Question 1

Which of the following statements is true?

Accepted Answer

A)  A positive balance on current account means a current account deficit. 
B)  A negative balance on current account means a current account deficit. 
C)  A positive balance on current account is a capital account surplus. 
D)  A negative balance on current account means a capital account deficit. 
A)  A positive balance on current account means a current account deficit. 
B)  A negative balance on current account means a current account deficit. 
C)  A positive balance on current account is a capital account surplus. 
D)  A negative balance on current account means a capital account deficit.

Question 2

While members of the European Union that are part of the eurozone continue to have their own central bank, these national central banks agree to cede the conduct of monetary policy to the European Central Bank.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  Japanese tourists shop in Barney's of New York. 
B)  A Japanese businesswoman sells her U.S. government bonds. 
C)  An American citizen buys Japanese Yen for her trip to Japan. 
D)  An American firm exports Sonoma wines to Japan. 
A)  Japanese tourists shop in Barney's of New York. 
B)  A Japanese businesswoman sells her U.S. government bonds. 
C)  An American citizen buys Japanese Yen for her trip to Japan. 
D)  An American firm exports Sonoma wines to Japan.

Question 4

Which of the following is an advantage of a free-floating exchange rate system?

Accepted Answer

A)  A free-floating exchange rate acts as a buffer to insulate an economy from the impact of international events. 
B)  Under a system of free-floating exchange rates, a nation will, over the long run, experience more surpluses than deficits in its balance of payments. 
C)  Fluctuating exchange rates reduces the risk involved in international transactions r and thus lower the cost of doing business with other countries. 
D)  A free-floating exchange rate system improves the effectiveness of a country's monetary policy and promotes price stability. 
A)  A free-floating exchange rate acts as a buffer to insulate an economy from the impact of international events. 
B)  Under a system of free-floating exchange rates, a nation will, over the long run, experience more surpluses than deficits in its balance of payments. 
C)  Fluctuating exchange rates reduces the risk involved in international transactions r and thus lower the cost of doing business with other countries. 
D)  A free-floating exchange rate system improves the effectiveness of a country's monetary policy and promotes price stability.

Question 5

Suppose a family from Peru eats in a restaurant in Salt Lake City, Utah. 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 6

A tax imposed by a country on an imported good or service is called a

Accepted Answer

A)  quota. 
B)  tariff. 
C)  non-tariff barrier. 
D)  trade embargo. 
A)  quota. 
B)  tariff. 
C)  non-tariff barrier. 
D)  trade embargo.

Question 7

Which of the following has contributed most to the significant increase in world trade since 1990?

Accepted Answer

A)  Removal of trade barriers 
B)  Decrease in world population 
C)  Decreases in income levels 
D)  Increase in the quantity of natural resources 
A)  Removal of trade barriers 
B)  Decrease in world population 
C)  Decreases in income levels 
D)  Increase in the quantity of natural resources

Question 8

An exchange rate system in which prices of various currencies are fixed relative to a given
Quantity of some commodity 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 9

The Bretton Woods system is an example of a fixed exchange rate system.

Accepted Answer

A) True 
 B)False

Question 10

If the U.S. exchange rate decreases relative to foreign currencies, then

Accepted Answer

A)  imports and exports of the United States will both increase. 
B)  imports and exports of the United States will both 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 both increase. 
B)  imports and exports of the United States will both 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 11

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and
Purchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its capital account?

Accepted Answer

A)  $50 billion 
B)  -$50 billion 
C)  $850 billion 
D)  -$850 billion 
A)  $50 billion 
B)  -$50 billion 
C)  $850 billion 
D)  -$850 billion

Question 12

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

Accepted Answer

A)  Net exports increases and shifts the short-run aggregate supply curve to the right. 
B)  Net exports decreases and shifts the short-run aggregate supply curve to the right. 
C)  Net exports increases and shifts the aggregate demand curve to the right. 
D)  Net exports decreases and shifts the aggregate demand curve to the left. 
A)  Net exports increases and shifts the short-run aggregate supply curve to the right. 
B)  Net exports decreases and shifts the short-run aggregate supply curve to the right. 
C)  Net exports increases and shifts the aggregate demand curve to the right. 
D)  Net exports decreases and shifts the aggregate demand curve to the left.

Question 13

The balance between spending flows into a country and spending flows out of that country is
Called a country's

Accepted Answer

A)  current account. 
B)  capital account. 
C)  foreign exchange. 
D)  balance of payments. 
A)  current account. 
B)  capital account. 
C)  foreign exchange. 
D)  balance of payments.

Question 14

Members of the countries in the eurozone

Accepted Answer

A)  have less autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced. 
B)  have more autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced. 
C)  have less autonomy in conducting their monetary policy than they did before the euro was introduced, but more autonomy in conducting their fiscal policy. 
D)  have more autonomy in conducting their monetary policy than they did before the euro was introduced, but less autonomy in conducting their fiscal policy. 
A)  have less autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced. 
B)  have more autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced. 
C)  have less autonomy in conducting their monetary policy than they did before the euro was introduced, but more autonomy in conducting their fiscal policy. 
D)  have more autonomy in conducting their monetary policy than they did before the euro was introduced, but less autonomy in conducting their fiscal policy.

Question 15

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Accepted Answer

A)  Aggregate demand, the price level, and real GDP all decrease and eventually, net exports will rise in response to the lower price level. 
B)  The price level increases and real GDP increases as producers respond to the higher price level but aggregate demand will fall. 
C)  Aggregate demand, the price level, and real GDP all increase, and eventually, net exports will fall in response to the higher price level. 
D)  The price level and real GDP increase, but aggregate demand will fall. 
A)  Aggregate demand, the price level, and real GDP all decrease and eventually, net exports will rise in response to the lower price level. 
B)  The price level increases and real GDP increases as producers respond to the higher price level but aggregate demand will fall. 
C)  Aggregate demand, the price level, and real GDP all increase, and eventually, net exports will fall in response to the higher price level. 
D)  The price level and real GDP increase, but aggregate demand will fall.

Question 16

Which of the following generates a demand for U.S. dollars in the currency market?

Accepted Answer

A)  Japanese tourists shop in Barney's of New York 
B)  A Japanese businesswoman sells her U.S. government bonds. 
C)  An American citizen buys Japanese Yen for her trip to Japan. 
D)  A restaurant in Kansas imports Kobe beef from Japan. 
A)  Japanese tourists shop in Barney's of New York 
B)  A Japanese businesswoman sells her U.S. government bonds. 
C)  An American citizen buys Japanese Yen for her trip to Japan. 
D)  A restaurant in Kansas imports Kobe beef from Japan.

Question 17

A deficit in the current account implies

Accepted Answer

A)  there is an excess demand in the foreign currency market. 
B)  a deficit in the capital account. 
C)  a surplus in the capital account. 
D)  nothing about the capital account. 
A)  there is an excess demand in the foreign currency market. 
B)  a deficit in the capital account. 
C)  a surplus in the capital account. 
D)  nothing about the capital account.

Question 18

Prosperity in the United States will

Accepted Answer

A)  increase imports of the United States. 
B)  increase exports of the United States. 
C)  increase imports and exports of the United States. 
D)  eventually lead to prosperity in foreign countries too. 
A)  increase imports of the United States. 
B)  increase exports of the United States. 
C)  increase imports and exports of the United States. 
D)  eventually lead to prosperity in foreign countries too.

Question 19

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after
The multiplier process works through the economy?

Accepted Answer

A)  $40 billion 
B)  Less than $20 billion 
C)  More than $40 billion 
D)  Cannot be determined without information on the trade policies in question 
A)  $40 billion 
B)  Less than $20 billion 
C)  More than $40 billion 
D)  Cannot be determined without information on the trade policies in question

Question 20

A nation engages in a managed float exchange rate system to ensure that its currency will fluctuate freely with market forces.

Accepted Answer

A) True 
 B)False

Which of the following statements is true?

While members of the European Union that are part of the eurozone continue to have their own central bank, these national central banks agree to cede the conduct of monetary policy to the European Central Bank.

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

Which of the following is an advantage of a free-floating exchange rate system?

Suppose a family from Peru eats in a restaurant in Salt Lake City, Utah. How will this Transaction be recorded in U.S. international transactions?

A tax imposed by a country on an imported good or service is called a

Which of the following has contributed most to the significant increase in world trade since 1990?

An exchange rate system in which prices of various currencies are fixed relative to a given Quantity of some commodity is called a

The Bretton Woods system is an example of a fixed exchange rate system.

If the U.S. exchange rate decreases relative to foreign currencies, then

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its capital account?

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

The balance between spending flows into a country and spending flows out of that country is Called a country's

Members of the countries in the eurozone

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Which of the following generates a demand for U.S. dollars in the currency market?

A deficit in the current account implies

Prosperity in the United States will

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after The multiplier process works through the economy?

A nation engages in a managed float exchange rate system to ensure that its currency will fluctuate freely with market forces.

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

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Exam 15: Net Exports and International Finance

Which of the following statements is true?

While members of the European Union that are part of the eurozone continue to have their own central bank, these national central banks agree to cede the conduct of monetary policy to the European Central Bank.

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

Which of the following is an advantage of a free-floating exchange rate system?

Suppose a family from Peru eats in a restaurant in Salt Lake City, Utah. How will this Transaction be recorded in U.S. international transactions?

A tax imposed by a country on an imported good or service is called a

Which of the following has contributed most to the significant increase in world trade since 1990?

An exchange rate system in which prices of various currencies are fixed relative to a given Quantity of some commodity is called a

The Bretton Woods system is an example of a fixed exchange rate system.

If the U.S. exchange rate decreases relative to foreign currencies, then

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its capital account?

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

The balance between spending flows into a country and spending flows out of that country is Called a country's

Members of the countries in the eurozone

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Which of the following generates a demand for U.S. dollars in the currency market?

A deficit in the current account implies

Prosperity in the United States will

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after The multiplier process works through the economy?

A nation engages in a managed float exchange rate system to ensure that its currency will fluctuate freely with market forces.

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