Question 1

Which of the following is not included in the capital account?

Accepted Answer

A)  debt forgiveness 
B)  purchases of foreign patents and copyrights. 
C)  migrant's transfers 
D)  net sales of currency 
A)  debt forgiveness 
B)  purchases of foreign patents and copyrights. 
C)  migrant's transfers 
D)  net sales of currency

Question 2

An increase in British demand for U.S. goods and services is likely to:

Accepted Answer

A)  not change the quantity of pounds supplied but increase the quantity of pounds demanded. 
B)  increase the quantity of pounds supplied. 
C)  increase the quantity of pounds demanded. 
D)  decrease the quantity of pounds supplied and not change the quantity of pounds demanded. 
A)  not change the quantity of pounds supplied but increase the quantity of pounds demanded. 
B)  increase the quantity of pounds supplied. 
C)  increase the quantity of pounds demanded. 
D)  decrease the quantity of pounds supplied and not change the quantity of pounds demanded.

Question 3

Suppose that the law of one price holds and that a pineapple costs 15 dirham in Morocco and $1.50 in the United States. If the nominal exchange rate is 10 dirham per U.S. dollar, what is the real exchange rate?

Accepted Answer

The real exchange rate would b

Question 4

Which of the following exacerbated the problems caused by the trade deficit in Mexico prior to 1994?

Accepted Answer

A)  the government and firms began to borrow in U.S. dollars instead of Mexican pesos. 
B)  political turmoil forced foreign investors to pull out their investments in the country. 
C)  the Mexican government did not undertake steps to slow down the growth rate of prices in Mexico. 
D)  All of the above are correct. 
A)  the government and firms began to borrow in U.S. dollars instead of Mexican pesos. 
B)  political turmoil forced foreign investors to pull out their investments in the country. 
C)  the Mexican government did not undertake steps to slow down the growth rate of prices in Mexico. 
D)  All of the above are correct.

Question 5

If BMW (a German company) earns profits while operating a business in the United States, then the value of the profit is entered as a _______ in the U.S. _______ account.

Accepted Answer

A)  negative; financial account 
B)  negative capital account 
C)  positive; current account 
D)  negative; current account 
A)  negative; financial account 
B)  negative capital account 
C)  positive; current account 
D)  negative; current account

Question 6

The law of one price states that if the costs of transportation are small, other things being equal, then the price of the same good in different countries should be roughly the same.

Accepted Answer

A) True 
 B)False

Question 7

The quantity supplied of pounds is likely to _______ when the price of pounds (dollars per pound) _______.

Accepted Answer

A)  fall; rises 
B)  fall; falls 
C)  not change; falls 
D)  rise; falls 
A)  fall; rises 
B)  fall; falls 
C)  not change; falls 
D)  rise; falls

Question 8

Figure 19.3
-Refer to Figure 19.3. The market for yen is currently at Point A. An increase in Japanese interest rates causes the equilibrium to move to point _______ and the U.S. dollar will _______.

Accepted Answer

A)  A; appreciate 
B)  D; depreciate 
C)  B; depreciate 
D)  C; appreciate 
A)  A; appreciate 
B)  D; depreciate 
C)  B; depreciate 
D)  C; appreciate

Question 9

Recall Application 1, "The Chinese Yuan and Big Macs," to answer the following questions:
-According to the application, the actual dollar- yuan exchange rate was 6.8 yuan per U.S. dollar and the predicted purchasing power exchange rate (using the Big Mac) in China is 3.49 yuan. If the exchange rates were to adjust so that the Law of One Price were achieved, then the:

Accepted Answer

A)  the yuan will depreciate. 
B)  the Big Mac will depreciate. 
C)  US dollar will appreciate. 
D)  yuan will appreciate. 
A)  the yuan will depreciate. 
B)  the Big Mac will depreciate. 
C)  US dollar will appreciate. 
D)  yuan will appreciate.

Which of the following is not included in the capital account?

An increase in British demand for U.S. goods and services is likely to:

Suppose that the law of one price holds and that a pineapple costs 15 dirham in Morocco and $1.50 in the United States. If the nominal exchange rate is 10 dirham per U.S. dollar, what is the real exchange rate?

Which of the following exacerbated the problems caused by the trade deficit in Mexico prior to 1994?

If BMW (a German company) earns profits while operating a business in the United States, then the value of the profit is entered as a _ in the U.S. _ account.

The law of one price states that if the costs of transportation are small, other things being equal, then the price of the same good in different countries should be roughly the same.

The quantity supplied of pounds is likely to _ when the price of pounds (dollars per pound) _.

Figure 19.3 -Refer to Figure 19.3. The market for yen is currently at Point A. An increase in Japanese interest rates causes the equilibrium to move to point _ and the U.S. dollar will _.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

Filters

Exam 19: The World of International Finance

Which of the following is not included in the capital account?

An increase in British demand for U.S. goods and services is likely to:

Suppose that the law of one price holds and that a pineapple costs 15 dirham in Morocco and $1.50 in the United States. If the nominal exchange rate is 10 dirham per U.S. dollar, what is the real exchange rate?

Which of the following exacerbated the problems caused by the trade deficit in Mexico prior to 1994?

If BMW (a German company) earns profits while operating a business in the United States, then the value of the profit is entered as a _______ in the U.S. _______ account.

The law of one price states that if the costs of transportation are small, other things being equal, then the price of the same good in different countries should be roughly the same.

The quantity supplied of pounds is likely to _______ when the price of pounds (dollars per pound) _______.

Figure 19.3 -Refer to Figure 19.3. The market for yen is currently at Point A. An increase in Japanese interest rates causes the equilibrium to move to point _______ and the U.S. dollar will _______.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

Filters

If BMW (a German company) earns profits while operating a business in the United States, then the value of the profit is entered as a _ in the U.S. _ account.

The quantity supplied of pounds is likely to _ when the price of pounds (dollars per pound) _.

Figure 19.3 -Refer to Figure 19.3. The market for yen is currently at Point A. An increase in Japanese interest rates causes the equilibrium to move to point _ and the U.S. dollar will _.