Question 1

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 2

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

Question 3

__________can intervene directly in the foreign exchange market by buying or selling dollars.

Accepted Answer

A)  The International Monetary Fund 
B)  The U.S. Treasury department 
C)  Congress 
D)  The Fed 
A)  The International Monetary Fund 
B)  The U.S. Treasury department 
C)  Congress 
D)  The Fed

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

Question 5

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts __________and the supply curve of U.S. dollars shifts__________ .

Accepted Answer

A)  rightward; rightward 
B)  leftward; rightward 
C)  rightward; leftward 
D)  leftward; leftward 
A)  rightward; rightward 
B)  leftward; rightward 
C)  rightward; leftward 
D)  leftward; leftward

Question 6

$$\begin{array} { | l | l | } 
\hline \text { Item } & \text { Billions of dollars } \
\hline \text { Imports of goods and services, } M & 275 \
\hline \text { Net taxes, } T & 300 \
\hline \text { Government exp enditure, } G & 250 \
\hline \text { Savings, } S & 125 \
\hline \text { Investment } , I & 100 \
\hline
\end{array}$$
-The table above gives some of the entries in the national income and product accounts. What is the value of exports?

Accepted Answer

A)  $25 billion 
B)  -$25 billion 
C)  $300 billion 
D)  $350 billion 
A)  $25 billion 
B)  -$25 billion 
C)  $300 billion 
D)  $350 billion

Question 7

Define net borrower, net lender, creditor nation, and debtor nation. Discuss the difference between a net borrower and a debtor nation.

Accepted Answer

A country that is borrowing more from th

Question 8

The term ʺforeign currencyʺ refers to foreign
I. coins
II. notes
III. bank deposits

Accepted Answer

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

Question 9

Over the past decade, the United States has had a current account deficit and capital account deficit.

Accepted Answer

A) True 
 B)False

Question 10

When a good is imported into the United States, there is created a

Accepted Answer

A)  demand for foreign currencies and a supply of dollars. 
B)  supply of foreign currency with no effect on the market for the dollar. 
C)  supply of foreign currencies and a demand for dollars. 
D)  demand for dollars with no effect on markets for foreign currencies. 
A)  demand for foreign currencies and a supply of dollars. 
B)  supply of foreign currency with no effect on the market for the dollar. 
C)  supply of foreign currencies and a demand for dollars. 
D)  demand for dollars with no effect on markets for foreign currencies.

Question 11

Suppose that the price of an identical sport-utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Based on this information what will happen to the exchange rate between the United States and Canada?

Accepted Answer

A)  The value of the U.S. dollar will fall as U.S. residents purchase SUVs in Canada. 
B)  The exchange rate will stay the same because purchasing power parity already holds. 
C)  The value of the Canadian dollar will fall because Canadian prices are lower than U.S. prices. 
D)  The value of the Canadian dollar will fall as Canadians purchase SUVs in the United States. 
A)  The value of the U.S. dollar will fall as U.S. residents purchase SUVs in Canada. 
B)  The exchange rate will stay the same because purchasing power parity already holds. 
C)  The value of the Canadian dollar will fall because Canadian prices are lower than U.S. prices. 
D)  The value of the Canadian dollar will fall as Canadians purchase SUVs in the United States.

Question 12

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has________

Accepted Answer

A)  a government budget surplus 
B)  negative net exports of $125 billion 
C)  positive net exports of $125 billion 
D)  Both answers B and C are correct. 
A)  a government budget surplus 
B)  negative net exports of $125 billion 
C)  positive net exports of $125 billion 
D)  Both answers B and C are correct.

Question 13

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

Accepted Answer

A)  -$150 billion 
B)  $150 billion 
C)  -$100 billion 
D)  $0 
A)  -$150 billion 
B)  $150 billion 
C)  -$100 billion 
D)  $0

Question 14

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

Accepted Answer

A)  always 0. 
B)  -$20 billion. 
C)  $20 billion. 
D)  impossible to determine with the information given. 
A)  always 0. 
B)  -$20 billion. 
C)  $20 billion. 
D)  impossible to determine with the information given.

Question 15

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

Accepted Answer

A)  people expect that the dollar will depreciate. 
B)  foreign interest rates fall. 
C)  the U.S. interest rate rises. 
D)  the expected future exchange rate increases. 
A)  people expect that the dollar will depreciate. 
B)  foreign interest rates fall. 
C)  the U.S. interest rate rises. 
D)  the expected future exchange rate increases.

Question 16

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the
U.S. exchange rate? Why is there this response?

Accepted Answer

If the U.S. exchange rate falls, the qua

Question 17

In the foreign exchange market, a decrease in the exchange rate increases the quantity of dollars supplied.

Accepted Answer

A) True 
 B)False

Question 18

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars__________ and the market moves to point such as __________.

Accepted Answer

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

Question 19

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

Question 20

-If the exchange rate is above equilibrium, there will be _________in the foreign exchange market.

Accepted Answer

A)  a shortage 
B)  a surplus 
C)  an increase in demand 
D)  a decrease in demand 
A)  a shortage 
B)  a surplus 
C)  an increase in demand 
D)  a decrease in demand

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

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

__________can intervene directly in the foreign exchange market by buying or selling dollars.

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

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts and the supply curve of U.S. dollars shifts .

Item Billions of dollars Imports of goods and services, M 275 Net taxes, T 300 Government exp enditure, G 250 Savings, S 125 Investment ,I 100 -The table above gives some of the entries in the national income and product accounts. What is the value of exports?

Define net borrower, net lender, creditor nation, and debtor nation. Discuss the difference between a net borrower and a debtor nation.

The term ʺforeign currencyʺ refers to foreign I. coins II. notes III. bank deposits

Over the past decade, the United States has had a current account deficit and capital account deficit.

When a good is imported into the United States, there is created a

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has________

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the U.S. exchange rate? Why is there this response?

In the foreign exchange market, a decrease in the exchange rate increases the quantity of dollars supplied.

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars and the market moves to point such as .

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

-If the exchange rate is above equilibrium, there will be _________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

If the Fed raises the U.S. interest rate, the demand for dollars__________ and the exchange rate__________

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

__________can intervene directly in the foreign exchange market by buying or selling dollars.

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

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts __________and the supply curve of U.S. dollars shifts__________ .

Item Billions of dollars Imports of goods and services, M 275 Net taxes, T 300 Government exp enditure, G 250 Savings, S 125 Investment ,I 100 -The table above gives some of the entries in the national income and product accounts. What is the value of exports?

Define net borrower, net lender, creditor nation, and debtor nation. Discuss the difference between a net borrower and a debtor nation.

The term ʺforeign currencyʺ refers to foreign I. coins II. notes III. bank deposits

Over the past decade, the United States has had a current account deficit and capital account deficit.

When a good is imported into the United States, there is created a

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has________

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the U.S. exchange rate? Why is there this response?

In the foreign exchange market, a decrease in the exchange rate increases the quantity of dollars supplied.

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars__________ and the market moves to point such as __________.

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

-If the exchange rate is above equilibrium, there will be _________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

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

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

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts and the supply curve of U.S. dollars shifts .

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars and the market moves to point such as .