Questions from General Economics

Q: In an open economy, national saving equals domestic investment a

In an open economy, national saving equals domestic investment a. plus the net outflow of capital abroad. b. minus the net exports of goods and services. c. plus the government’s budget deficit. d. mi...

Q: If the value of a nation’s imports exceeds the value of its

If the value of a nation’s imports exceeds the value of its exports, which of the following is NOT true? a. Net exports are negative. b. GDP is less than the sum of consumption, investment, and govern...

Q: If a nation’s currency doubles in value on foreign exchange markets,

If a nation’s currency doubles in value on foreign exchange markets, the currency is said to _________, reflecting a change in the _________ exchange rate. a. appreciate, nominal b. appreciate, real c...

Q: Economist George Stigler once wrote that, according to consumer theory,

Economist George Stigler once wrote that, according to consumer theory, “if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity...

Q: If a cup of coffee costs 2 euros in Paris and $

If a cup of coffee costs 2 euros in Paris and $6 in New York and purchasing-power parity holds, what is the exchange rate? a. 1/4 euro per dollar b. 1/3 euro per dollar c. 3 euros per dollar d. 4 euro...

Q: The theory of purchasing-power parity says that higher inflation in

The theory of purchasing-power parity says that higher inflation in a nation causes the nation’s currency to _________, leaving the _________ exchange rate unchanged. a. appreciate, nominal b. appreci...

Q: Define net exports and net capital outflow. Explain how they are

Define net exports and net capital outflow. Explain how they are related.

Q: Over the past 20 years, Mexico has had high inflation and

Over the past 20 years, Mexico has had high inflation and Japan has had low inflation. What do you predict has happened to the number of Mexican pesos a person can buy with a Japanese yen?

Q: Suppose that Congress is considering an investment tax credit, which subsidizes

Suppose that Congress is considering an investment tax credit, which subsidizes domestic investment. a. How does this policy affect national saving, domestic investment, net capital outflow, the inter...

Q: The chapter notes that the rise in the U.S.

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the increa...