Question 1

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Accepted Answer

A)  World supply of gold dropped drastically in the 1930s, severely limiting a country's ability to increase its money supply. 
B)  Imbalances in a country's balance of payments can be corrected only through changes in the entire economy. 
C)  In order to correct imbalances in its balance of payments, a country was forced on its trading partners to intervene in currency markets. 
D)  Some nations started hoarding gold in order to manipulate relative exchange rates. 
A)  World supply of gold dropped drastically in the 1930s, severely limiting a country's ability to increase its money supply. 
B)  Imbalances in a country's balance of payments can be corrected only through changes in the entire economy. 
C)  In order to correct imbalances in its balance of payments, a country was forced on its trading partners to intervene in currency markets. 
D)  Some nations started hoarding gold in order to manipulate relative exchange rates.

Question 2

Given that countries A and B each specialize in the production of one good and voluntarily
Trade it for the other country's good, then

Accepted Answer

A)  only country A can experience positive gains from trade. 
B)  only country B can experience positive gains from trade. 
C)  both countries can experience positive gains from trade. 
D)  both countries experience negative gains from trade. 
A)  only country A can experience positive gains from trade. 
B)  only country B can experience positive gains from trade. 
C)  both countries can experience positive gains from trade. 
D)  both countries experience negative gains from trade.

Question 3

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion.
Foreigners purchased $200 billion worth of assets in Cavland. What is the value of
Foreign assets purchased by the citizens of Cavland?

Accepted Answer

A)  $100 billion 
B) -$100 billion 
C)  $300 billion 
D)  -$300 billion 
A)  $100 billion 
B) -$100 billion 
C)  $300 billion 
D)  -$300 billion

Question 4

A system in which exchange rates are set by government policy is called a

Accepted Answer

A)  managed float system. 
B)  free-floating exchange rate system. 
C)  commodity standard system. 
D)  fixed exchange rate system. 
A)  managed float system. 
B)  free-floating exchange rate system. 
C)  commodity standard system. 
D)  fixed exchange rate system.

Question 5

In the United States since 1960

Accepted Answer

A)  the export share of GDP has increased while the import share of GDP has not changed. 
B)  the import share of GDP has increased while the export share of GDP has not changed. 
C)  both the export share of GDP and the import share of GDP have increased. 
D)  both the export share of GDP and the import share of GDP have decreased. 
A)  the export share of GDP has increased while the import share of GDP has not changed. 
B)  the import share of GDP has increased while the export share of GDP has not changed. 
C)  both the export share of GDP and the import share of GDP have increased. 
D)  both the export share of GDP and the import share of GDP have decreased.

Question 6

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Accepted Answer

A)  U.S. purchases of foreign goods and services 
B)  Payments to foreign owners of U.S. assets 
C)  Transfer payments from foreign individuals, firms, or governments to U.S. residents 
D)  Domestic purchases of U.S. goods and services 
A)  U.S. purchases of foreign goods and services 
B)  Payments to foreign owners of U.S. assets 
C)  Transfer payments from foreign individuals, firms, or governments to U.S. residents 
D)  Domestic purchases of U.S. goods and services

Question 7

Use the following to answer questions .
Exhibit: A Fixed Exchange Rate  
-(Exhibit: A Fixed Exchange Rate) Suppose the exchange rate between the dollar and the British pound is fixed at £0.3 per dollar. Now suppose U.S. residents choose to purchase more British goods and services. Under the terms of the Bretton Woods Agreement, what must happen to bring the exchange rate back to £0.3 per dollar?

Accepted Answer

A)  Either the Fed or the Bank of England (Britain's central bank) will be required to increase the demand for dollars by purchasing dollars. 
B)  Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the supply of dollars by purchasing dollars. 
C)  Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the demand for dollars by purchasing British pounds. 
D)  Either the Fed or the Bank of England (Britain's central bank) will be required to increase the supply of dollars by purchasing British pounds. 
A)  Either the Fed or the Bank of England (Britain's central bank) will be required to increase the demand for dollars by purchasing dollars. 
B)  Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the supply of dollars by purchasing dollars. 
C)  Either the Fed or the Bank of England (Britain's central bank) will be required to decrease the demand for dollars by purchasing British pounds. 
D)  Either the Fed or the Bank of England (Britain's central bank) will be required to increase the supply of dollars by purchasing British pounds.

Question 8

Which of the following applies to a managed float system?
I. Governments and central banks seek to influence exchange rates by buying or selling
Their own currencies.
II. The exchange rates are allowed to float, but their values are influenced by governments.
III. Governments intervene to prevent large and sudden swings in the exchange rate.

Accepted Answer

A)  II and III only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III 
A)  II and III only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III

Question 9

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in
Value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports if strong income growth in the U.S. has a stronger effect than that of the Canadian dollar appreciation?

Accepted Answer

A)  Net exports will rise. 
B)  Net exports will fall. 
C)  Net exports will remain constant. 
D)  The effect on net exports is indeterminate. 
A)  Net exports will rise. 
B)  Net exports will fall. 
C)  Net exports will remain constant. 
D)  The effect on net exports is indeterminate.

Question 10

Japan's current account balance equals

Accepted Answer

A)  spending flowing from Japan to the rest of the world on current account less spending flowing into Japan from the rest of the world on current account. 
B)  spending flowing into Japan from the rest of the world on current account less spending flowing from Japan to the rest of the world on current account. 
C)  spending flowing into Japan from the rest of the world on current account plus spending flowing from Japan to the rest of the world on current account. 
D)  the amount the rest of the world owes Japan for purchases of Japanese products and assets. 
A)  spending flowing from Japan to the rest of the world on current account less spending flowing into Japan from the rest of the world on current account. 
B)  spending flowing into Japan from the rest of the world on current account less spending flowing from Japan to the rest of the world on current account. 
C)  spending flowing into Japan from the rest of the world on current account plus spending flowing from Japan to the rest of the world on current account. 
D)  the amount the rest of the world owes Japan for purchases of Japanese products and assets.

Question 11

International trade has the potential to

Accepted Answer

A)  increase the availability of goods and services to those nations that export more than they import. 
B)  increase the availability of goods and services to those nations that have an absolute advantage in the production of a good or service. 
C)  increase the availability of goods and services to all nations. 
D)  decrease the availability of goods and services to all nations. 
A)  increase the availability of goods and services to those nations that export more than they import. 
B)  increase the availability of goods and services to those nations that have an absolute advantage in the production of a good or service. 
C)  increase the availability of goods and services to all nations. 
D)  decrease the availability of goods and services to all nations.

Question 12

Suppose a U.S. financial investor purchases bonds issued by the government of Peru. How
Will this transaction be recorded in U.S. international transactions?

Accepted Answer

A)  It is recorded in the current account as a positive (plus) item. 
B)  It is recorded in the current account as a negative (minus) item. 
C)  It is recorded in the capital account as a positive item. 
D)  It is recorded in the capital account as a negative item. 
A)  It is recorded in the current account as a positive (plus) item. 
B)  It is recorded in the current account as a negative (minus) item. 
C)  It is recorded in the capital account as a positive item. 
D)  It is recorded in the capital account as a negative item.

Question 13

Use the following to answer questions .
Exhibit: Exchange Rates  
-(Exhibit: Exchange Rates) Which of the following is true of the equilibrium quantity, Q1?

Accepted Answer

A)  It represents the quantity of U.S. dollars demanded by foreigners who purchase U.S. goods and services and U.S. assets. 
B)  It represents the quantity of U.S. dollars supplied by the Federal Reserve. 
C)  It represents the quantity of U.S. dollars supplied and demanded by foreign nationals. 
D)  It represents the total amount foreigners spent in the United States during a given period. 
A)  It represents the quantity of U.S. dollars demanded by foreigners who purchase U.S. goods and services and U.S. assets. 
B)  It represents the quantity of U.S. dollars supplied by the Federal Reserve. 
C)  It represents the quantity of U.S. dollars supplied and demanded by foreign nationals. 
D)  It represents the total amount foreigners spent in the United States during a given period.

Question 14

All other things unchanged, an decrease in the value of the dollar against the euro

Accepted Answer

A)  increases U.S. net exports and shifts the investment demand curve to the right. 
B)  decreases U.S. net exports and shifts the investment demand curve to the right. 
C)  increases U.S. net exports and shifts the aggregate demand curve to the right. 
D)  decreases U.S. net exports and shifts the aggregate demand curve to the left. 
A)  increases U.S. net exports and shifts the investment demand curve to the right. 
B)  decreases U.S. net exports and shifts the investment demand curve to the right. 
C)  increases U.S. net exports and shifts the aggregate demand curve to the right. 
D)  decreases U.S. net exports and shifts the aggregate demand curve to the left.

Question 15

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

Accepted Answer

A)  Foreign purchases of U.S. goods and services 
B)  Payments to U.S. owners of foreign assets 
C)  Domestic purchases of U.S. goods and services 
D)  U.S. purchases of foreign assets 
A)  Foreign purchases of U.S. goods and services 
B)  Payments to U.S. owners of foreign assets 
C)  Domestic purchases of U.S. goods and services 
D)  U.S. purchases of foreign assets

Question 16

A change in net exports due to a change in the exchange rate will result in a movement along the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Members of the European Union

Accepted Answer

A)  adopted a common currency called the euro. 
B)  float their domestic currency exchange rate with both the euro and the rest of the world. 
C)  can continue to use their own domestic currency but are required to hold a stipulated amount of a common currency. 
D)  cannot hold reserves of the common currency. 
A)  adopted a common currency called the euro. 
B)  float their domestic currency exchange rate with both the euro and the rest of the world. 
C)  can continue to use their own domestic currency but are required to hold a stipulated amount of a common currency. 
D)  cannot hold reserves of the common currency.

Question 18

When exchange rates are fixed but fiscal and monetary policies are not coordinated, equilibrium exchange rates can move away from their fixed levels.

Accepted Answer

A) True 
 B)False

Question 19

If the price level in the United States decreases relative to prices in foreign countries, then

Accepted Answer

A)  imports and exports of the United States will increase. 
B)  imports and exports of the United States will decrease. 
C)  imports of the United States will decrease and exports of the United States will increase. 
D)  imports of the United States will increase and exports of the United States will decrease. 
A)  imports and exports of the United States will increase. 
B)  imports and exports of the United States will decrease. 
C)  imports of the United States will decrease and exports of the United States will increase. 
D)  imports of the United States will increase and exports of the United States will decrease.

Question 20

A reduction in net exports, all other things unchanged

Accepted Answer

A)  results in a movement up along the aggregate demand curve. 
B)  reduces aggregate supply. 
C)  reduces aggregate demand. 
D)  does not change aggregate demand or aggregate supply in the domestic economy. 
A)  results in a movement up along the aggregate demand curve. 
B)  reduces aggregate supply. 
C)  reduces aggregate demand. 
D)  does not change aggregate demand or aggregate supply in the domestic economy.

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Given that countries A and B each specialize in the production of one good and voluntarily Trade it for the other country's good, then

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. Foreigners purchased $200 billion worth of assets in Cavland. What is the value of Foreign assets purchased by the citizens of Cavland?

A system in which exchange rates are set by government policy is called a

In the United States since 1960

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Japan's current account balance equals

International trade has the potential to

Suppose a U.S. financial investor purchases bonds issued by the government of Peru. How Will this transaction be recorded in U.S. international transactions?

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) Which of the following is true of the equilibrium quantity, Q₁?

All other things unchanged, an decrease in the value of the dollar against the euro

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

A change in net exports due to a change in the exchange rate will result in a movement along the aggregate demand curve.

Members of the European Union

When exchange rates are fixed but fiscal and monetary policies are not coordinated, equilibrium exchange rates can move away from their fixed levels.

If the price level in the United States decreases relative to prices in foreign countries, then

A reduction in net exports, all other things unchanged

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 15: Net Exports and International Finance

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Given that countries A and B each specialize in the production of one good and voluntarily Trade it for the other country's good, then

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. Foreigners purchased $200 billion worth of assets in Cavland. What is the value of Foreign assets purchased by the citizens of Cavland?

A system in which exchange rates are set by government policy is called a

In the United States since 1960

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Japan's current account balance equals

International trade has the potential to

Suppose a U.S. financial investor purchases bonds issued by the government of Peru. How Will this transaction be recorded in U.S. international transactions?

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) Which of the following is true of the equilibrium quantity, Q1?

All other things unchanged, an decrease in the value of the dollar against the euro

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

A change in net exports due to a change in the exchange rate will result in a movement along the aggregate demand curve.

Members of the European Union

When exchange rates are fixed but fiscal and monetary policies are not coordinated, equilibrium exchange rates can move away from their fixed levels.

If the price level in the United States decreases relative to prices in foreign countries, then

A reduction in net exports, all other things unchanged

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) Which of the following is true of the equilibrium quantity, Q₁?