Question 1

Exports minus imports define a country's

Accepted Answer

A) Current account balance. 
B) Capital account balance. 
C) Balance of payments. 
D) Trade balance. 
A) Current account balance. 
B) Capital account balance. 
C) Balance of payments. 
D) Trade balance.

Question 2

The demand for U.S.dollars originates from all of the following except

Accepted Answer

A) Foreign demand for U.S.exports. 
B) Speculation in U.S.dollars. 
C) Foreign demand for U.S.investments. 
D) U.S.demand for imported goods. 
A) Foreign demand for U.S.exports. 
B) Speculation in U.S.dollars. 
C) Foreign demand for U.S.investments. 
D) U.S.demand for imported goods.

Question 3

Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for dollars given the following situation,ceteris paribus: A sudden,unexpected surge in inflation in the United States causes reduced purchases of U.S.goods by foreigners.

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
A) a. 
B) b. 
C) c. 
D) d.

Question 4

With flexible exchange rates

Accepted Answer

A) The equilibrium exchange rate is determined in a foreign exchange market. 
B) The balance of trade is zero. 
C) Foreign exchange reserves are used to offset balance-of-payment deficits. 
D) All countries will run either a trade surplus or trade deficit. 
A) The equilibrium exchange rate is determined in a foreign exchange market. 
B) The balance of trade is zero. 
C) Foreign exchange reserves are used to offset balance-of-payment deficits. 
D) All countries will run either a trade surplus or trade deficit.

Question 5

You have decided to purchase,directly from the French manufacturer,a helicopter that costs 800,000 euros.At the equilibrium exchange rate between dollars and euros in Figure 36.1,this purchase will cost you

Accepted Answer

A) $1,600,000. 
B) $800,000. 
C) $400,000. 
D) $200,000. 
A) $1,600,000. 
B) $800,000. 
C) $400,000. 
D) $200,000.

Question 6

The capital account includes

Accepted Answer

A) Trade in goods. 
B) Trade in services. 
C) Unilateral transfers. 
D) Foreign purchases of U.S.assets. 
A) Trade in goods. 
B) Trade in services. 
C) Unilateral transfers. 
D) Foreign purchases of U.S.assets.

Question 7

When foreigners come to the United States as tourists,they are generating a

Accepted Answer

A) Demand for U.S.dollars and a demand for a foreign currency. 
B) Supply of U.S.dollars and a supply of a foreign currency. 
C) Supply of U.S.dollars and a demand for a foreign currency. 
D) Demand for U.S.dollars and a supply of a foreign currency. 
A) Demand for U.S.dollars and a demand for a foreign currency. 
B) Supply of U.S.dollars and a supply of a foreign currency. 
C) Supply of U.S.dollars and a demand for a foreign currency. 
D) Demand for U.S.dollars and a supply of a foreign currency.

Question 8

The balance of payments is the domestic price of a foreign currency.

Accepted Answer

A) True 
 B)False

Question 9

Except for any statistical errors,any current account deficit

Accepted Answer

A) Can be only partially offset by capital account surpluses and unilateral transfers. 
B) Must be completely offset by unilateral transfers. 
C) Must be completely offset by a capital account surplus. 
D) Must be completely offset by a trade surplus. 
A) Can be only partially offset by capital account surpluses and unilateral transfers. 
B) Must be completely offset by unilateral transfers. 
C) Must be completely offset by a capital account surplus. 
D) Must be completely offset by a trade surplus.

Question 10

The supply of U.S.dollars in the foreign exchange market originates from

Accepted Answer

A) Demand by foreigners for U.S.-produced goods. 
B) Demand for U.S.dollars for speculative purposes. 
C) Foreign investments in America. 
D) American demand for imported goods. 
A) Demand by foreigners for U.S.-produced goods. 
B) Demand for U.S.dollars for speculative purposes. 
C) Foreign investments in America. 
D) American demand for imported goods.

Question 11

The exchange rate is the

Accepted Answer

A) Opportunity cost at which goods are produced domestically. 
B) Balance-of-trade ratio of one country to another. 
C) Price of one country's currency expressed in terms of another country's currency. 
D) Amount of currency that can be purchased with one ounce of gold. 
A) Opportunity cost at which goods are produced domestically. 
B) Balance-of-trade ratio of one country to another. 
C) Price of one country's currency expressed in terms of another country's currency. 
D) Amount of currency that can be purchased with one ounce of gold.

Question 12

If speculators with Swiss francs believed the yen was going to depreciate against the dollar,they would most likely: =

Accepted Answer

A) Purchase euros. 
B) Purchase dollars. 
C) Purchase yen. 
D) Not participate in foreign exchange markets because of the volatility. 
A) Purchase euros. 
B) Purchase dollars. 
C) Purchase yen. 
D) Not participate in foreign exchange markets because of the volatility.

Question 13

A good time for an American to hold German stocks,ceteris paribus,is when the

Accepted Answer

A) Euro is stable compared to the U.S.dollar. 
B) U.S.dollar depreciates in value compared to the euro. 
C) U.S.dollar appreciates in value compared to the euro. 
D) The return in the German stock market has no relationship to the value of the dollar compared to the euro. 
A) Euro is stable compared to the U.S.dollar. 
B) U.S.dollar depreciates in value compared to the euro. 
C) U.S.dollar appreciates in value compared to the euro. 
D) The return in the German stock market has no relationship to the value of the dollar compared to the euro.

Question 14

Suppose a men's suit produced in Moldavia sells for 250 euros.If the exchange rate between euros and dollars is €1 = $1.38,how much will an American pay for the suit?

Accepted Answer

A) $345.00. 
B) $181.16. 
C) $250.00. 
D) $138.00. 
A) $345.00. 
B) $181.16. 
C) $250.00. 
D) $138.00.

Question 15

A major problem with countries setting fixed exchange rates for their currencies is

Accepted Answer

A) Some participating countries are likely to experience continuing balance-of-payments deficits. 
B) The foreign exchange reserves of participating countries will always be depleted. 
C) Import and export prices will probably become more unstable. 
D) The fixed rate will have to be maintained by currency market intervention. 
A) Some participating countries are likely to experience continuing balance-of-payments deficits. 
B) The foreign exchange reserves of participating countries will always be depleted. 
C) Import and export prices will probably become more unstable. 
D) The fixed rate will have to be maintained by currency market intervention.

Question 16

The article on China's $4 trillion of reserves indicates that the yuan's depreciation is due to

Accepted Answer

A) Intervention of the Chinese government into the exchange markets to purchase yuan. 
B) Intervention of the Chinese government to purchase dollars to suppress the yuan. 
C) Intervention of the U.S.government to cause the dollar to depreciate. 
D) Intervention on the part of the U.S.government to devalue the yuan. 
A) Intervention of the Chinese government into the exchange markets to purchase yuan. 
B) Intervention of the Chinese government to purchase dollars to suppress the yuan. 
C) Intervention of the U.S.government to cause the dollar to depreciate. 
D) Intervention on the part of the U.S.government to devalue the yuan.

Question 17

The depreciation of a country's currency causes the price of imports to

Accepted Answer

A) Rise and the prices of exports to rise. 
B) Rise and the prices of exports to fall. 
C) Fall and the prices of exports to rise. 
D) Fall and the prices of exports to fall. 
A) Rise and the prices of exports to rise. 
B) Rise and the prices of exports to fall. 
C) Fall and the prices of exports to rise. 
D) Fall and the prices of exports to fall.

Question 18

Which of the following generates demand for foreign currencies?

Accepted Answer

A) Expenditures by Americans traveling abroad. 
B) Exports from the United States to foreign countries. 
C) The purchase by foreigners of bonds issued by the U.S.government. 
D) Transfers of money from foreigners to relatives in the United States. 
A) Expenditures by Americans traveling abroad. 
B) Exports from the United States to foreign countries. 
C) The purchase by foreigners of bonds issued by the U.S.government. 
D) Transfers of money from foreigners to relatives in the United States.

Question 19

The demand for U.S.dollars in the foreign exchange market is determined by all of the following except

Accepted Answer

A) Foreign demand for American exports. 
B) Foreign demand for American investments. 
C) Europeans who would rather hold U.S.dollars than euros. 
D) American demand for American products. 
A) Foreign demand for American exports. 
B) Foreign demand for American investments. 
C) Europeans who would rather hold U.S.dollars than euros. 
D) American demand for American products.

Question 20

As a result of an increase in demand from D2 to D1 in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Accepted Answer

A) Decrease in price by 200,000 million yen. 
B) Increase in price by 200,000 million yen. 
C) Decrease in price by 800,000 yen. 
D) Increase in price by 800,000 yen. 
A) Decrease in price by 200,000 million yen. 
B) Increase in price by 200,000 million yen. 
C) Decrease in price by 800,000 yen. 
D) Increase in price by 800,000 yen.

Exam 36: International Finance

Exports minus imports define a country's

The demand for U.S.dollars originates from all of the following except

Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for dollars given the following situation,ceteris paribus: A sudden,unexpected surge in inflation in the United States causes reduced purchases of U.S.goods by foreigners.

With flexible exchange rates

You have decided to purchase,directly from the French manufacturer,a helicopter that costs 800,000 euros.At the equilibrium exchange rate between dollars and euros in Figure 36.1,this purchase will cost you

The capital account includes

When foreigners come to the United States as tourists,they are generating a

The balance of payments is the domestic price of a foreign currency.

Except for any statistical errors,any current account deficit

The supply of U.S.dollars in the foreign exchange market originates from

The exchange rate is the

If speculators with Swiss francs believed the yen was going to depreciate against the dollar,they would most likely: =

A good time for an American to hold German stocks,ceteris paribus,is when the

Suppose a men's suit produced in Moldavia sells for 250 euros.If the exchange rate between euros and dollars is €1 = $1.38,how much will an American pay for the suit?

A major problem with countries setting fixed exchange rates for their currencies is

The article on China's $4 trillion of reserves indicates that the yuan's depreciation is due to

The depreciation of a country's currency causes the price of imports to

Which of the following generates demand for foreign currencies?

The demand for U.S.dollars in the foreign exchange market is determined by all of the following except

As a result of an increase in demand from D2 to D1 in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

Global Poverty

Filters

As a result of an increase in demand from D₂ to D₁ in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =