Question 1

If U.S. net exports are positive,

Accepted Answer

A)  the United States borrows from other countries to pay for some of the goods the United States purchases from them. 
B)  other countries make loans to the United States so that the United States can pay for some of the goods it purchases from other countries. 
C)  the United States sells some of the assets it owns in other countries to pay for some of the goods it sells to other countries. 
D)  other countries borrow from the United States to pay for some of the goods they purchase from the United States. 
A)  the United States borrows from other countries to pay for some of the goods the United States purchases from them. 
B)  other countries make loans to the United States so that the United States can pay for some of the goods it purchases from other countries. 
C)  the United States sells some of the assets it owns in other countries to pay for some of the goods it sells to other countries. 
D)  other countries borrow from the United States to pay for some of the goods they purchase from the United States.

Question 2

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be_________ in official reserves of _________.

Accepted Answer

A)  an increase; $180 
B)  a decrease; $20 
C)  an increase; $20 
D)  a decrease; $180 
A)  an increase; $180 
B)  a decrease; $20 
C)  an increase; $20 
D)  a decrease; $180

Question 3

Suppose $1 will buy 150 yen in January and 200 yen in December. This change could have occurred if the

Accepted Answer

A)  demand curve for dollars shifted leftward. 
B)  supply curve of dollars shifted rightward. 
C)  demand curve for yen shifted rightward. 
D)  demand curve for dollars shifted rightward. 
A)  demand curve for dollars shifted leftward. 
B)  supply curve of dollars shifted rightward. 
C)  demand curve for yen shifted rightward. 
D)  demand curve for dollars shifted rightward.

Question 4

In the foreign exchange market, the higher the dollarʹs exchange rate, the

Accepted Answer

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

Question 5

Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 on Wednesday, and on Monday the exchange rate was $0.75 = 1.00 British pound. Which of the following best explains what has happened between Wednesday and Monday?

Accepted Answer

A)  The U.S. dollar appreciated against the British pound. 
B)  The British pound appreciated against the U.S. dollar. 
C)  The U.S. dollar depreciated against the British pound. 
D)  Both answers B and C are correct. 
A)  The U.S. dollar appreciated against the British pound. 
B)  The British pound appreciated against the U.S. dollar. 
C)  The U.S. dollar depreciated against the British pound. 
D)  Both answers B and C are correct.

Question 6

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

Question 7

The country of Pimm exports $500 billion worth of goods and services and imports $400 billion worth of goods and services. Net interest income paid abroad is $50 billion and net transfers are
$0. The current account balance is________ .

Accepted Answer

A)  $175 billion 
B)  $25 billion 
C)  $50 billion 
D)  $975 billion 
A)  $175 billion 
B)  $25 billion 
C)  $50 billion 
D)  $975 billion

Question 8

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

Question 9

What are the main components of the current account? What has been the recent U.S. experience with these items?

Accepted Answer

The current account records payments for

Question 10

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

Accepted Answer

A)  X - M ) = T - G ) + S - I ) 
B)  X - M ) + T - G ) + S - I ) = 0 
C)  T - G ) + X - M ) = S - I ) 
D)  T - G ) = X - M ) + S - I ) 
A)  X - M ) = T - G ) + S - I ) 
B)  X - M ) + T - G ) + S - I ) = 0 
C)  T - G ) + X - M ) = S - I ) 
D)  T - G ) = X - M ) + S - I )

Question 11

According to purchasing power parity, the foreign exchange market will

Accepted Answer

A)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
B)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations. 
C)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
D)  undervalue the dollar if inflation in the United States is greater than it is elsewhere. 
A)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
B)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations. 
C)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
D)  undervalue the dollar if inflation in the United States is greater than it is elsewhere.

Question 12

Suppose Italy lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations. Italy definitely is a

Accepted Answer

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

Question 13

The capital and financial account measures__________ .

Accepted Answer

A)  capital used inside the United States but manufactured outside the United States 
B)  capital used outside the United States but manufactured inside the United States 
C)  foreign investment in the United States minus U.S. investment abroad 
D)  capital produced outside of the United States minus capital produced inside the United States 
A)  capital used inside the United States but manufactured outside the United States 
B)  capital used outside the United States but manufactured inside the United States 
C)  foreign investment in the United States minus U.S. investment abroad 
D)  capital produced outside of the United States minus capital produced inside the United States

Question 14

In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 15

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely that year

Accepted Answer

A)  it is a debtor nation. 
B)  it has a current account deficit. 
C)  it is a net lender. 
D)  it is a creditor nation. 
A)  it is a debtor nation. 
B)  it has a current account deficit. 
C)  it is a net lender. 
D)  it is a creditor nation.

Question 16

If the Fed wants to depreciate the U.S. dollar against the British pound, it will__________ .

Accepted Answer

A)  sell U.S. dollars 
B)  sell British pounds 
C)  sell foreign exchange 
D)  decrease the money supply 
A)  sell U.S. dollars 
B)  sell British pounds 
C)  sell foreign exchange 
D)  decrease the money supply

Question 17

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

Accepted Answer

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

Question 18

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

Accepted Answer

If U.S. official res

Question 19

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

Accepted Answer

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

Question 20

By fixing its exchange rate, China is most likely

Accepted Answer

A)  achieving a low inflation rate by anchoring to the U.S. inflation rate. 
B)  keeping its export prices low. 
C)  making it easier to compete in world markets. 
D)  Both B and C. 
A)  achieving a low inflation rate by anchoring to the U.S. inflation rate. 
B)  keeping its export prices low. 
C)  making it easier to compete in world markets. 
D)  Both B and C.

If U.S. net exports are positive,

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be_ in official reserves of _.

Suppose $1 will buy 150 yen in January and 200 yen in December. This change could have occurred if the

In the foreign exchange market, the higher the dollarʹs exchange rate, the

Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 on Wednesday, and on Monday the exchange rate was $0.75 = 1.00 British pound. Which of the following best explains what has happened between Wednesday and Monday?

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 country of Pimm exports $500 billion worth of goods and services and imports $400 billion worth of goods and services. Net interest income paid abroad is $50 billion and net transfers are $0. The current account balance is________ .

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

What are the main components of the current account? What has been the recent U.S. experience with these items?

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

According to purchasing power parity, the foreign exchange market will

Suppose Italy lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations. Italy definitely is a

The capital and financial account measures__________ .

In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely that year

If the Fed wants to depreciate the U.S. dollar against the British pound, it will__________ .

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

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

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

By fixing its exchange rate, China is most likely

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 U.S. net exports are positive,

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be_________ in official reserves of _________.

Suppose $1 will buy 150 yen in January and 200 yen in December. This change could have occurred if the

In the foreign exchange market, the higher the dollarʹs exchange rate, the

Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 on Wednesday, and on Monday the exchange rate was $0.75 = 1.00 British pound. Which of the following best explains what has happened between Wednesday and Monday?

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 country of Pimm exports $500 billion worth of goods and services and imports $400 billion worth of goods and services. Net interest income paid abroad is $50 billion and net transfers are $0. The current account balance is________ .

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

What are the main components of the current account? What has been the recent U.S. experience with these items?

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

According to purchasing power parity, the foreign exchange market will

Suppose Italy lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations. Italy definitely is a

The capital and financial account measures__________ .

In the short run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate.

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely that year

If the Fed wants to depreciate the U.S. dollar against the British pound, it will__________ .

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

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

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

By fixing its exchange rate, China is most likely

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 current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be_ in official reserves of _.

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