having direct control over a business. Additionally, this investment is not considered U.S. domestic investment since it is not taking place within the United States.

Question 9

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss
A)exports.
B)imports.
C)foreign portfolio investment.
D)foreign direct investment.

Accepted Answer

A Swiss watchmaker opening a factory in the United States is an example of foreign direct investment (FDI). FDI refers to the ownership or control of assets in one country by a foreign company or individual. In this case, the Swiss watchmaker is establishing physical presence in the United States by setting up a factory, which involves significant investment and risk-taking. This is different from foreign portfolio investment (C), which involves investing in financial assets such as stocks and bonds, and imports (B), which involve bringing goods or services from a foreign country to the domestic market. Swiss exports (A) would refer to Swiss products and services being sold in foreign markets, rather than a Swiss company setting up operations in a foreign country.

Question 10

Net exports measures the difference between a country's
A)income and expenditures.
B)sale of goods and services abroad and purchase of foreign goods and services.
C)sale of domestic assets abroad and purchase of foreign assets.
D)All of the above are correct.

Accepted Answer

Net exports measures the difference between a country's exports (sale of goods and services abroad) and imports (purchase of foreign goods and services). It does not include income and expenditures or the sale and purchase of domestic and foreign assets.

Question 11

Mark,a U.S.citizen,buys stock in a British Shipping company.This purchase is an example of
A)investment for Mark and U.S.foreign direct investment.
B)investment for Mark and U.S.foreign portfolio investment.
C)saving for Mark and U.S.foreign direct investment.
D)saving for Mark and U.S.foreign portfolio investment.

Accepted Answer

The answer of Mark,a U.S.citizen,buys stock in a British Shipping...

Question 12

If domestic residents of other countries purchase $600 billion of U.S.assets and U.S residents purchase $500 billion of foreign assets,then U.S.net capital outflow is
A)$100 billion and the U.S.has a trade surplus.
B)$100 billion and the U.S has a trade deficit.
C)-$100 billion and the U.S.has a trade surplus.
D)-$100 billion and the U.S.has a trade deficit.

Accepted Answer

Net capital outflow is equal to domestic residents' purchases of foreign assets minus foreign residents' purchases of domestic assets. In this case, U.S net capital outflow would be $100 billion ($500 billion foreign assets purchased by U.S residents minus $600 billion U.S assets purchased by foreign residents), indicating that the U.S. has a net capital outflow and a trade deficit.

Question 13

Which of the following is an example of U.S.foreign direct investment?
A)A Chinese company opens a restaurant in the U.S.
B)An Australian bank buys stocks issued by a U.S.corporation.
C)A U.S.bank buys bonds issued by an Australian corporation.
D)A U.S.company opens an auto parts factory in Canada.

Accepted Answer

U.S. foreign direct investment refers to the direct investment made by U.S. companies in foreign countries. Opening an auto parts factory in Canada involves a U.S. company investing in a foreign country, thus it is an example of U.S. foreign direct investment. Options A and B refer to foreign companies investing in the U.S., while option C refers to a U.S. bank buying bonds issued by a foreign company, which is not considered foreign direct investment.

Question 14

Which of the following is an example of U.S.foreign direct investment?
A)A Swedish car manufacturer opens a plant in Tennessee.
B)A Dutch citizen buys shares of stock in a U.S.company.
C)A U.S.based restaurant chain opens new restaurants in India.
D)A U.S.citizen buys stock in companies located in Japan.

Accepted Answer

Foreign direct investment (FDI) involves a company or individual from one country making an investment into business interests located in another country. In this case, a U.S.-based restaurant chain opening new restaurants in India is an example of U.S. foreign direct investment.

Question 15

Which of the following is an example of U.S.foreign portfolio investment?
A)A U.S.legal office opens a branch office in Holland.
B)Erica,a U.S.resident,buys bonds issued by the Swiss government.
C)Both A and B are examples of U.S.portfolio investment.
D)Neither A nor B are examples of U.S.portfolio investment.

Accepted Answer

U.S. foreign portfolio investment refers to investments made by U.S. residents or entities in foreign financial assets such as stocks, bonds, and mutual funds. Buying bonds issued by the Swiss government is an example of such investment. Opening a branch office in Holland is an example of foreign direct investment, which is different from foreign portfolio investment. Therefore, option A is incorrect, and option B is the correct answer.

Question 16

Which of the following is an example of U.S.foreign portfolio investment?
A)Albert,a German citizen,buys stock in a U.S.computer company.
B)Larry,a citizen of Ireland,opens a fish and chips restaurant in the United States.
C)Nancy,a U.S.citizen,buys bonds issued by a Japanese bank.
D)Dustin,a U.S.citizen,opens a country-western tavern in New Zealand.

Accepted Answer

Foreign portfolio investment refers to the purchase of stocks, bonds, and other financial assets by foreign investors in a country. Option A is an example of a foreign direct investment where a foreign citizen buys stock in a U.S. company. Option B is an example of a foreign direct investment where a citizen from Ireland establishes a business in the United States. Option D is also an example of a foreign direct investment where a U.S. citizen establishes a business in New Zealand. Only option C involves a U.S. citizen buying bonds issued by a Japanese bank, which constitutes foreign portfolio investment.

Question 17

Carl and Carly are American residents.Carl buys stock of a corporation in Austria.Carly opens a coffee shop in Austria.Whose purchase,by itself,decreases Austria's net capital outflow?
A)Carl's
B)Carly's
C)both Carl's and Carly's
D)neither Carl's nor Carly's

Accepted Answer

The answer of Carl and Carly are American residents.Carl buys...

Question 18

Suppose that foreign citizens decide to purchase more U.S.pharmaceuticals and U.S.citizens decide to buy more stock in foreign corporations.Other things the same,these actions
A)raise both U.S.net exports and U.S.net capital outflows.
B)raise U.S.net exports and lower U.S.net capital outflows.
C)lower both U.S.net exports and U.S.net capital outflows.
D)lower U.S.net exports and raise U.S.net capital outflows.

Accepted Answer

Foreign citizens purchasing more U.S. pharmaceuticals increases U.S. exports, while U.S. citizens buying more stock in foreign corporations increases U.S. capital outflows.

Question 19

Matt and Melinda are American residents.Matt buys stock issued by a German corporation.Melinda opens a shoe factory in Panama.Whose purchase,by itself,increases the U.S.'s net capital outflow?
A)Matt's
B)Melinda's
C)both Matt's and Melinda's
D)neither Matt's nor Melinda's

Accepted Answer

The answer of Matt and Melinda are American residents.Matt buys...

Question 20

Jen and Alica are both U.S.citizens.Jen opens a cafe in France.Alicia buys equipment from a company in Canada to use in her factory.Whose action is an example of U.S.foreign direct investment?
A)Jen's and Alica's
B)Jen's but not Alicia's
C)Alicia's but not Jen's
D)Neither Anthony's nor Tom's.

Accepted Answer

Jen's action of opening a cafe in France involves U.S. foreign direct investment as she is directly investing in a business located in a foreign country. Alicia's action of buying equipment from a Canadian company does not involve foreign direct investment as she is not directly investing in a foreign business, but rather just purchasing goods from a foreign company.

Quiz 18: Open Economy Macroeconomics Basic Concepts: The International Flows of Goods and Capital

The purchase of U.S.government bonds by Egyptians is an example of

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets,then France's net capital outflow is

Suppose that more British decide to vacation in the U.S.and that the British purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,

Which of the following is an example of U.S.foreign portfolio investment?

John,a U.S.citizen,opens up a Sports bar in Tokyo.This is an example of U.S.

Which of the following is an example of U.S.foreign direct investment?

Which of the following is an example of U.S.foreign direct investment?

Susan,a U.S.citizen,builds and operates a kennel in France.This action is an example of

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

Net exports measures the difference between a country's

Mark,a U.S.citizen,buys stock in a British Shipping company.This purchase is an example of

If domestic residents of other countries purchase $600 billion of U.S.assets and U.S residents purchase $500 billion of foreign assets,then U.S.net capital outflow is

Which of the following is an example of U.S.foreign direct investment?

Which of the following is an example of U.S.foreign direct investment?

Which of the following is an example of U.S.foreign portfolio investment?

Which of the following is an example of U.S.foreign portfolio investment?

Carl and Carly are American residents.Carl buys stock of a corporation in Austria.Carly opens a coffee shop in Austria.Whose purchase,by itself,decreases Austria's net capital outflow?

Suppose that foreign citizens decide to purchase more U.S.pharmaceuticals and U.S.citizens decide to buy more stock in foreign corporations.Other things the same,these actions

Matt and Melinda are American residents.Matt buys stock issued by a German corporation.Melinda opens a shoe factory in Panama.Whose purchase,by itself,increases the U.S.'s net capital outflow?

Jen and Alica are both U.S.citizens.Jen opens a cafe in France.Alicia buys equipment from a company in Canada to use in her factory.Whose action is an example of U.S.foreign direct investment?