Question 1

The main source of fluctuations in the current account balance is

Accepted Answer

A)  net exports. 
B)  net transfers. 
C)  net interest income. 
D)  net taxes. 
A)  net exports. 
B)  net transfers. 
C)  net interest income. 
D)  net taxes.

Question 2

Which of the following accounts records the change in U.S. official reserves?

Accepted Answer

A)  current account 
B)  official settlements account 
C)  capital account 
D)  none of the above 
A)  current account 
B)  official settlements account 
C)  capital account 
D)  none of the above

Question 3

-The table above shows the transactions made during 2009 by the citizens of Biscuit, whose currency is the crumb. During 2009, the official reserves increased by 380 million crumbs. Calculate the current account balance.

Accepted Answer

A)  - 1,000 million crumbs 
B)  1,000 million crumbs 
C)  - 880 million crumbs 
D)  880 million crumbs 
A)  - 1,000 million crumbs 
B)  1,000 million crumbs 
C)  - 880 million crumbs 
D)  880 million crumbs

Question 4

In the foreign exchange market, when the U.S. interest rate differential decreases, the

Accepted Answer

A)  exchange rate does not change. 
B)  demand for dollars decreases. 
C)  demand for dollars increases. 
D)  quantity of dollars demanded increases. 
A)  exchange rate does not change. 
B)  demand for dollars decreases. 
C)  demand for dollars increases. 
D)  quantity of dollars demanded increases.

Question 5

If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?

Accepted Answer

To lower the exchange rate, th

Question 6

Over the last 25 years, according to the United States balance of payments,

Accepted Answer

A)  the current account and the capital account balances tend to move in the same direction. 
B)  the official settlements balance fluctuates greatly from year to year. 
C)  the current account and the capital account balances tend to move in opposite directions. 
D)  there is no clear relationship between the current account balance and the capital account balance. 
A)  the current account and the capital account balances tend to move in the same direction. 
B)  the official settlements balance fluctuates greatly from year to year. 
C)  the current account and the capital account balances tend to move in opposite directions. 
D)  there is no clear relationship between the current account balance and the capital account balance.

Question 7

With everything else the same, in the foreign exchange market the

Accepted Answer

A)  the lower the exchange rate, the smaller is the expected profit from buying dollars. 
B)  larger the value of U.S. exports, the greater is the quantity of dollars demanded. 
C)  lower the exchange rate, the smaller the amount of U.S. exports. 
D)  the higher the exchange rate, the cheaper are U.S.- produced goods and services. 
A)  the lower the exchange rate, the smaller is the expected profit from buying dollars. 
B)  larger the value of U.S. exports, the greater is the quantity of dollars demanded. 
C)  lower the exchange rate, the smaller the amount of U.S. exports. 
D)  the higher the exchange rate, the cheaper are U.S.- produced goods and services.

Question 8

An increase in the value of a domestic currency in terms of other currencies is known as

Accepted Answer

A)  a depreciation. 
B)  a flexible exchange rate. 
C)  an appreciation. 
D)  a term not given in the above answers. 
A)  a depreciation. 
B)  a flexible exchange rate. 
C)  an appreciation. 
D)  a term not given in the above answers.

Question 9

In 2007, the U.S. sold $73 million of cigarettes to Iran. Iran paid for these cigarettes using

Accepted Answer

A)  pounds. 
B)  euros. 
C)  dollars. 
D)  rials, the Iranian currency. 
A)  pounds. 
B)  euros. 
C)  dollars. 
D)  rials, the Iranian currency.

Question 10

-The citizens of Exland, whose currency is the bun, conduct the transactions outlined in the table above.
a) What is Exland's current account balance?
b) What is Exland's capital account balance?
c) What is Exland's official settlement balance?
d) What is Exland's net foreign borrowing?

Accepted Answer

a) The current account balance equals ex

Question 11

In the foreign exchange market, the supply curve for dollars slopes upwards because

Accepted Answer

A)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
B)  supply curves always slope upwards. 
C)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
D)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. 
A)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
B)  supply curves always slope upwards. 
C)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
D)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports.

Question 12

Suppose U.S. net exports are - $400 billion and the U.S. government sector surplus is $200 billion. Then in the private sector, saving minus investment equals

Accepted Answer

A)  - $200 billion. 
B)  - $600 billion. 
C)  +$600 billion. 
D)  +$200 billion. 
A)  - $200 billion. 
B)  - $600 billion. 
C)  +$600 billion. 
D)  +$200 billion.

Question 13

If net interest and net transfers are zero, and a country's exports exceed its imports, the country definitely has .

Accepted Answer

A)  an official settlements account surplus 
B)  a current account deficit 
C)  a capital account surplus 
D)  a current account surplus 
A)  an official settlements account surplus 
B)  a current account deficit 
C)  a capital account surplus 
D)  a current account surplus

Question 14

-Using the above figure, which of the following is correct?

Accepted Answer

A)  1 dollar will sell for 1/2 guilder. 
B)  A shortage of guilders exists at an exchange rate above $0.60. 
C)  A surplus of guilders exists at an exchange rate above $0.60. 
D)  1 guilder will sell for $2. 
A)  1 dollar will sell for 1/2 guilder. 
B)  A shortage of guilders exists at an exchange rate above $0.60. 
C)  A surplus of guilders exists at an exchange rate above $0.60. 
D)  1 guilder will sell for $2.

Question 15

-In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when

Accepted Answer

A)  the U.S. interest rate differential increases. 
B)  the U.S. interest rate falls. 
C)  the current exchange rate falls. 
D)  the expected future exchange rate rises. 
A)  the U.S. interest rate differential increases. 
B)  the U.S. interest rate falls. 
C)  the current exchange rate falls. 
D)  the expected future exchange rate rises.

Question 16

During the period 1998 to 2008, the U.S. dollar as compared to the trade- weighted index of other currencies

Accepted Answer

A)  appreciated up to 2001, and then depreciated. 
B)  depreciated. 
C)  depreciated up to 2001, and then appreciated. 
D)  appreciated. 
A)  appreciated up to 2001, and then depreciated. 
B)  depreciated. 
C)  depreciated up to 2001, and then appreciated. 
D)  appreciated.

Question 17

Give an example of currency depreciation and appreciation.

Accepted Answer

A currency depreciates when it becomes l

Question 18

The trade - weighted index of major currencies is an index based on currencies of

Accepted Answer

A)  the United States, Europe, Japan and the United Kingdom. 
B)  the United States, Europe, Australia, Canada, Japan, Sweden, Switzerland and the United Kingdom. 
C)  Europe, Sweden, Switzerland and the United Kingdom. 
D)  Europe, Australia, Canada, Japan, Sweden, Switzerland and the United Kingdom. 
A)  the United States, Europe, Japan and the United Kingdom. 
B)  the United States, Europe, Australia, Canada, Japan, Sweden, Switzerland and the United Kingdom. 
C)  Europe, Sweden, Switzerland and the United Kingdom. 
D)  Europe, Australia, Canada, Japan, Sweden, Switzerland and the United Kingdom.

Question 19

If net exports increase, but neither government expenditure nor net taxes change, investment must increase.

Accepted Answer

A) True 
 B)False

Question 20

If the U.S. interest rate differential increases, then in the foreign exchange market the

Accepted Answer

A)  demand for U.S. dollars does not change. 
B)  supply of U.S. dollars increases. 
C)  quantity of U.S. dollars supplied increases. 
D)  supply of U.S. dollars decreases. 
A)  demand for U.S. dollars does not change. 
B)  supply of U.S. dollars increases. 
C)  quantity of U.S. dollars supplied increases. 
D)  supply of U.S. dollars decreases.

The main source of fluctuations in the current account balance is

Which of the following accounts records the change in U.S. official reserves?

-The table above shows the transactions made during 2009 by the citizens of Biscuit, whose currency is the crumb. During 2009, the official reserves increased by 380 million crumbs. Calculate the current account balance.

In the foreign exchange market, when the U.S. interest rate differential decreases, the

If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?

Over the last 25 years, according to the United States balance of payments,

With everything else the same, in the foreign exchange market the

An increase in the value of a domestic currency in terms of other currencies is known as

In 2007, the U.S. sold $73 million of cigarettes to Iran. Iran paid for these cigarettes using

-The citizens of Exland, whose currency is the bun, conduct the transactions outlined in the table above. a) What is Exland's current account balance? b) What is Exland's capital account balance? c) What is Exland's official settlement balance? d) What is Exland's net foreign borrowing?

In the foreign exchange market, the supply curve for dollars slopes upwards because

Suppose U.S. net exports are - $400 billion and the U.S. government sector surplus is $200 billion. Then in the private sector, saving minus investment equals

If net interest and net transfers are zero, and a country's exports exceed its imports, the country definitely has .

-Using the above figure, which of the following is correct?

-In the figure above, the shift in the supply curve for U.S. dollars from S₀to S₂could occur when

During the period 1998 to 2008, the U.S. dollar as compared to the trade- weighted index of other currencies

Give an example of currency depreciation and appreciation.

The trade - weighted index of major currencies is an index based on currencies of

If net exports increase, but neither government expenditure nor net taxes change, investment must increase.

If the U.S. interest rate differential increases, then in the foreign exchange market the

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 main source of fluctuations in the current account balance is

Which of the following accounts records the change in U.S. official reserves?

-The table above shows the transactions made during 2009 by the citizens of Biscuit, whose currency is the crumb. During 2009, the official reserves increased by 380 million crumbs. Calculate the current account balance.

In the foreign exchange market, when the U.S. interest rate differential decreases, the

If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?

Over the last 25 years, according to the United States balance of payments,

With everything else the same, in the foreign exchange market the

An increase in the value of a domestic currency in terms of other currencies is known as

In 2007, the U.S. sold $73 million of cigarettes to Iran. Iran paid for these cigarettes using

-The citizens of Exland, whose currency is the bun, conduct the transactions outlined in the table above. a) What is Exland's current account balance? b) What is Exland's capital account balance? c) What is Exland's official settlement balance? d) What is Exland's net foreign borrowing?

In the foreign exchange market, the supply curve for dollars slopes upwards because

Suppose U.S. net exports are - $400 billion and the U.S. government sector surplus is $200 billion. Then in the private sector, saving minus investment equals

If net interest and net transfers are zero, and a country's exports exceed its imports, the country definitely has .

-Using the above figure, which of the following is correct?

-In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when

During the period 1998 to 2008, the U.S. dollar as compared to the trade- weighted index of other currencies

Give an example of currency depreciation and appreciation.

The trade - weighted index of major currencies is an index based on currencies of

If net exports increase, but neither government expenditure nor net taxes change, investment must increase.

If the U.S. interest rate differential increases, then in the foreign exchange market the

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 supply curve for U.S. dollars from S₀to S₂could occur when