Question 1

A balance-of-payments surplus can be reduced with

Accepted Answer

A) Increased taxes. 
B) Increased tariffs and quotas on foreign goods. 
C) Contractionary monetary policy. 
D) Increased government spending. 
A) Increased taxes. 
B) Increased tariffs and quotas on foreign goods. 
C) Contractionary monetary policy. 
D) Increased government spending.

Question 2

Explain the forces that can cause an exchange rate to change.

Accepted Answer

Anything that can cause the demand or su

Question 3

Under a fixed exchange rate regime,what will happen to the balance of payments for the United States and Mexico when the demand for Mexican goods rises? What is the only possible solution to this problem,given the fixed exchange rate?

Accepted Answer

Under a fixed exchange rate regime,when

Question 4

Ceteris paribus,if interest rates in the United States rise relative to those abroad,then the surplus in the U.S.capital account would

Accepted Answer

A) Become smaller and the dollar would appreciate. 
B) Become smaller and the dollar would depreciate. 
C) Grow larger and the dollar would appreciate. 
D) Grow larger and the dollar would depreciate. 
A) Become smaller and the dollar would appreciate. 
B) Become smaller and the dollar would depreciate. 
C) Grow larger and the dollar would appreciate. 
D) Grow larger and the dollar would depreciate.

Question 5

When foreigners buy U.S.dollars because they are a more stable currency than the currencies in their countries,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) Demand for U.S.dollars and a supply of a foreign currency. 
D) Supply of U.S.dollars and a demand for 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) Demand for U.S.dollars and a supply of a foreign currency. 
D) Supply of U.S.dollars and a demand for a foreign currency.

Question 6

Which of the following generates a supply of U.S.dollars?

Accepted Answer

A) The demand for U.S.exports to foreign countries. 
B) Foreign tourists visiting the United States. 
C) The construction of a plant abroad by a U.S.corporation. 
D) Chinese buyers of American aircraft. 
A) The demand for U.S.exports to foreign countries. 
B) Foreign tourists visiting the United States. 
C) The construction of a plant abroad by a U.S.corporation. 
D) Chinese buyers of American aircraft.

Question 7

The inflow of foreign investment into the United States

Accepted Answer

A) Signals a lack of confidence in the U.S.economy. 
B) Diminishes production possibilities for the United States. 
C) Has no effect on the U.S.economy. 
D) Stimulates more economic growth for the United States. 
A) Signals a lack of confidence in the U.S.economy. 
B) Diminishes production possibilities for the United States. 
C) Has no effect on the U.S.economy. 
D) Stimulates more economic growth for the United States.

Question 8

The capital account balance equals

Accepted Answer

A) The current account balance minus imports. 
B) Foreign purchases of U.S.assets plus U.S.purchases of foreign assets. 
C) The balance of payments plus the sum of the merchandise balance,the services balance,and unilateral transfers. 
D) The negative of the current account balance. 
A) The current account balance minus imports. 
B) Foreign purchases of U.S.assets plus U.S.purchases of foreign assets. 
C) The balance of payments plus the sum of the merchandise balance,the services balance,and unilateral transfers. 
D) The negative of the current account balance.

Question 9

The capital account balance is equal to the negative of

Accepted Answer

A) Trade balance + unilateral transfers + net investment income. 
B) Trade balance + current account balance + services balance. 
C) Current account balance + exports + unilateral transfers. 
D) Unilateral transfers + exports + imports. 
A) Trade balance + unilateral transfers + net investment income. 
B) Trade balance + current account balance + services balance. 
C) Current account balance + exports + unilateral transfers. 
D) Unilateral transfers + exports + imports.

Question 10

Use a model of the dollar-euro foreign exchange market to illustrate how the value of the dollar is determined in terms of the euro.Identify two factors that would increase the value of the dollar in terms of the euro.

Accepted Answer

See Figure 36.1 in your text for the mod

Question 11

A depreciation of the South Korean won against the U.S.dollar will

Accepted Answer

A) Raise the dollar price of Korean goods. 
B) Lower the dollar price of U.S.goods. 
C) Raise the won price of U.S.goods. 
D) Lower the won price of Korean goods. 
A) Raise the dollar price of Korean goods. 
B) Lower the dollar price of U.S.goods. 
C) Raise the won price of U.S.goods. 
D) Lower the won price of Korean goods.

Question 12

When American companies buy office buildings in Australia,they are generating a

Accepted Answer

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

Question 13

Suppose that at the prevailing euro-dollar exchange rate there is an excess demand for dollars.To stabilize exchange rates,the United States might

Accepted Answer

A) Raise taxes. 
B) Decrease trade restrictions on euro-priced goods. 
C) Raise interest rates. 
D) Reduce government spending. 
A) Raise taxes. 
B) Decrease trade restrictions on euro-priced goods. 
C) Raise interest rates. 
D) Reduce government spending.

Question 14

Appreciation of the U.S.dollar can be caused by

Accepted Answer

A) A decrease in the demand for dollars. 
B) An increase in the demand for dollars. 
C) An increase in the supply of dollars. 
D) A decrease in the U.S.interest rate. 
A) A decrease in the demand for dollars. 
B) An increase in the demand for dollars. 
C) An increase in the supply of dollars. 
D) A decrease in the U.S.interest rate.

Question 15

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the ________ German currency to ________.

Accepted Answer

A) demand for;decrease 
B) demand for;increase 
C) supply of;decrease 
D) supply of;increase 
A) demand for;decrease 
B) demand for;increase 
C) supply of;decrease 
D) supply of;increase

Question 16

Suppose the supply of dollars decreased from S2 to S1 in Figure 36.3.As a result of this change,

Accepted Answer

A) Swiss chocolate imports to the United States will be lower-priced in dollars. 
B) U.S.computer exports to Switzerland will be lower-priced in dollars. 
C) A trade deficit will be created in Switzerland. 
D) The Swiss franc will gain value worldwide. 
A) Swiss chocolate imports to the United States will be lower-priced in dollars. 
B) U.S.computer exports to Switzerland will be lower-priced in dollars. 
C) A trade deficit will be created in Switzerland. 
D) The Swiss franc will gain value worldwide.

Question 17

Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

Accepted Answer

A) Trade restrictions on Japanese imported goods are ultimately the only way to reduce the trade deficit. 
B) The value of the U.S.dollar will decrease in terms of the yen,ceteris paribus,thereby reducing the trade deficit. 
C) The trade deficit will continue to increase in size as Japan gains more U.S.dollars and economic strength. 
D) We cannot say anything for sure about the trade deficit other than that it exists. 
A) Trade restrictions on Japanese imported goods are ultimately the only way to reduce the trade deficit. 
B) The value of the U.S.dollar will decrease in terms of the yen,ceteris paribus,thereby reducing the trade deficit. 
C) The trade deficit will continue to increase in size as Japan gains more U.S.dollars and economic strength. 
D) We cannot say anything for sure about the trade deficit other than that it exists.

Question 18

Yesterday the exchange rate was €1 = $1.30,and today it is €1 = $1.35.In this case the dollar has appreciated.

Accepted Answer

A) True 
 B)False

Question 19

An increase in the price of the U.S.dollar in terms of euros will cause,ceteris paribus,

Accepted Answer

A) A lower European inflation rate. 
B) Higher interest rates in the United States. 
C) European goods to be cheaper to residents of the United States. 
D) European goods to be more expensive to residents of the United States. 
A) A lower European inflation rate. 
B) Higher interest rates in the United States. 
C) European goods to be cheaper to residents of the United States. 
D) European goods to be more expensive to residents of the United States.

Question 20

A system in which governments intervene in foreign exchange markets to limit but not eliminate exchange rate fluctuations is referred to as

Accepted Answer

A) Speculative exchange rates. 
B) Marginal exchange rates. 
C) Managed exchange rates. 
D) Balance-of-payments exchange rates. 
A) Speculative exchange rates. 
B) Marginal exchange rates. 
C) Managed exchange rates. 
D) Balance-of-payments exchange rates.

Exam 36: International Finance

A balance-of-payments surplus can be reduced with

Explain the forces that can cause an exchange rate to change.

Under a fixed exchange rate regime,what will happen to the balance of payments for the United States and Mexico when the demand for Mexican goods rises? What is the only possible solution to this problem,given the fixed exchange rate?

Ceteris paribus,if interest rates in the United States rise relative to those abroad,then the surplus in the U.S.capital account would

When foreigners buy U.S.dollars because they are a more stable currency than the currencies in their countries,they are generating a

Which of the following generates a supply of U.S.dollars?

The inflow of foreign investment into the United States

The capital account balance equals

The capital account balance is equal to the negative of

Use a model of the dollar-euro foreign exchange market to illustrate how the value of the dollar is determined in terms of the euro.Identify two factors that would increase the value of the dollar in terms of the euro.

A depreciation of the South Korean won against the U.S.dollar will

When American companies buy office buildings in Australia,they are generating a

Suppose that at the prevailing euro-dollar exchange rate there is an excess demand for dollars.To stabilize exchange rates,the United States might

Appreciation of the U.S.dollar can be caused by

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the ________ German currency to ________.

Suppose the supply of dollars decreased from S2 to S1 in Figure 36.3.As a result of this change,

Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

Yesterday the exchange rate was €1 = $1.30,and today it is €1 = $1.35.In this case the dollar has appreciated.

An increase in the price of the U.S.dollar in terms of euros will cause,ceteris paribus,

A system in which governments intervene in foreign exchange markets to limit but not eliminate exchange rate fluctuations is referred to as

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

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the German currency to .

Suppose the supply of dollars decreased from S₂ to S₁ in Figure 36.3.As a result of this change,