Question 1

What is a ʺdebtor nation?ʺ Is the United States a debtor nation?

Accepted Answer

A debtor nation is a country that during

Question 2

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

Accepted Answer

A)  rise 
B)  stay constant 
C)  fall 
D)  could rise, fall or stay constant 
A)  rise 
B)  stay constant 
C)  fall 
D)  could rise, fall or stay constant

Question 3

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

Accepted Answer

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

Question 4

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

Accepted Answer

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

Question 5

Which of the following will lead to a depreciation of the dollar against the British pound?

Accepted Answer

A)  an increase in U.S. interest rates 
B)  an increase in British demand for U.S. imports 
C)  a decrease in British demand for U.S. assets 
D)  a decrease in U.S. demand for British goods 
A)  an increase in U.S. interest rates 
B)  an increase in British demand for U.S. imports 
C)  a decrease in British demand for U.S. assets 
D)  a decrease in U.S. demand for British goods

Question 6

An American consumer buys a French luxury product in New York. In the U.S. balance of payments accounts, this transaction directly appears in

Accepted Answer

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

Question 7

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

Accepted Answer

A)  the Fed must sell dollars. 
B)  the Fed can do nothing in the short run. 
C)  the Fed must buy dollars. 
D)  will try to print more dollars for foreign distribution. 
A)  the Fed must sell dollars. 
B)  the Fed can do nothing in the short run. 
C)  the Fed must buy dollars. 
D)  will try to print more dollars for foreign distribution.

Question 8

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a___________ , and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a___________ .

Accepted Answer

A)  net borrower nation; net lender nation 
B)  debtor nation; creditor nation 
C)  borrower nation; creditor nation 
D)  debtor nation; investor nation 
A)  net borrower nation; net lender nation 
B)  debtor nation; creditor nation 
C)  borrower nation; creditor nation 
D)  debtor nation; investor nation

Question 9

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

Accepted Answer

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

Question 10

The U.S. dollar will depreciate in value if

Accepted Answer

A)  the demand for the dollar increases. 
B)  U.S. citizens choose to buy fewer foreign goods. 
C)  the supply of foreign exchange decreases. 
D)  the demand for the dollar decreases. 
A)  the demand for the dollar increases. 
B)  U.S. citizens choose to buy fewer foreign goods. 
C)  the supply of foreign exchange decreases. 
D)  the demand for the dollar decreases.

Question 11

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month. As a result,

Accepted Answer

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

Question 12

As the expected future exchange rate for dollars increases,

Accepted Answer

A)  the expected profit from selling U.S. dollars today falls. 
B)  the supply of U.S. dollars decreases. 
C)  the U.S. interest rate will fall. 
D)  Both answers A and B are correct. 
A)  the expected profit from selling U.S. dollars today falls. 
B)  the supply of U.S. dollars decreases. 
C)  the U.S. interest rate will fall. 
D)  Both answers A and B are correct.

Question 13

$$\begin{array} { | l | l | l | } 
\hline \begin{array} { l } 
\text { Exch ange rate } \
\text { (yen per } \
\text { dollar) }
\end{array} & \begin{array} { l } 
\text { Quantity of } \
\text { dollars } \
\text { demanded } \
\text { (billions) }
\end{array} & \begin{array} { l } 
\text { Quantity of } \
\text { dollars } \
\text { demanded } \
\text { (billions) }
\end{array} \
\hline 180 & 200 & 230 \
\hline 160 & 220 & 220 \
\hline 140 & 240 & 210 \
\hline 120 & 260 & 200 \
\hline 100 & 280 & 190 \
\hline
\end{array}$$
-The table above gives the supply and demand schedules of U.S. dollars. Suppose that the Fed spends $30 billion and buys foreign securities. As a result, the U.S. dollar will__________ .

Accepted Answer

A)  depreciate by 140 yen per dollar 
B)  depreciate by 20 yen per dollar 
C)  appreciate by 180 yen per dollar 
D)  appreciate by 20 yen per dollar 
A)  depreciate by 140 yen per dollar 
B)  depreciate by 20 yen per dollar 
C)  appreciate by 180 yen per dollar 
D)  appreciate by 20 yen per dollar

Question 14

The lower the exchange rate, the cheaper are foreign -produced goods and services.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

The official settlements account records the change in official U.S. reserves.

Accepted Answer

A) True 
 B)False

Question 17

Americans demand Japanese yen in order to

Accepted Answer

A)  buy Japanese products. 
B)  balance the current account. 
C)  allow the Japanese to buy U.S. products. 
D)  supply American goods in Japanese markets. 
A)  buy Japanese products. 
B)  balance the current account. 
C)  allow the Japanese to buy U.S. products. 
D)  supply American goods in Japanese markets.

Question 18

-In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when

Accepted Answer

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

Question 19

$$\begin{array} { | l | l | } 
\hline \text { Component } & \begin{array} { l } 
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Investment }, I & 700 \
\hline \text { Net taxes, } T & 1,300 \\hline \text { Government expenditure }, & 1,200 \
G\\hline \text { Exports, } X & 1,500 \
\hline \text { Imports }, M & 1,700 \
\hline
\end{array}$$
-In the above table, the private sector has a

Accepted Answer

A)  deficit of $300 billion. 
B)  surplus of $300 billion. 
C)  deficit of $400 billion. 
D)  deficit of $200 billion. 
A)  deficit of $300 billion. 
B)  surplus of $300 billion. 
C)  deficit of $400 billion. 
D)  deficit of $200 billion.

Question 20

The_________ the expected profit from holding a foreign currency, the greater is the _________in the foreign exchange market.

Accepted Answer

A)  larger; quantity supplied of dollars 
B)  smaller; quantity demanded of foreign currency 
C)  larger; quantity demanded of dollars 
D)  None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency. 
A)  larger; quantity supplied of dollars 
B)  smaller; quantity demanded of foreign currency 
C)  larger; quantity demanded of dollars 
D)  None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency.

What is a ʺdebtor nation?ʺ Is the United States a debtor nation?

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

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

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

Which of the following will lead to a depreciation of the dollar against the British pound?

An American consumer buys a French luxury product in New York. In the U.S. balance of payments accounts, this transaction directly appears in

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a_ , and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a_ .

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

The U.S. dollar will depreciate in value if

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month. As a result,

As the expected future exchange rate for dollars increases,

The lower the exchange rate, the cheaper are foreign -produced goods and services.

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

The official settlements account records the change in official U.S. reserves.

Americans demand Japanese yen in order to

-In the figure above, the shift in the supply curve for U.S. dollars from S₀to S₁could occur when

Component Amount (billions of dollars) Investment ,I 700 Net taxes, T 1,300 Government expenditure , 1,200 G Exports, X 1,500 Imports ,M 1,700 -In the above table, the private sector has a

The_ the expected profit from holding a foreign currency, the greater is the _in the foreign exchange market.

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

What is a ʺdebtor nation?ʺ Is the United States a debtor nation?

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

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

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

Which of the following will lead to a depreciation of the dollar against the British pound?

An American consumer buys a French luxury product in New York. In the U.S. balance of payments accounts, this transaction directly appears in

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a___________ , and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a___________ .

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

The U.S. dollar will depreciate in value if

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month. As a result,

As the expected future exchange rate for dollars increases,

The lower the exchange rate, the cheaper are foreign -produced goods and services.

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

The official settlements account records the change in official U.S. reserves.

Americans demand Japanese yen in order to

-In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when

Component Amount (billions of dollars) Investment ,I 700 Net taxes, T 1,300 Government expenditure , 1,200 G Exports, X 1,500 Imports ,M 1,700 -In the above table, the private sector has a

The_________ the expected profit from holding a foreign currency, the greater is the _________in the foreign exchange market.

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

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a_ , and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a_ .

-In the figure above, the shift in the supply curve for U.S. dollars from S₀to S₁could occur when

The_ the expected profit from holding a foreign currency, the greater is the _in the foreign exchange market.