Question 1

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

Accepted Answer

A)  foreign interest rates rise. 
B)  the U.S. interest rate rises. 
C)  the expected future exchange rate rises. 
D)  the current exchange rate falls. 
A)  foreign interest rates rise. 
B)  the U.S. interest rate rises. 
C)  the expected future exchange rate rises. 
D)  the current exchange rate falls.

Question 2

As the exchange rate _, the quantity of dollars _ on the foreign exchange market
)

Accepted Answer

A)  falls; demanded; decreases 
B)  falls; supplied; increases 
C)  rises; supplied; increases 
D)  rises; demanded; increases 
A)  falls; demanded; decreases 
B)  falls; supplied; increases 
C)  rises; supplied; increases 
D)  rises; demanded; increases

Question 3

The change in U.S. official reserves is equal to

Accepted Answer

A)  the current account balance minus the capital account balance. 
B)  the current account balance plus the capital account balance. 
C)  borrowing from abroad plus the current account deficit. 
D)  foreign investment in the United States minus U.S. investment abroad. 
A)  the current account balance minus the capital account balance. 
B)  the current account balance plus the capital account balance. 
C)  borrowing from abroad plus the current account deficit. 
D)  foreign investment in the United States minus U.S. investment abroad.

Question 4

If the Fed raises the U.S. interest rate, the demand for dollars and the exchange rate
)

Accepted Answer

A)  increases; falls 
B)  increases; rises 
C)  decreases; falls 
D)  decreases; rises 
A)  increases; falls 
B)  increases; rises 
C)  decreases; falls 
D)  decreases; rises

Question 5

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Accepted Answer

A)  The Jamaican dollar would be expected to appreciate. 
B)  The U.S. dollar would be expected to depreciate. 
C)  Purchasing power parity does not prevail with these prices. 
D)  All of the above are correct. 
A)  The Jamaican dollar would be expected to appreciate. 
B)  The U.S. dollar would be expected to depreciate. 
C)  Purchasing power parity does not prevail with these prices. 
D)  All of the above are correct.

Question 6

The balance of payments account used to record payments for imported goods and services is the

Accepted Answer

A)  capital account. 
B)  current account. 
C)  import account. 
D)  exim account. 
A)  capital account. 
B)  current account. 
C)  import account. 
D)  exim account.

Question 7

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Accepted Answer

A)  pounds. 
B)  foreign exchange rates. 
C)  dollars. 
D)  euros. 
A)  pounds. 
B)  foreign exchange rates. 
C)  dollars. 
D)  euros.

Question 8

Suppose the exchange rate between the U.S. dollar and the Mexican peso was $1 = 5 pesos. A can of Pepsi sells for $2 in Boston and 12 pesos in Mexico City.

Accepted Answer

A)  The U.S. dollar would be expected to depreciate. 
B)  Purchasing power parity prevails with these prices. 
C)  Purchasing power parity does not prevail with these prices. 
D)  None of the above answers is correct. 
A)  The U.S. dollar would be expected to depreciate. 
B)  Purchasing power parity prevails with these prices. 
C)  Purchasing power parity does not prevail with these prices. 
D)  None of the above answers is correct.

Question 9

Suppose the exchange rate between the U.S. dollar and the French franc is 0.25 francs per dollar. If a television sells for 100 francs in France, what is the dollar price of the television set?

Accepted Answer

A)  $25 
B)  $400 
C)  $200 
D)  $50 
A)  $25 
B)  $400 
C)  $200 
D)  $50

Question 10

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 4 percent a year, .

Accepted Answer

A)  the Canadian dollar is expected to depreciate 
B)  the U.S. dollar is expected to depreciate 
C)  interest rate parity does not exist 
D)  the quantity of Canadian dollars purchased will increase 
A)  the Canadian dollar is expected to depreciate 
B)  the U.S. dollar is expected to depreciate 
C)  interest rate parity does not exist 
D)  the quantity of Canadian dollars purchased will increase

Question 11

In the foreign exchange market, the higher the dollar's exchange rate, the

Accepted Answer

A)  larger the supply of dollars. 
B)  smaller the supply of dollars. 
C)  smaller the quantity supplied of dollars. 
D)  larger the quantity supplied of dollars. 
A)  larger the supply of dollars. 
B)  smaller the supply of dollars. 
C)  smaller the quantity supplied of dollars. 
D)  larger the quantity supplied of dollars.

Question 12

If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is

Accepted Answer

A)  6 South African goods per U.S. good. 
B)  1.4 South African goods per U.S. good. 
C)  9.8 South African goods per U.S. good. 
D)  8.4 South African goods per U.S. good. 
A)  6 South African goods per U.S. good. 
B)  1.4 South African goods per U.S. good. 
C)  9.8 South African goods per U.S. good. 
D)  8.4 South African goods per U.S. good.

Question 13

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

Accepted Answer

A)  the exchange rate for the dollar falls. 
B)  the expected future exchange rate falls. 
C)  the U.S. interest rate differential falls. 
D)  None of the above answers is correct. 
A)  the exchange rate for the dollar falls. 
B)  the expected future exchange rate falls. 
C)  the U.S. interest rate differential falls. 
D)  None of the above answers is correct.

Question 14

What balance of payment account records foreign investment between countries?

Accepted Answer

The capital account records fo

Question 15

Suppose that a dollar buys 120 yen. If a VCR sells for 18,600 yen in Japan, the price of the VCR in dollars is .

Accepted Answer

A)  $120.00 
B)  $186.00 
C)  $155.00 
D)  $223.20 
A)  $120.00 
B)  $186.00 
C)  $155.00 
D)  $223.20

Question 16

What is a "debtor nation?" Is the United States a debtor nation?

Accepted Answer

A debtor nation is a country that during

Question 17

If the Fed wants to depreciate the dollar against the yen, the Fed will

Accepted Answer

A)  increase the demand for dollars by selling yen. 
B)  decrease the supply of dollars by selling yen. 
C)  increase the supply of dollars by selling yen. 
D)  increase the supply of dollars by buying yen. 
A)  increase the demand for dollars by selling yen. 
B)  decrease the supply of dollars by selling yen. 
C)  increase the supply of dollars by selling yen. 
D)  increase the supply of dollars by buying yen.

Question 18

When a nation's currency depreciates, the country might

Accepted Answer

A)  be responding to a decrease in the domestic demand for foreign currencies. 
B)  have an inflation rate below the inflation rate in nations with which it trades. 
C)  have an inflation rate that exceeds the inflation rate in nations with which it trades. 
D)  be responding to an increase in the demand for its currency. 
A)  be responding to a decrease in the domestic demand for foreign currencies. 
B)  have an inflation rate below the inflation rate in nations with which it trades. 
C)  have an inflation rate that exceeds the inflation rate in nations with which it trades. 
D)  be responding to an increase in the demand for its currency.

Question 19

Consider the market for dollars. If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

Accepted Answer

A)  there is an upward movement along the supply curve for dollars. 
B)  there is a downward movement along the supply curve for dollars. 
C)  the supply curve of dollars shifts rightward. 
D)  the supply curve of dollars shifts leftward. 
A)  there is an upward movement along the supply curve for dollars. 
B)  there is a downward movement along the supply curve for dollars. 
C)  the supply curve of dollars shifts rightward. 
D)  the supply curve of dollars shifts leftward.

Question 20

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 U.S. and in Montreal it costs $15 Canadian, then .

Accepted Answer

A)  Canadians will buy CDs in St. Louis 
B)  Virgin Records will have an incentive to build more stores in North America 
C)  Americans will buy CDs in Montreal 
D)  purchasing power parity exists 
A)  Canadians will buy CDs in St. Louis 
B)  Virgin Records will have an incentive to build more stores in North America 
C)  Americans will buy CDs in Montreal 
D)  purchasing power parity exists

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

As the exchange rate _, the quantity of dollars _ on the foreign exchange market )

The change in U.S. official reserves is equal to

If the Fed raises the U.S. interest rate, the demand for dollars and the exchange rate )

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

The balance of payments account used to record payments for imported goods and services is the

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Suppose the exchange rate between the U.S. dollar and the Mexican peso was $1 = 5 pesos. A can of Pepsi sells for $2 in Boston and 12 pesos in Mexico City.

Suppose the exchange rate between the U.S. dollar and the French franc is 0.25 francs per dollar. If a television sells for 100 francs in France, what is the dollar price of the television set?

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 4 percent a year, .

In the foreign exchange market, the higher the dollar's exchange rate, the

If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

What balance of payment account records foreign investment between countries?

Suppose that a dollar buys 120 yen. If a VCR sells for 18,600 yen in Japan, the price of the VCR in dollars is .

What is a "debtor nation?" Is the United States a debtor nation?

If the Fed wants to depreciate the dollar against the yen, the Fed will

When a nation's currency depreciates, the country might

Consider the market for dollars. If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 U.S. and in Montreal it costs $15 Canadian, then .

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

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

As the exchange rate _, the quantity of dollars _ on the foreign exchange market )

The change in U.S. official reserves is equal to

If the Fed raises the U.S. interest rate, the demand for dollars and the exchange rate )

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

The balance of payments account used to record payments for imported goods and services is the

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Suppose the exchange rate between the U.S. dollar and the Mexican peso was $1 = 5 pesos. A can of Pepsi sells for $2 in Boston and 12 pesos in Mexico City.

Suppose the exchange rate between the U.S. dollar and the French franc is 0.25 francs per dollar. If a television sells for 100 francs in France, what is the dollar price of the television set?

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 4 percent a year, .

In the foreign exchange market, the higher the dollar's exchange rate, the

If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

What balance of payment account records foreign investment between countries?

Suppose that a dollar buys 120 yen. If a VCR sells for 18,600 yen in Japan, the price of the VCR in dollars is .

What is a "debtor nation?" Is the United States a debtor nation?

If the Fed wants to depreciate the dollar against the yen, the Fed will

When a nation's currency depreciates, the country might

Consider the market for dollars. If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 U.S. and in Montreal it costs $15 Canadian, then .

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