Question 1

All of the following are a current account transaction EXCEPT

Accepted Answer

A)  importing services. 
B)  importing goods. 
C)  exporting goods. 
D)  investing abroad. 
A)  importing services. 
B)  importing goods. 
C)  exporting goods. 
D)  investing abroad.

Question 2

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

Accepted Answer

The relationship is that X - M

Question 3

How does the Fed intervene in the foreign exchange market and what the effects are of the Fedʹs actions?

Accepted Answer

The Fed intervenes in the foreign exchan

Question 4

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

Accepted Answer

A)  increases the demand for euros. 
B)  decreases the demand for dollars. 
C)  increases the demand for dollars. 
D)  increases the value of exports to Europe. 
A)  increases the demand for euros. 
B)  decreases the demand for dollars. 
C)  increases the demand for dollars. 
D)  increases the value of exports to Europe.

Question 5

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

Question 6

A decrease in the expected future exchange rate__________ the demand for U.S. dollars and shifts the demand curve for U.S. dollars__________ .

Accepted Answer

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

Question 7

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

Question 8

An increase in the value of a domestic currency in terms of other currencies is known as

Accepted Answer

A)  a depreciation. 
B)  a flexible exchange rate. 
C)  an appreciation. 
D)  a term not given in the above answers. 
A)  a depreciation. 
B)  a flexible exchange rate. 
C)  an appreciation. 
D)  a term not given in the above answers.

Question 9

In October 2008, Icelandʹs central bank increased its lending rate to 18% in an ʺeffort to prop up the countryʹs frozen currency and markets ʺ www.nytimes.com, October, 29, 2008)
As a result, the _________	and demand curve for Icelandic krona shifted__________ , holding all else the same.

Accepted Answer

A)  interest rate differential between U.S. and Icelandic interest rates decreased; leftward 
B)  dollar appreciated relative to the krona; rightward 
C)  value of U.S. exports to Iceland increased; leftward 
D)  interest rate differential between U.S. and Icelandic interest rates increased; rightward 
A)  interest rate differential between U.S. and Icelandic interest rates decreased; leftward 
B)  dollar appreciated relative to the krona; rightward 
C)  value of U.S. exports to Iceland increased; leftward 
D)  interest rate differential between U.S. and Icelandic interest rates increased; rightward

Question 10

If the target exchange rate is 100 yen per dollar and the current exchange rate is 90 yen per dollar, the Fed will

Accepted Answer

A)  sell dollars and the demand for dollars will decrease. 
B)  buy dollars and the demand for dollars will decrease. 
C)  buy dollars and the demand for dollars will increase. 
D)  sell dollars and the demand for dollars will increase. 
A)  sell dollars and the demand for dollars will decrease. 
B)  buy dollars and the demand for dollars will decrease. 
C)  buy dollars and the demand for dollars will increase. 
D)  sell dollars and the demand for dollars will increase.

Question 11

If we import more than we export from the rest of the world we

Accepted Answer

A)  are running a trade surplus. 
B)  are helping to finance investment in the rest of the world. 
C)  must borrow an equal amount from the rest of the world. 
D)  can lend an equal amount to the rest of the world. 
A)  are running a trade surplus. 
B)  are helping to finance investment in the rest of the world. 
C)  must borrow an equal amount from the rest of the world. 
D)  can lend an equal amount to the rest of the world.

Question 12

Why do people and firms in the United States supply dollars to the foreign exchange market?

Accepted Answer

People and firms supply dollar

Question 13

Which of the following is one of the balance of payments accounts?

Accepted Answer

A)  net borrowing account 
B)  capital and financial account 
C)  reserve account 
D)  government expenditure account 
A)  net borrowing account 
B)  capital and financial account 
C)  reserve account 
D)  government expenditure account

Question 14

In the foreign exchange market, an increase in the world demand for U.S. exports shifts

Accepted Answer

A)  demand curve for U.S. dollars leftward 
B)  supply curve for U.S. dollars rightward 
C)  demand curve for U.S. dollars rightward 
D)  supply curve for U.S. dollars leftward 
A)  demand curve for U.S. dollars leftward 
B)  supply curve for U.S. dollars rightward 
C)  demand curve for U.S. dollars rightward 
D)  supply curve for U.S. dollars leftward

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

Question 16

A negative balance in the capital and financial account means the economy is

Accepted Answer

A)  running a capital account surplus 
B)  importing more than it is exporting 
C)  borrowing from the rest of the world 
D)  lending to the rest of the world 
A)  running a capital account surplus 
B)  importing more than it is exporting 
C)  borrowing from the rest of the world 
D)  lending to the rest of the world

Question 17

When people who are holding the money of some other country want to exchange it for U.S. dollars, they_________ U.S. dollars and _________that other countryʹs money.

Accepted Answer

A)  demand, demand 
B)  demand, supply 
C)  supply, demand 
D)  supply, supply 
A)  demand, demand 
B)  demand, supply 
C)  supply, demand 
D)  supply, supply

Question 18

Which of the following countries are net lenders?
I. Japan
II. United States

Accepted Answer

A)  II only 
B)  neither I nor II 
C)  I only 
D)  both I and II 
A)  II only 
B)  neither I nor II 
C)  I only 
D)  both I and II

Question 19

If net exports is a negative number, the government sector must________  if the private sector is in a ________ .

Accepted Answer

A)  run a deficit; surplus 
B)  The statement errs because the accounts are not related. 
C)  run a surplus; surplus 
D)  equal zero; deficit 
A)  run a deficit; surplus 
B)  The statement errs because the accounts are not related. 
C)  run a surplus; surplus 
D)  equal zero; deficit

Question 20

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

Accepted Answer

A)  the U.S. interest rate rises. 
B)  people expect that the dollar will appreciate. 
C)  the U.S. interest rate falls. 
D)  foreign interest rates fall. 
A)  the U.S. interest rate rises. 
B)  people expect that the dollar will appreciate. 
C)  the U.S. interest rate falls. 
D)  foreign interest rates fall.

All of the following are a current account transaction EXCEPT

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

How does the Fed intervene in the foreign exchange market and what the effects are of the Fedʹs actions?

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

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

A decrease in the expected future exchange rate the demand for U.S. dollars and shifts the demand curve for U.S. dollars .

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

An increase in the value of a domestic currency in terms of other currencies is known as

In October 2008, Icelandʹs central bank increased its lending rate to 18% in an ʺeffort to prop up the countryʹs frozen currency and markets ʺ www.nytimes.com, October, 29, 2008) As a result, the _ and demand curve for Icelandic krona shifted__ , holding all else the same.

If the target exchange rate is 100 yen per dollar and the current exchange rate is 90 yen per dollar, the Fed will

If we import more than we export from the rest of the world we

Why do people and firms in the United States supply dollars to the foreign exchange market?

Which of the following is one of the balance of payments accounts?

In the foreign exchange market, an increase in the world demand for U.S. exports shifts

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_________

A negative balance in the capital and financial account means the economy is

When people who are holding the money of some other country want to exchange it for U.S. dollars, they_ U.S. dollars and _that other countryʹs money.

Which of the following countries are net lenders? I. Japan II. United States

If net exports is a negative number, the government sector must if the private sector is in a .

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

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

All of the following are a current account transaction EXCEPT

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

How does the Fed intervene in the foreign exchange market and what the effects are of the Fedʹs actions?

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

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

A decrease in the expected future exchange rate__________ the demand for U.S. dollars and shifts the demand curve for U.S. dollars__________ .

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

An increase in the value of a domestic currency in terms of other currencies is known as

In October 2008, Icelandʹs central bank increased its lending rate to 18% in an ʺeffort to prop up the countryʹs frozen currency and markets ʺ www.nytimes.com, October, 29, 2008) As a result, the _________ and demand curve for Icelandic krona shifted__________ , holding all else the same.

If the target exchange rate is 100 yen per dollar and the current exchange rate is 90 yen per dollar, the Fed will

If we import more than we export from the rest of the world we

Why do people and firms in the United States supply dollars to the foreign exchange market?

Which of the following is one of the balance of payments accounts?

In the foreign exchange market, an increase in the world demand for U.S. exports shifts

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_________

A negative balance in the capital and financial account means the economy is

When people who are holding the money of some other country want to exchange it for U.S. dollars, they_________ U.S. dollars and _________that other countryʹs money.

Which of the following countries are net lenders? I. Japan II. United States

If net exports is a negative number, the government sector must________ if the private sector is in a ________ .

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

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 S₁could occur when

A decrease in the expected future exchange rate the demand for U.S. dollars and shifts the demand curve for U.S. dollars .

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

In October 2008, Icelandʹs central bank increased its lending rate to 18% in an ʺeffort to prop up the countryʹs frozen currency and markets ʺ www.nytimes.com, October, 29, 2008) As a result, the _ and demand curve for Icelandic krona shifted__ , holding all else the same.

When people who are holding the money of some other country want to exchange it for U.S. dollars, they_ U.S. dollars and _that other countryʹs money.

If net exports is a negative number, the government sector must if the private sector is in a .

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