Question 1

The U.S. interest rate minus the foreign interest rate is called the __________.

Accepted Answer

A)  U.S. interest rate differential 
B)  foreign interest rate differential 
C)  U.S. bond rate differential 
D)  U.S. stock yield differential 
A)  U.S. interest rate differential 
B)  foreign interest rate differential 
C)  U.S. bond rate differential 
D)  U.S. stock yield differential

Question 2

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

Question 3

$\begin{array}{|l|l|}
\hline \text { Item } & \text { Billions of dollars } \
\hline \text { Exports of goods } & 1000 \
\hline \text { Imports of goods } & -665 \
\hline \text { Exp orts of services } & 410 \
\hline \text { Imports of services } & -590 \
\hline \text { Net interest income } & 0 \
\hline \text { Net transfers } & -15 \
\hline \text { U } S \text {. investment abroad } & -600 \
\hline \text { Foreign investment in } & 400 \
\text { the United States}\\hline \begin{array}{l}
\text { Official settlements } \
\text { account }
\end{array} & 60 \
\hline
\end{array}$
-The data in the table above are the U.S. balance of payments. The current account balance is

Accepted Answer

A)  $155 billion. 
B)  $140 billion. 
C)  $170 billion. 
D)  -$45 billion. 
A)  $155 billion. 
B)  $140 billion. 
C)  $170 billion. 
D)  -$45 billion.

Question 4

The law of demand for dollars in the foreign exchange market means that the

Accepted Answer

A)  lower the exchange rate, the greater the quantity of dollars demanded. 
B)  higher the exchange rate, the smaller the quantity of dollars demanded. 
C)  lower the exchange rate, the smaller the quantity of U.S. exports demanded. 
D)  Both answers A and B are correct. 
A)  lower the exchange rate, the greater the quantity of dollars demanded. 
B)  higher the exchange rate, the smaller the quantity of dollars demanded. 
C)  lower the exchange rate, the smaller the quantity of U.S. exports demanded. 
D)  Both answers A and B are correct.

Question 5

The quantity of dollars demanded by foreign nations increases as

Accepted Answer

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

Question 6

A factor helping determine demand for the dollar in the foreign exchange market is

Accepted Answer

A)  the expected future interest rate. 
B)  the amount of U.S. imports. 
C)  the expected future exchange rate. 
D)  the supply of U.S. dollars. 
A)  the expected future interest rate. 
B)  the amount of U.S. imports. 
C)  the expected future exchange rate. 
D)  the supply of U.S. dollars.

Question 7

Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decreases the Fed

Accepted Answer

A)  can permanently meet the target by buying dollars. 
B)  must violate both interest rate parity and purchasing power parity to permanently meet the target. 
C)  cannot permanently maintain the target rate. 
D)  can permanently meet the target by selling dollars. 
A)  can permanently meet the target by buying dollars. 
B)  must violate both interest rate parity and purchasing power parity to permanently meet the target. 
C)  cannot permanently maintain the target rate. 
D)  can permanently meet the target by selling dollars.

Question 8

If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world, the country is a

Accepted Answer

A)  creditor nation. 
B)  net lender. 
C)  debtor nation. 
D)  net borrower. 
A)  creditor nation. 
B)  net lender. 
C)  debtor nation. 
D)  net borrower.

Question 9

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

Accepted Answer

A)  international monetary credits. 
B)  dollars. 
C)  euros, or any other third currency. 
D)  yuan, the Chinese currency. 
A)  international monetary credits. 
B)  dollars. 
C)  euros, or any other third currency. 
D)  yuan, the Chinese currency.

Question 10

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

Question 11

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars__________and the supply of U.S. dollars__________ .

Accepted Answer

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

Question 12

In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the supply of dollars?

Accepted Answer

Changes in the expected future exchange

Question 13

Over its history, Brazil has borrowed more from the rest of the world than it has loaned to the rest of the world. Brazil

Accepted Answer

A)  is a creditor nation. 
B)  is a debtor nation. 
C)  eventually will have a balance of payments account that does not balance. 
D)  has no current account balance. 
A)  is a creditor nation. 
B)  is a debtor nation. 
C)  eventually will have a balance of payments account that does not balance. 
D)  has no current account balance.

Question 14

$\begin{array}{|l|l|}
\hline \text { Item } & \text { Billions of dollars } \
\hline \begin{array}{l}
\text { Imports of goods and } \
\text { services }
\end{array} & 750 \\hline \begin{array}{l}
\text { Exports of goods and } \
\text { services }
\end{array} & 1,000 \\hline \text { Net interest income } & -50 \
\hline \text { Net transfers } & -50 \
\hline \text { US. investment abroad } & -350 \\hline \begin{array}{l}
\text { For eign investment in } \
\text { the United States}
\end{array} & 200 \
\hline
\end{array}$
-The data in the table above are the U.S. balance of payments. What is the capital and financial account balance?

Accepted Answer

A)  -$150 billion 
B)  $150 billion 
C)  -$350 billion 
D)  $0 
A)  -$150 billion 
B)  $150 billion 
C)  -$350 billion 
D)  $0

Question 15

If a country has a capital and financial account deficit, that countryʹs stock of international indebtedness is

Accepted Answer

A)  constant. 
B)  increasing. 
C)  decreasing. 
D)  zero. 
A)  constant. 
B)  increasing. 
C)  decreasing. 
D)  zero.

Question 16

Suppose that the U.S. exchange rate is expected to fall in the future. As a result, in the foreign exchange market, there will be

Accepted Answer

A)  an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. 
B)  a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate. 
C)  a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. 
D)  an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate. 
A)  an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. 
B)  a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate. 
C)  a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. 
D)  an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate.

Question 17

Which of the following is recorded in the U.S. balance of payments account?
I. foreign investment in the United States
II. U.S. investment abroad
III. the U.S. government deficit or surplus

Accepted Answer

A)  I and II 
B)  III only 
C)  I and III 
D)  I, II and III 
A)  I and II 
B)  III only 
C)  I and III 
D)  I, II and III

Question 18

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

Accepted Answer

A)  buy dollars. 
B)  violate interest rate parity. 
C)  sell dollars. 
D)  violate purchasing power parity. 
A)  buy dollars. 
B)  violate interest rate parity. 
C)  sell dollars. 
D)  violate purchasing power parity.

Question 19

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 20

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.

The U.S. interest rate minus the foreign interest rate is called the __________.

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

The law of demand for dollars in the foreign exchange market means that the

The quantity of dollars demanded by foreign nations increases as

A factor helping determine demand for the dollar in the foreign exchange market is

Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decreases the Fed

If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world, the country is a

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

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

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollarsand the supply of U.S. dollars .

In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the supply of dollars?

Over its history, Brazil has borrowed more from the rest of the world than it has loaned to the rest of the world. Brazil

If a country has a capital and financial account deficit, that countryʹs stock of international indebtedness is

Suppose that the U.S. exchange rate is expected to fall in the future. As a result, in the foreign exchange market, there will be

Which of the following is recorded in the U.S. balance of payments account? I. foreign investment in the United States II. U.S. investment abroad III. the U.S. government deficit or surplus

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

As the exchange rate _____, the quantity of dollars _on the foreign exchange market_____

The U.S. dollar will depreciate in value if

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 9: The Exchange Rate and the Balance of Payments

The U.S. interest rate minus the foreign interest rate is called the __________.

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

The law of demand for dollars in the foreign exchange market means that the

The quantity of dollars demanded by foreign nations increases as

A factor helping determine demand for the dollar in the foreign exchange market is

Suppose the target exchange rate set by the Fed is 150 yen per dollar. If the demand for dollars permanently decreases the Fed

If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world, the country is a

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

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

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars__________and the supply of U.S. dollars__________ .

In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the supply of dollars?

Over its history, Brazil has borrowed more from the rest of the world than it has loaned to the rest of the world. Brazil

If a country has a capital and financial account deficit, that countryʹs stock of international indebtedness is

Suppose that the U.S. exchange rate is expected to fall in the future. As a result, in the foreign exchange market, there will be

Which of the following is recorded in the U.S. balance of payments account? I. foreign investment in the United States II. U.S. investment abroad III. the U.S. government deficit or surplus

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

As the exchange rate _________, the quantity of dollars _________on the foreign exchange market_________

The U.S. dollar will depreciate in value if

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

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

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollarsand the supply of U.S. dollars .

As the exchange rate _____, the quantity of dollars _on the foreign exchange market_____