Question 1

The idea that the value of money is equal across countries is known as

Accepted Answer

A)  the expected profit parity effect. 
B)  purchasing power parity. 
C)  interest rate parity. 
D)  exchange rate parity. 
A)  the expected profit parity effect. 
B)  purchasing power parity. 
C)  interest rate parity. 
D)  exchange rate parity.

Question 2

If a country's central bank does not intervene in the foreign exchange market, the country has

Accepted Answer

A)  a flexible exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a crawling peg exchange rate policy. 
D)  no exchange rate policy. 
A)  a flexible exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a crawling peg exchange rate policy. 
D)  no exchange rate policy.

Question 3

The higher the exchange rate today, the

Accepted Answer

A)  smaller the quantity of U.S. dollars supplied in the foreign exchange market today. 
B)  greater is the expected profit from buying U.S. dollars today and holding them. 
C)  smaller is the expected profit from buying U.S. dollars today. 
D)  greater is the expected profit from buying foreign currency today and holding it. 
A)  smaller the quantity of U.S. dollars supplied in the foreign exchange market today. 
B)  greater is the expected profit from buying U.S. dollars today and holding them. 
C)  smaller is the expected profit from buying U.S. dollars today. 
D)  greater is the expected profit from buying foreign currency today and holding it.

Question 4

If the U.S. government decreased its holdings of Mexican pesos, definitely

Accepted Answer

A)  the capital account would decrease. 
B)  there would be a decrease in U.S. official reserves. 
C)  the capital account would increase. 
D)  there would be an increase in U.S. official reserves. 
A)  the capital account would decrease. 
B)  there would be a decrease in U.S. official reserves. 
C)  the capital account would increase. 
D)  there would be an increase in U.S. official reserves.

Question 5

The account that records the receipts from the exports of goods and services sold abroad, the payments for imports of goods and services from abroad, net interest income paid abroad, and net transfers is the _ .

Accepted Answer

A)  official settlements account 
B)  current account 
C)  capital account 
D)  international capital account 
A)  official settlements account 
B)  current account 
C)  capital account 
D)  international capital account

Question 6

The U.S. dollar will depreciate in value if

Accepted Answer

A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Both answers B and C are correct. 
A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Both answers B and C are correct.

Question 7

Today the U.S. dollar is worth 1.5 Canadian dollars. By the end of the month, it is expected that the
u.S. dollar will be worth 1.2 Canadian dollars. This belief

Accepted Answer

A)  decreases the value of exports to Canada. 
B)  increases the demand for U.S. dollars. 
C)  decreases the demand for U.S. dollars. 
D)  decreases the demand for Canadian dollars. 
A)  decreases the value of exports to Canada. 
B)  increases the demand for U.S. dollars. 
C)  decreases the demand for U.S. dollars. 
D)  decreases the demand for Canadian dollars.

Question 8

-The table above shows some data for Wiland, a country whose currency is the bont. The official settlement balan interest income, and net transfers from abroad are zero.
a) What is Wiland's imports of goods and services?
b) What is Wiland's current account balance?
c) What is Wiland's capital account balance?
d) What is Wiland's net taxes?
e) What is Wiland's private sector balance?

Accepted Answer

a) The country's net exports are GDP min

Question 9

The exchange rate is the

Accepted Answer

A)  price of one country's currency expressed in terms of another country's currency. 
B)  ratio between imports and exports. 
C)  interest rate that is charged on risk- free international capital flow. 
D)  opportunity cost of pursuing a nation's comparative advantage. 
A)  price of one country's currency expressed in terms of another country's currency. 
B)  ratio between imports and exports. 
C)  interest rate that is charged on risk- free international capital flow. 
D)  opportunity cost of pursuing a nation's comparative advantage.

Question 10

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

Accepted Answer

A)  foreign interest rates fall. 
B)  people expect that the dollar will depreciate. 
C)  the expected future exchange rate increases. 
D)  the U.S. interest rate rises. 
A)  foreign interest rates fall. 
B)  people expect that the dollar will depreciate. 
C)  the expected future exchange rate increases. 
D)  the U.S. interest rate rises.

Question 11

The current account is

Accepted Answer

A)  is the amount of tax revenue that the government expects to collect. 
B)  the difference between exports and imports, also taking into account interest payments to and from the rest of the world. 
C)  the amount of money the government keeps on hand to pay its bills taking account of the interest payments on its debt. 
D)  is the total amount of interest payments that the U.S. owes to foreign countries. 
A)  is the amount of tax revenue that the government expects to collect. 
B)  the difference between exports and imports, also taking into account interest payments to and from the rest of the world. 
C)  the amount of money the government keeps on hand to pay its bills taking account of the interest payments on its debt. 
D)  is the total amount of interest payments that the U.S. owes to foreign countries.

Question 12

If net interest and net transfers are $0, and a nation's purchases of foreign goods and services are
$3)5 billion while its sales of goods and services to foreigners are $4.5 billion,

Accepted Answer

A)  it has a $1 billion surplus in its current account. 
B)  its capital account shows a surplus. 
C)  it has a $1 billion deficit in its current account. 
D)  it has a $1 billion surplus in its balance of payments. 
A)  it has a $1 billion surplus in its current account. 
B)  its capital account shows a surplus. 
C)  it has a $1 billion deficit in its current account. 
D)  it has a $1 billion surplus in its balance of payments.

Question 13

A fall in the U.S. exchange rate will

Accepted Answer

A)  decrease the quantity of dollars demanded. 
B)  increase the demand for dollars. 
C)  increase the quantity of dollars demanded. 
D)  decrease the demand for dollars. 
A)  decrease the quantity of dollars demanded. 
B)  increase the demand for dollars. 
C)  increase the quantity of dollars demanded. 
D)  decrease the demand for dollars.

Question 14

International borrowing in the United States is financing .

Accepted Answer

A)  private and public investment 
B)  net exports 
C)  consumption 
D)  government purchases of goods and services 
A)  private and public investment 
B)  net exports 
C)  consumption 
D)  government purchases of goods and services

Question 15

In 2008, the U.S. current account had a

Accepted Answer

A)  deficit of $90 billion. 
B)  deficit of $792 billion. 
C)  balance with a discrepancy of $40 billion. 
D)  surplus of $792 billion. 
A)  deficit of $90 billion. 
B)  deficit of $792 billion. 
C)  balance with a discrepancy of $40 billion. 
D)  surplus of $792 billion.

Question 16

The larger the U.S. interest rate differential, the

Accepted Answer

A)  smaller the supply of yen on the foreign exchange market. 
B)  larger the demand for foreign assets. 
C)  smaller the supply of dollars on the foreign exchange market. 
D)  larger the supply of dollars on the foreign exchange market. 
A)  smaller the supply of yen on the foreign exchange market. 
B)  larger the demand for foreign assets. 
C)  smaller the supply of dollars on the foreign exchange market. 
D)  larger the supply of dollars on the foreign exchange market.

Question 17

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a _ of dollars, and the exchange rate will .

Accepted Answer

A)  shortage; change only when the supply curve shifts leftward 
B)  surplus; rise to the equilibrium level 
C)  shortage; rise to the equilibrium level 
D)  surplus; fall to the equilibrium level 
A)  shortage; change only when the supply curve shifts leftward 
B)  surplus; rise to the equilibrium level 
C)  shortage; rise to the equilibrium level 
D)  surplus; fall to the equilibrium level

Question 18

If prices increase in Mexico, but remain constant in the United States, then

Accepted Answer

A)  people expect the current value of the dollar is too high. 
B)  people expect the value of the dollar will rise in the future. 
C)  the demand for dollars will decrease. 
D)  interest rate parity will not occur. 
A)  people expect the current value of the dollar is too high. 
B)  people expect the value of the dollar will rise in the future. 
C)  the demand for dollars will decrease. 
D)  interest rate parity will not occur.

Question 19

Suppose the exchange rate of the U.S. dollar was 1.00 euro = $0.50 on Thursday, and on Friday the exchange rate was $1.00 = 2.10 euros. Which of the following best explains what has happened between Thursday and Friday?

Accepted Answer

A)  The U.S. dollar depreciated against the euro. 
B)  The euro appreciated against the U.S. dollar. 
C)  The U.S. dollar appreciated against the euro. 
D)  Both answers B and C are correct. 
A)  The U.S. dollar depreciated against the euro. 
B)  The euro appreciated against the U.S. dollar. 
C)  The U.S. dollar appreciated against the euro. 
D)  Both answers B and C are correct.

Question 20

If the Fed raises the interest rate, in the foreign exchange market the demand for the U.S. dollar increases.

Accepted Answer

A) True 
 B)False

The idea that the value of money is equal across countries is known as

If a country's central bank does not intervene in the foreign exchange market, the country has

The higher the exchange rate today, the

If the U.S. government decreased its holdings of Mexican pesos, definitely

The account that records the receipts from the exports of goods and services sold abroad, the payments for imports of goods and services from abroad, net interest income paid abroad, and net transfers is the _ .

The U.S. dollar will depreciate in value if

Today the U.S. dollar is worth 1.5 Canadian dollars. By the end of the month, it is expected that the u.S. dollar will be worth 1.2 Canadian dollars. This belief

The exchange rate is the

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

The current account is

If net interest and net transfers are $0, and a nation's purchases of foreign goods and services are $3)5 billion while its sales of goods and services to foreigners are $4.5 billion,

A fall in the U.S. exchange rate will

International borrowing in the United States is financing .

In 2008, the U.S. current account had a

The larger the U.S. interest rate differential, the

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a _ of dollars, and the exchange rate will .

If prices increase in Mexico, but remain constant in the United States, then

Suppose the exchange rate of the U.S. dollar was 1.00 euro = $0.50 on Thursday, and on Friday the exchange rate was $1.00 = 2.10 euros. Which of the following best explains what has happened between Thursday and Friday?

If the Fed raises the interest rate, in the foreign exchange market the demand for the U.S. dollar increases.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

The idea that the value of money is equal across countries is known as

If a country's central bank does not intervene in the foreign exchange market, the country has

The higher the exchange rate today, the

If the U.S. government decreased its holdings of Mexican pesos, definitely

The account that records the receipts from the exports of goods and services sold abroad, the payments for imports of goods and services from abroad, net interest income paid abroad, and net transfers is the _ .

The U.S. dollar will depreciate in value if

Today the U.S. dollar is worth 1.5 Canadian dollars. By the end of the month, it is expected that the u.S. dollar will be worth 1.2 Canadian dollars. This belief

The exchange rate is the

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

The current account is

If net interest and net transfers are $0, and a nation's purchases of foreign goods and services are $3)5 billion while its sales of goods and services to foreigners are $4.5 billion,

A fall in the U.S. exchange rate will

International borrowing in the United States is financing .

In 2008, the U.S. current account had a

The larger the U.S. interest rate differential, the

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a _ of dollars, and the exchange rate will .

If prices increase in Mexico, but remain constant in the United States, then

Suppose the exchange rate of the U.S. dollar was 1.00 euro = $0.50 on Thursday, and on Friday the exchange rate was $1.00 = 2.10 euros. Which of the following best explains what has happened between Thursday and Friday?

If the Fed raises the interest rate, in the foreign exchange market the demand for the U.S. dollar increases.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when