Question 1

Foreign demand for U.S.dollars also represents a supply of dollars.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following generates a demand for dollars in the foreign exchange market?

Accepted Answer

A) Transfers of money by foreign workers in the United States to relatives abroad. 
B) U.S.military installations abroad. 
C) Foreign aid given by the United States. 
D) Travel by foreign visitors in the United States. 
A) Transfers of money by foreign workers in the United States to relatives abroad. 
B) U.S.military installations abroad. 
C) Foreign aid given by the United States. 
D) Travel by foreign visitors in the United States.

Question 3

The trade balance for the United States equals

Accepted Answer

A) The difference between service exports and service imports. 
B) The difference between the dollar value of exports and the dollar value of imports. 
C) Exports plus imports. 
D) The current account balance minus the capital account balance. 
A) The difference between service exports and service imports. 
B) The difference between the dollar value of exports and the dollar value of imports. 
C) Exports plus imports. 
D) The current account balance minus the capital account balance.

Question 4

Depreciation of the dollar refers to

Accepted Answer

A) A loss of foreign exchange reserves. 
B) An increase in the price of foreign currency in terms of dollars. 
C) Intervention in international money markets. 
D) A fall in the dollar price of a foreign currency. 
A) A loss of foreign exchange reserves. 
B) An increase in the price of foreign currency in terms of dollars. 
C) Intervention in international money markets. 
D) A fall in the dollar price of a foreign currency.

Question 5

When reality show participants travel through foreign 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

Suppose that today 1 British pound exchanges for $1.60.If next week 1 pound exchanges for $1.70,it is clear that

Accepted Answer

A) The pound has depreciated relative to the dollar. 
B) The dollar has appreciated relative to the pound. 
C) Both currencies have appreciated. 
D) The dollar has depreciated relative to the pound. 
A) The pound has depreciated relative to the dollar. 
B) The dollar has appreciated relative to the pound. 
C) Both currencies have appreciated. 
D) The dollar has depreciated relative to the pound.

Question 7

Which of the following is not likely to occur because of exchange rate fluctuations?

Accepted Answer

A) An end to flexible exchange rates worldwide. 
B) A decrease in the demand for exports. 
C) An increase in the demand for imports. 
D) Inflation. 
A) An end to flexible exchange rates worldwide. 
B) A decrease in the demand for exports. 
C) An increase in the demand for imports. 
D) Inflation.

Question 8

A currency bailout

Accepted Answer

A) Occurs when money is borrowed from an economy to increase the value of its currency. 
B) Can help avoid a situation in which a weakness in one currency undermines other currencies. 
C) Is considered to be a dangerous move by the International Monetary Fund. 
D) Is considered to be a dangerous move by the central banks of the strongest economies worldwide. 
A) Occurs when money is borrowed from an economy to increase the value of its currency. 
B) Can help avoid a situation in which a weakness in one currency undermines other currencies. 
C) Is considered to be a dangerous move by the International Monetary Fund. 
D) Is considered to be a dangerous move by the central banks of the strongest economies worldwide.

Question 9

If income is rising faster in Japan than in the United States,there will be an increase in the demand for the yen and a decrease in the demand for the dollar.

Accepted Answer

A) True 
 B)False

Question 10

Appreciation of the dollar refers to

Accepted Answer

A) A loss of foreign exchange reserves. 
B) An increase in the dollar price of foreign currency. 
C) Intervention in international money markets. 
D) A fall in the dollar price of a foreign currency. 
A) A loss of foreign exchange reserves. 
B) An increase in the dollar price of foreign currency. 
C) Intervention in international money markets. 
D) A fall in the dollar price of a foreign currency.

Question 11

Ceteris paribus,with a fixed exchange rate,if people in Argentina decide to buy more Russian oil,this causes a market ________ of Russian currency and creates a balance-of-payments ________ for Russia.

Accepted Answer

A) surplus;deficit 
B) shortage;deficit 
C) surplus;surplus 
D) shortage;surplus 
A) surplus;deficit 
B) shortage;deficit 
C) surplus;surplus 
D) shortage;surplus

Question 12

Under a flexible exchange rate system,there is no need for foreign exchange reserves.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following generates demand for foreign currencies?

Accepted Answer

A) Exports from the United States to foreign countries. 
B) Imports of foreign goods by firms located in the United States. 
C) The building of plants by foreign corporations in the United States. 
D) Foreign tourists traveling to the United States. 
A) Exports from the United States to foreign countries. 
B) Imports of foreign goods by firms located in the United States. 
C) The building of plants by foreign corporations in the United States. 
D) Foreign tourists traveling to the United States.

Question 14

The current account balance is equal to

Accepted Answer

A) Imports minus exports. 
B) Exports minus imports. 
C) The trade balance plus unilateral transfers plus net investment income. 
D) The trade balance times unilateral transfers. 
A) Imports minus exports. 
B) Exports minus imports. 
C) The trade balance plus unilateral transfers plus net investment income. 
D) The trade balance times unilateral transfers.

Question 15

The exchange rate is the price of

Accepted Answer

A) One good in terms of another. 
B) An import purchased at the local electronics store. 
C) One currency in terms of another. 
D) An export purchased in a foreign nation. 
A) One good in terms of another. 
B) An import purchased at the local electronics store. 
C) One currency in terms of another. 
D) An export purchased in a foreign nation.

Question 16

The capital account balance equals foreign purchases of U.S.assets minus U.S.purchases of foreign assets.

Accepted Answer

A) True 
 B)False

Question 17

Refer to Figure 36.5 for the dollar-euro foreign exchange market with the market exchange rate at P1.The European Union (EU)and U.S.governments have agreed on a fixed exchange rate of P2.This situation

Accepted Answer

A) Causes a balance-of-payments deficit for the EU. 
B) Calls for an expansionary fiscal policy in the EU. 
C) Causes an excess demand for euros. 
D) Requires that the EU buy U.S.dollars. 
A) Causes a balance-of-payments deficit for the EU. 
B) Calls for an expansionary fiscal policy in the EU. 
C) Causes an excess demand for euros. 
D) Requires that the EU buy U.S.dollars.

Question 18

Refer to Figure 36.4 for the dollar-yen foreign exchange market.A decrease in demand from D1 to D2 could have been caused by

Accepted Answer

A) A decrease in the demand for U.S.computers. 
B) An increase in the number of Japanese visitors to the United States. 
C) A quota placed on Japanese television imports to the United States. 
D) A poor performance by the Japanese stock market compared to the U.S.stock market. 
A) A decrease in the demand for U.S.computers. 
B) An increase in the number of Japanese visitors to the United States. 
C) A quota placed on Japanese television imports to the United States. 
D) A poor performance by the Japanese stock market compared to the U.S.stock market.

Question 19

If the U.S.dollar depreciates,in the long run the United States should experience a

Accepted Answer

A) Lower inflation rate. 
B) Smaller deficit in the U.S.trade balance. 
C) Larger deficit in the U.S.current account. 
D) Larger deficit in the U.S.capital account. 
A) Lower inflation rate. 
B) Smaller deficit in the U.S.trade balance. 
C) Larger deficit in the U.S.current account. 
D) Larger deficit in the U.S.capital account.

Question 20

At an exchange rate of $1 = €1 in Figure 36.1,there is

Accepted Answer

A) Equilibrium in the foreign exchange market. 
B) A surplus of dollars. 
C) A shortage of euros. 
D) a shortage of dollars. 
A) Equilibrium in the foreign exchange market. 
B) A surplus of dollars. 
C) A shortage of euros. 
D) a shortage of dollars.

Exam 36: International Finance

Foreign demand for U.S.dollars also represents a supply of dollars.

Which of the following generates a demand for dollars in the foreign exchange market?

The trade balance for the United States equals

Depreciation of the dollar refers to

When reality show participants travel through foreign countries,they are generating a

Suppose that today 1 British pound exchanges for $1.60.If next week 1 pound exchanges for $1.70,it is clear that

Which of the following is not likely to occur because of exchange rate fluctuations?

A currency bailout

If income is rising faster in Japan than in the United States,there will be an increase in the demand for the yen and a decrease in the demand for the dollar.

Appreciation of the dollar refers to

Ceteris paribus,with a fixed exchange rate,if people in Argentina decide to buy more Russian oil,this causes a market ________ of Russian currency and creates a balance-of-payments ________ for Russia.

Under a flexible exchange rate system,there is no need for foreign exchange reserves.

Which of the following generates demand for foreign currencies?

The current account balance is equal to

The exchange rate is the price of

The capital account balance equals foreign purchases of U.S.assets minus U.S.purchases of foreign assets.

Refer to Figure 36.5 for the dollar-euro foreign exchange market with the market exchange rate at P1.The European Union (EU)and U.S.governments have agreed on a fixed exchange rate of P2.This situation

Refer to Figure 36.4 for the dollar-yen foreign exchange market.A decrease in demand from D1 to D2 could have been caused by

If the U.S.dollar depreciates,in the long run the United States should experience a

At an exchange rate of $1 = €1 in Figure 36.1,there is

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,with a fixed exchange rate,if people in Argentina decide to buy more Russian oil,this causes a market of Russian currency and creates a balance-of-payments for Russia.

Refer to Figure 36.5 for the dollar-euro foreign exchange market with the market exchange rate at P_1.The European Union (EU)and U.S.governments have agreed on a fixed exchange rate of P₂.This situation

Refer to Figure 36.4 for the dollar-yen foreign exchange market.A decrease in demand from D₁ to D₂ could have been caused by