Question 1

The real exchange rate is the

Accepted Answer

A)  trade- weighted index 
B)  price of foreign goods relative to the price of domestic goods 
C)  relative price of U.S. produced output relative to foreign- produced output. 
D)  current account balance 
A)  trade- weighted index 
B)  price of foreign goods relative to the price of domestic goods 
C)  relative price of U.S. produced output relative to foreign- produced output. 
D)  current account balance

Question 2

In the foreign exchange market, which of the following shifts the demand curve for U.S. dollars rightward?

Accepted Answer

A)  a decrease in the exchange rate 
B)  an decrease in the U.S. interest rate relative to interest rates in other countries 
C)  an increase in the U.S. interest rate relative to interest rates in other countries 
D)  an increase in the exchange rate 
A)  a decrease in the exchange rate 
B)  an decrease in the U.S. interest rate relative to interest rates in other countries 
C)  an increase in the U.S. interest rate relative to interest rates in other countries 
D)  an increase in the exchange rate

Question 3

A German publishing company buys an American publishing company based in New York. In the
u.S. balance of payments accounts, this transaction directly appears in

Accepted Answer

A)  the imports part of the current account. 
B)  the official settlements account. 
C)  the capital account. 
D)  the net transfers part of the current account. 
A)  the imports part of the current account. 
B)  the official settlements account. 
C)  the capital account. 
D)  the net transfers part of the current account.

Question 4

The largest part of the U.S. current account consists of

Accepted Answer

A)  net borrowing between the United States and other countries. 
B)  Fed transfers of U.S. dollars to other central banks. 
C)  net transfer payments between the United States and Mexico. 
D)  receipts from exports and payments for imports. 
A)  net borrowing between the United States and other countries. 
B)  Fed transfers of U.S. dollars to other central banks. 
C)  net transfer payments between the United States and Mexico. 
D)  receipts from exports and payments for imports.

Question 5

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 2 euro per 21 yuan, the price of this airplane to China Airlines is

Accepted Answer

A)  86 million yuan. 
B)  997.5 million yuan. 
C)  953 million yuan. 
D)  9.1 million yuan. 
A)  86 million yuan. 
B)  997.5 million yuan. 
C)  953 million yuan. 
D)  9.1 million yuan.

Question 6

The sum of the current, capital and official settlements accounts is always zero.

Accepted Answer

A) True 
 B)False

Question 7

The quantity of dollars demanded by foreign nations increases as

Accepted Answer

A)  U.S. residents travel abroad more. 
B)  U.S. exports fall. 
C)  foreigners purchase more U.S. goods. 
D)  U.S. residents purchase more foreign goods. 
A)  U.S. residents travel abroad more. 
B)  U.S. exports fall. 
C)  foreigners purchase more U.S. goods. 
D)  U.S. residents purchase more foreign goods.

Question 8

An exchange rate is the price of one country's currency in terms of another country's currency.

Accepted Answer

A) True 
 B)False

Question 9

U.S. official reserves are the .

Accepted Answer

A)  U.S. government's holdings of foreign currency 
B)  holdings of foreign currency by the public and the banks 
C)  reserves of U.S. dollars held by foreign banks 
D)  reserves of U.S. dollars held by the World Bank 
A)  U.S. government's holdings of foreign currency 
B)  holdings of foreign currency by the public and the banks 
C)  reserves of U.S. dollars held by foreign banks 
D)  reserves of U.S. dollars held by the World Bank

Question 10

If the U.S. Federal Reserve increases interest rates, ceteris paribus,

Accepted Answer

A)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
B)  only the demand curve for U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
D)  the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. 
A)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
B)  only the demand curve for U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
D)  the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward.

Question 11

Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will

Accepted Answer

A)  appreciate 10 percent. 
B)  appreciate 4 percent. 
C)  depreciate 10 percent. 
D)  depreciate 4 percent. 
A)  appreciate 10 percent. 
B)  appreciate 4 percent. 
C)  depreciate 10 percent. 
D)  depreciate 4 percent.

Question 12

"In the foreign exchange market, if the demand for the U.S. dollar increases, the U.S. dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is correct. The increase i

Question 13

-The above figure shows the demand curve for dollars in the yen/dollar exchange market. A movement from point A to point B means that the

Accepted Answer

A)  quantity demanded of yen has decreased. 
B)  quantity demanded of dollars has increased. 
C)  quantity demanded of dollars has decreased. 
D)  quantity supplied of dollars has increased. 
A)  quantity demanded of yen has decreased. 
B)  quantity demanded of dollars has increased. 
C)  quantity demanded of dollars has decreased. 
D)  quantity supplied of dollars has increased.

Question 14

If interest rates in Japan rise and those in the United States do not change, there is

Accepted Answer

A)  a downward movement along the supply curve for dollars. 
B)  an increase in the supply of dollars. 
C)  a decrease in the supply of dollars. 
D)  None of the above answers is correct. 
A)  a downward movement along the supply curve for dollars. 
B)  an increase in the supply of dollars. 
C)  a decrease in the supply of dollars. 
D)  None of the above answers is correct.

Question 15

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

Accepted Answer

A)  the exchange rate for the dollar rises. 
B)  the U.S. interest rate differential decreases. 
C)  the expected future exchange rate rises. 
D)  All of the above are correct. 
A)  the exchange rate for the dollar rises. 
B)  the U.S. interest rate differential decreases. 
C)  the expected future exchange rate rises. 
D)  All of the above are correct.

Question 16

As the exchange rate _, the is the value of U.S. _ .

Accepted Answer

A)  falls; greater; exports 
B)  rises; greater; exports 
C)  falls; greater; imports 
D)  rises; smaller; imports 
A)  falls; greater; exports 
B)  rises; greater; exports 
C)  falls; greater; imports 
D)  rises; smaller; imports

Question 17

Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to

Accepted Answer

A)  appreciate by 6 percent. 
B)  depreciate by 6 percent. 
C)  depreciate by 2 percent. 
D)  appreciate by 2 percent. 
A)  appreciate by 6 percent. 
B)  depreciate by 6 percent. 
C)  depreciate by 2 percent. 
D)  appreciate by 2 percent.

Question 18

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed

Accepted Answer

A)  must violate both interest rate parity and purchasing power parity. 
B)  can buy dollars. 
C)  cannot maintain the target exchange rate. 
D)  can sell dollars. 
A)  must violate both interest rate parity and purchasing power parity. 
B)  can buy dollars. 
C)  cannot maintain the target exchange rate. 
D)  can sell dollars.

Question 19

"Fluctuations in exchange rates, other things remaining the same, creates a situation in which money buys the same amount of goods and services in different currencies." What does the previous statement describe? Will these fluctuations occur in the short run or the long run?

Accepted Answer

The statement describes purchasing power

Question 20

-In the figure above, illustrate the effect of an increase in the U.S. interest rate. What is the effect on the exchange rate?

Accepted Answer

@#IMG-DLM& The figure above shows the effect of th

The real exchange rate is the

In the foreign exchange market, which of the following shifts the demand curve for U.S. dollars rightward?

A German publishing company buys an American publishing company based in New York. In the u.S. balance of payments accounts, this transaction directly appears in

The largest part of the U.S. current account consists of

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 2 euro per 21 yuan, the price of this airplane to China Airlines is

The sum of the current, capital and official settlements accounts is always zero.

The quantity of dollars demanded by foreign nations increases as

An exchange rate is the price of one country's currency in terms of another country's currency.

U.S. official reserves are the .

If the U.S. Federal Reserve increases interest rates, ceteris paribus,

Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will

"In the foreign exchange market, if the demand for the U.S. dollar increases, the U.S. dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

-The above figure shows the demand curve for dollars in the yen/dollar exchange market. A movement from point A to point B means that the

If interest rates in Japan rise and those in the United States do not change, there is

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

As the exchange rate _, the is the value of U.S. _ .

Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D₂. To maintain the target exchange rate, the Fed

"Fluctuations in exchange rates, other things remaining the same, creates a situation in which money buys the same amount of goods and services in different currencies." What does the previous statement describe? Will these fluctuations occur in the short run or the long run?

-In the figure above, illustrate the effect of an increase in the U.S. interest rate. What is the effect on the exchange rate?

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 real exchange rate is the

In the foreign exchange market, which of the following shifts the demand curve for U.S. dollars rightward?

A German publishing company buys an American publishing company based in New York. In the u.S. balance of payments accounts, this transaction directly appears in

The largest part of the U.S. current account consists of

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 2 euro per 21 yuan, the price of this airplane to China Airlines is

The sum of the current, capital and official settlements accounts is always zero.

The quantity of dollars demanded by foreign nations increases as

An exchange rate is the price of one country's currency in terms of another country's currency.

U.S. official reserves are the .

If the U.S. Federal Reserve increases interest rates, ceteris paribus,

Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will

"In the foreign exchange market, if the demand for the U.S. dollar increases, the U.S. dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

-The above figure shows the demand curve for dollars in the yen/dollar exchange market. A movement from point A to point B means that the

If interest rates in Japan rise and those in the United States do not change, there is

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

As the exchange rate _, the is the value of U.S. _ .

Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed

"Fluctuations in exchange rates, other things remaining the same, creates a situation in which money buys the same amount of goods and services in different currencies." What does the previous statement describe? Will these fluctuations occur in the short run or the long run?

-In the figure above, illustrate the effect of an increase in the U.S. interest rate. What is the effect on the exchange rate?

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, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D₂. To maintain the target exchange rate, the Fed