Question 1

A nation's merchandise trade balance reflects

Accepted Answer

A) trade in tangible products 
B) value of exports 
C) value of imports 
D) the same information as its balance of payments 
E) trade in tangibles and intangibles 
A) trade in tangible products 
B) value of exports 
C) value of imports 
D) the same information as its balance of payments 
E) trade in tangibles and intangibles

Question 2

If $1 equals 2 euros, then 1 euro equals

Accepted Answer

A) $4.00 
B) $2.00 
C) $0.50 
D) $1.00 
E) $0.25 
A) $4.00 
B) $2.00 
C) $0.50 
D) $1.00 
E) $0.25

Question 3

If the exchange rate changes from 20 cents per franc to 18 cents per franc, the U.S.dollar has

Accepted Answer

A) appreciated, since its value has increased 
B) appreciated, since its value has declined 
C) depreciated, making French goods more expensive in U.S.dollars 
D) depreciated, since its value has declined 
E) depreciated, since its value has increased 
A) appreciated, since its value has increased 
B) appreciated, since its value has declined 
C) depreciated, making French goods more expensive in U.S.dollars 
D) depreciated, since its value has declined 
E) depreciated, since its value has increased

Question 4

The balance of payments can be thought of as the balance of economic transactions.

Accepted Answer

A) True 
 B)False

Question 5

If fewer U.S.dollars are needed to buy a Swiss franc, then

Accepted Answer

A) Swiss goods become relatively more expensive to U.S.residents 
B) U.S.residents buy fewer francs 
C) U.S.goods become relatively cheaper to Swiss residents 
D) U.S.residents buy more Swiss goods 
E) U.S.residents supply more francs 
A) Swiss goods become relatively more expensive to U.S.residents 
B) U.S.residents buy fewer francs 
C) U.S.goods become relatively cheaper to Swiss residents 
D) U.S.residents buy more Swiss goods 
E) U.S.residents supply more francs

Question 6

If the U.S.dollar depreciates, it means that

Accepted Answer

A) the value of the U.S.dollar has increased 
B) the value of foreign exchange has decreased 
C) fewer U.S.dollars are required to purchase foreign exchange 
D) more U.S.dollars are required to purchase foreign exchange 
E) exports will immediately fall 
A) the value of the U.S.dollar has increased 
B) the value of foreign exchange has decreased 
C) fewer U.S.dollars are required to purchase foreign exchange 
D) more U.S.dollars are required to purchase foreign exchange 
E) exports will immediately fall

Question 7

Under the initial Bretton Woods system,

Accepted Answer

A) foreign currencies could be converted into U.S.dollars, which could be redeemed for gold at a rate determined by supply and demand 
B) foreign currencies could be converted into U.S.dollars, which could be redeemed for gold at a rate of $35 per ounce 
C) foreign currencies could be converted into gold at a rate determined by supply and demand 
D) foreign currencies could be converted into gold at a rate of $35 per ounce 
E) gold was the international medium of exchange 
A) foreign currencies could be converted into U.S.dollars, which could be redeemed for gold at a rate determined by supply and demand 
B) foreign currencies could be converted into U.S.dollars, which could be redeemed for gold at a rate of $35 per ounce 
C) foreign currencies could be converted into gold at a rate determined by supply and demand 
D) foreign currencies could be converted into gold at a rate of $35 per ounce 
E) gold was the international medium of exchange

Question 8

If the exchange rate changes from 1500 lire per U.S.dollar to 1000 lire per U.S.dollar, the U.S.dollar has

Accepted Answer

A) appreciated, since its value has increased 
B) appreciated, since the price of foreign exchange has increased 
C) appreciated, making Italian goods cheaper in U.S.dollars 
D) depreciated, since its value has declined 
E) depreciated, since its value has increased 
A) appreciated, since its value has increased 
B) appreciated, since the price of foreign exchange has increased 
C) appreciated, making Italian goods cheaper in U.S.dollars 
D) depreciated, since its value has declined 
E) depreciated, since its value has increased

Question 9

Today's exchange rate system can be described as

Accepted Answer

A) a fixed exchange rate system 
B) a freely floating exchange rate system 
C) a pegged exchange rate system 
D) a flexible exchange rate system 
E) a managed float 
A) a fixed exchange rate system 
B) a freely floating exchange rate system 
C) a pegged exchange rate system 
D) a flexible exchange rate system 
E) a managed float

Question 10

A country's balance of payments summarizes all economic transactions during a given period between residents of that country and residents of other countries.

Accepted Answer

A) True 
 B)False

Question 11

The supply of foreign exchange to the United States is generated by the desire for foreigners to acquire dollars for all except one of the following reasons.Which is the exception?

Accepted Answer

A) The United States is considered a safe haven in times of political unrest. 
B) The dollar has long been accepted as an international medium of exchange. 
C) Foreigners want to buy U.S.assets. 
D) U.S.goods have become less attractive to foreigners. 
E) Foreigners wish to make cash gifts to family in the United States. 
A) The United States is considered a safe haven in times of political unrest. 
B) The dollar has long been accepted as an international medium of exchange. 
C) Foreigners want to buy U.S.assets. 
D) U.S.goods have become less attractive to foreigners. 
E) Foreigners wish to make cash gifts to family in the United States.

Question 12

President Nixon "closed the gold window"

Accepted Answer

A) as a political expediency 
B) to force the allies to devalue their currencies 
C) to try to save the Bretton Woods exchange rate system 
D) to halt dramatic inflows of gold into the United States 
E) to cure the U.S.domestic deflationary spiral 
A) as a political expediency 
B) to force the allies to devalue their currencies 
C) to try to save the Bretton Woods exchange rate system 
D) to halt dramatic inflows of gold into the United States 
E) to cure the U.S.domestic deflationary spiral

Question 13

Exhibit 20-5   Suppose that British incomes rise relative to incomes in the United States.Then, in Exhibit 20-5

Accepted Answer

A) the demand curve will shift from D1 to D2 
B) the demand curve will shift from D2 to D1 
C) the supply curve will shift from S1 to S2 
D) the supply curve will shift from S2 to S1 
E) neither the demand for nor the supply curve will shift 
A) the demand curve will shift from D1 to D2 
B) the demand curve will shift from D2 to D1 
C) the supply curve will shift from S1 to S2 
D) the supply curve will shift from S2 to S1 
E) neither the demand for nor the supply curve will shift

Question 14

Prior to World War II, the international financial system had operated on

Accepted Answer

A) a floating exchange rate system 
B) a managed exchange rate system 
C) a laissez-faire exchange rate system 
D) the gold standard 
E) the dollar standard 
A) a floating exchange rate system 
B) a managed exchange rate system 
C) a laissez-faire exchange rate system 
D) the gold standard 
E) the dollar standard

Question 15

As the price of foreign exchange decreases relative to the U.S.dollar,

Accepted Answer

A) U.S.products become cheaper for foreigners 
B) foreign goods become cheaper for Americans 
C) more foreign currency is required to purchase a U.S.dollar 
D) the U.S.demand curve for foreign exchange shifts to the right 
E) the supply curve of foreign exchange to U.S.markets decreases 
A) U.S.products become cheaper for foreigners 
B) foreign goods become cheaper for Americans 
C) more foreign currency is required to purchase a U.S.dollar 
D) the U.S.demand curve for foreign exchange shifts to the right 
E) the supply curve of foreign exchange to U.S.markets decreases

Question 16

A German who exchanges euros for dollars in a U.S.airport is

Accepted Answer

A) contributing to U.S.exports 
B) lending dollars to Germans 
C) participating in the foreign exchange market 
D) engaging in speculative activities 
E) engaging in illegal activities 
A) contributing to U.S.exports 
B) lending dollars to Germans 
C) participating in the foreign exchange market 
D) engaging in speculative activities 
E) engaging in illegal activities

Question 17

Which of the following would be represented as a debit in the U.S.balance of payments?

Accepted Answer

A) U.S.purchase of cars from Italy 
B) U.S.sale of beef to Israel 
C) U.S.government receives transfers from foreign governments to support U.S.expenses incurred in Europe 
D) U.S.residents receive gifts of money from friends abroad 
E) income received by U.S.resident from overseas investment 
A) U.S.purchase of cars from Italy 
B) U.S.sale of beef to Israel 
C) U.S.government receives transfers from foreign governments to support U.S.expenses incurred in Europe 
D) U.S.residents receive gifts of money from friends abroad 
E) income received by U.S.resident from overseas investment

Question 18

As the price of the U.S.dollar increases in terms of foreign currency,

Accepted Answer

A) U.S.products become cheaper for foreigners 
B) foreign goods become cheaper for Americans 
C) dollars are worth less 
D) the U.S.demand for foreign exchange increases 
E) the supply of foreign exchange to U.S.markets decreases 
A) U.S.products become cheaper for foreigners 
B) foreign goods become cheaper for Americans 
C) dollars are worth less 
D) the U.S.demand for foreign exchange increases 
E) the supply of foreign exchange to U.S.markets decreases

Question 19

The Bretton Woods system

Accepted Answer

A) fixed exchange rates in terms of U.S.dollars 
B) fixed exchange rates in terms of all major currencies 
C) fixed exchange rates in terms of gold 
D) established a system of flexible exchange rates 
E) established the European monetary system 
A) fixed exchange rates in terms of U.S.dollars 
B) fixed exchange rates in terms of all major currencies 
C) fixed exchange rates in terms of gold 
D) established a system of flexible exchange rates 
E) established the European monetary system

Question 20

Which of the following is not a criticism of flexible exchange rates?

Accepted Answer

A) All of the following. 
B) They are volatile, which increases risks for importers and exporters. 
C) They could affect employment and increase demand for trade restrictions. 
D) They do not allow for discretionary monetary policy. 
E) They allow central banks to follow expansionary monetary policies. 
A) All of the following. 
B) They are volatile, which increases risks for importers and exporters. 
C) They could affect employment and increase demand for trade restrictions. 
D) They do not allow for discretionary monetary policy. 
E) They allow central banks to follow expansionary monetary policies.

Exam 20: International Finance

A nation's merchandise trade balance reflects

If $1 equals 2 euros, then 1 euro equals

If the exchange rate changes from 20 cents per franc to 18 cents per franc, the U.S.dollar has

The balance of payments can be thought of as the balance of economic transactions.

If fewer U.S.dollars are needed to buy a Swiss franc, then

If the U.S.dollar depreciates, it means that

Under the initial Bretton Woods system,

If the exchange rate changes from 1500 lire per U.S.dollar to 1000 lire per U.S.dollar, the U.S.dollar has

Today's exchange rate system can be described as

A country's balance of payments summarizes all economic transactions during a given period between residents of that country and residents of other countries.

The supply of foreign exchange to the United States is generated by the desire for foreigners to acquire dollars for all except one of the following reasons.Which is the exception?

President Nixon "closed the gold window"

Exhibit 20-5 Suppose that British incomes rise relative to incomes in the United States.Then, in Exhibit 20-5

Prior to World War II, the international financial system had operated on

As the price of foreign exchange decreases relative to the U.S.dollar,

A German who exchanges euros for dollars in a U.S.airport is

Which of the following would be represented as a debit in the U.S.balance of payments?

As the price of the U.S.dollar increases in terms of foreign currency,

The Bretton Woods system

Which of the following is not a criticism of flexible exchange rates?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

Economic Development

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