Question 1

The Asian financial crisis of 1997 was avoided thanks to the coordination of large scale international lending.

Accepted Answer

A) True 
 B)False

Question 2

Figure 19.1
-Refer to Figure 19.1. The yen is currently at Point A. An increase in interest rates in the U.S. , all else constant, will cause the yen to move to Point _______.

Accepted Answer

A)  C 
B)  B 
C)  D 
D)  E 
A)  C 
B)  B 
C)  D 
D)  E

Question 3

Net international investment position measures:

Accepted Answer

A)  the imbalance between the amount of foreign assets sold to domestic residents and the quantity of foreign goods and services purchased by domestic residents. 
B)  foreign holdings of domestic assets. 
C)  the imbalance between the amount of domestic assets held by foreigners and the amount of foreign assets held by domestic residents. 
D)  the imbalance between the amount of domestic assets held by foreigners and the quantity of domestic goods and services purchased by foreigners. 
A)  the imbalance between the amount of foreign assets sold to domestic residents and the quantity of foreign goods and services purchased by domestic residents. 
B)  foreign holdings of domestic assets. 
C)  the imbalance between the amount of domestic assets held by foreigners and the amount of foreign assets held by domestic residents. 
D)  the imbalance between the amount of domestic assets held by foreigners and the quantity of domestic goods and services purchased by foreigners.

Question 4

All other things equal, an appreciation of the U.S. real exchange rate causes consumers to buy _______domestic goods and _______ foreign goods.

Accepted Answer

A)  fewer; more 
B)  more; more 
C)  fewer; fewer 
D)  more; fewer 
A)  fewer; more 
B)  more; more 
C)  fewer; fewer 
D)  more; fewer

Question 5

In the balance of payments accounts, what does the statistical discrepancy measure? What causes a statistical discrepancy to emerge?

Accepted Answer

The statistical discrepancy is an entry

Question 6

The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar falls (the dollar depreciates):

Accepted Answer

A)  Americans demand fewer foreign goods because these goods have become more expensive to American consumers. 
B)  foreigners demand more American goods because these goods have become less expensive to foreign consumers. 
C)  foreigners demand more foreign goods because these goods have become more expensive to foreign consumers. 
D)  Americans demand more foreign goods because these goods have become less expensive to American consumers. 
A)  Americans demand fewer foreign goods because these goods have become more expensive to American consumers. 
B)  foreigners demand more American goods because these goods have become less expensive to foreign consumers. 
C)  foreigners demand more foreign goods because these goods have become more expensive to foreign consumers. 
D)  Americans demand more foreign goods because these goods have become less expensive to American consumers.

Question 7

Recall Application 3, "A Downside to the Euro," to answer the following questions:
-According to the application, how did countries like Spain and Greece benefit from being members of the Euro- zone?

Accepted Answer

A)  By using the euro, Spanish and Greek exporters can sell their goods to other countries without an exchange rate premium. 
B)  By using the euro, investors would be assured that Spain and Greece would pursue inflationary policies. 
C)  By using the euro, Spain and Greece now have full control of monetary policy. 
D)  By using the euro, investors would no longer fear that Spain and Greece would pursue inflationary policies. 
A)  By using the euro, Spanish and Greek exporters can sell their goods to other countries without an exchange rate premium. 
B)  By using the euro, investors would be assured that Spain and Greece would pursue inflationary policies. 
C)  By using the euro, Spain and Greece now have full control of monetary policy. 
D)  By using the euro, investors would no longer fear that Spain and Greece would pursue inflationary policies.

Question 8

All other things equal, a depreciation of the U.S. real exchange rate causes:

Accepted Answer

A)  an increase in imports and a decrease in exports. 
B)  a decrease in imports and an increase in exports. 
C)  a decrease in imports and a decrease in exports. 
D)  an increase in imports and an increase in exports. 
A)  an increase in imports and a decrease in exports. 
B)  a decrease in imports and an increase in exports. 
C)  a decrease in imports and a decrease in exports. 
D)  an increase in imports and an increase in exports.

Question 9

The Mexican financial crisis of 1994 did not develop into a generalized financial collapse thanks to:

Accepted Answer

A)  a large revaluation of the Mexican peso. 
B)  massive lending of dollars to Mexico. 
C)  the creation of the euro. 
D)  the coordination of Mexican monetary policy with the Fed. 
A)  a large revaluation of the Mexican peso. 
B)  massive lending of dollars to Mexico. 
C)  the creation of the euro. 
D)  the coordination of Mexican monetary policy with the Fed.

Question 10

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

Accepted Answer

A)  change in U.S. government assets held abroad 
B)  income received on investments 
C)  change in foreign assets held in the United States 
D)  change in private U.S. assets held abroad 
A)  change in U.S. government assets held abroad 
B)  income received on investments 
C)  change in foreign assets held in the United States 
D)  change in private U.S. assets held abroad

Question 11

Fixed exchange rates:

Accepted Answer

A)  can only be altered with the previous authorization of the IMF. 
B)  make international transactions more expensive. 
C)  allow countries to run large balance of payments imbalances without the need to change their holdings of foreign reserves. 
D)  make international transactions easier and less costly. 
A)  can only be altered with the previous authorization of the IMF. 
B)  make international transactions more expensive. 
C)  allow countries to run large balance of payments imbalances without the need to change their holdings of foreign reserves. 
D)  make international transactions easier and less costly.

Question 12

Explain why the supply of foreign currency in the foreign exchange market is upward sloping and the demand for foreign currency in the foreign exchange market is downward sloping.

Accepted Answer

As the dollar price of foreign currency

Question 13

A balance of payments surplus occurs when a country experiences a _______ that is not matched by additional purchases of _______ by the private sector.

Accepted Answer

A)  current account surplus; foreign assets 
B)  current account surplus; government issued debt 
C)  financial account surplus; foreign assets 
D)  capital account surplus; home made goods and services 
A)  current account surplus; foreign assets 
B)  current account surplus; government issued debt 
C)  financial account surplus; foreign assets 
D)  capital account surplus; home made goods and services

Question 14

In 2006, the U.S. net international investment position was $2.5 trillion. This means that in 2006:

Accepted Answer

A)  the U.S. was a net lender. 
B)  foreign governments made $2.5 trillion billion in investments in the U.S. 
C)  the U.S. government made $2.5 trillion billion in investments abroad. 
D)  the U.S. was a net borrower. 
A)  the U.S. was a net lender. 
B)  foreign governments made $2.5 trillion billion in investments in the U.S. 
C)  the U.S. government made $2.5 trillion billion in investments abroad. 
D)  the U.S. was a net borrower.

Question 15

Explain what the current account measures.

Accepted Answer

The balance of payments provides a recor

Question 16

In the supply and demand for U.S. dollars in Europe, who is a demander in that market?

Accepted Answer

A)  Americans who want to invest in Europe 
B)  Americans who want to bring their investments back to the U.S. 
C)  Europeans who want to invest in the U.S. 
D)  B and C only 
A)  Americans who want to invest in Europe 
B)  Americans who want to bring their investments back to the U.S. 
C)  Europeans who want to invest in the U.S. 
D)  B and C only

Question 17

Which of the following is not included in the U.S. financial account?

Accepted Answer

A)  change in foreign private assets held in the United States 
B)  exports of U.S. made goods to Japan 
C)  change in foreign government assets held in the United States 
D)  change in private U.S. assets held abroad 
A)  change in foreign private assets held in the United States 
B)  exports of U.S. made goods to Japan 
C)  change in foreign government assets held in the United States 
D)  change in private U.S. assets held abroad

Question 18

Figure 19.5
-From Figure 19.5 above, suppose the U.S. is currently fixing its exchange rate at $1.25 per euro. If the U.S. wants to attain equilibrium in the foreign exchange market, it must:

Accepted Answer

A)  devalue its currency. 
B)  abandon the U.S. dollar in favor of the euro. 
C)  keep the exchange rate unchanged. 
D)  revalue its currency. 
A)  devalue its currency. 
B)  abandon the U.S. dollar in favor of the euro. 
C)  keep the exchange rate unchanged. 
D)  revalue its currency.

Question 19

In the following series of questions explain how the situations affect the United States' balance of payments.
(a) A U.S. defense contractor sells its consulting services to a company in France.
(b) Your investment club decides to buy 100 shares of a promising Korean automobile manufacturer.
(c) A consortium of European investors decides to build a large manufacturing facility in Montana.

Accepted Answer

(a) This would bring foreign exchange in

Question 20

If it takes more U.S. dollars to get a euro, then:

Accepted Answer

A)  the U.S. dollar appreciates and the euro depreciates. 
B)  the U.S. dollar and the euro depreciates. 
C)  the U.S. dollar depreciates and the euro appreciates. 
D)  the U.S. dollar and the euro appreciates. 
A)  the U.S. dollar appreciates and the euro depreciates. 
B)  the U.S. dollar and the euro depreciates. 
C)  the U.S. dollar depreciates and the euro appreciates. 
D)  the U.S. dollar and the euro appreciates.

The Asian financial crisis of 1997 was avoided thanks to the coordination of large scale international lending.

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An increase in interest rates in the U.S. , all else constant, will cause the yen to move to Point _______.

Net international investment position measures:

All other things equal, an appreciation of the U.S. real exchange rate causes consumers to buy _domestic goods and _ foreign goods.

In the balance of payments accounts, what does the statistical discrepancy measure? What causes a statistical discrepancy to emerge?

The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar falls (the dollar depreciates):

Recall Application 3, "A Downside to the Euro," to answer the following questions: -According to the application, how did countries like Spain and Greece benefit from being members of the Euro- zone?

All other things equal, a depreciation of the U.S. real exchange rate causes:

The Mexican financial crisis of 1994 did not develop into a generalized financial collapse thanks to:

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

Fixed exchange rates:

Explain why the supply of foreign currency in the foreign exchange market is upward sloping and the demand for foreign currency in the foreign exchange market is downward sloping.

A balance of payments surplus occurs when a country experiences a _ that is not matched by additional purchases of _ by the private sector.

In 2006, the U.S. net international investment position was $2.5 trillion. This means that in 2006:

Explain what the current account measures.

In the supply and demand for U.S. dollars in Europe, who is a demander in that market?

Which of the following is not included in the U.S. financial account?

Figure 19.5 -From Figure 19.5 above, suppose the U.S. is currently fixing its exchange rate at $1.25 per euro. If the U.S. wants to attain equilibrium in the foreign exchange market, it must:

If it takes more U.S. dollars to get a euro, then:

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

The Asian financial crisis of 1997 was avoided thanks to the coordination of large scale international lending.

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An increase in interest rates in the U.S. , all else constant, will cause the yen to move to Point _______.

Net international investment position measures:

All other things equal, an appreciation of the U.S. real exchange rate causes consumers to buy _______domestic goods and _______ foreign goods.

In the balance of payments accounts, what does the statistical discrepancy measure? What causes a statistical discrepancy to emerge?

The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar falls (the dollar depreciates):

Recall Application 3, "A Downside to the Euro," to answer the following questions: -According to the application, how did countries like Spain and Greece benefit from being members of the Euro- zone?

All other things equal, a depreciation of the U.S. real exchange rate causes:

The Mexican financial crisis of 1994 did not develop into a generalized financial collapse thanks to:

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

Fixed exchange rates:

Explain why the supply of foreign currency in the foreign exchange market is upward sloping and the demand for foreign currency in the foreign exchange market is downward sloping.

A balance of payments surplus occurs when a country experiences a _______ that is not matched by additional purchases of _______ by the private sector.

In 2006, the U.S. net international investment position was $2.5 trillion. This means that in 2006:

Explain what the current account measures.

In the supply and demand for U.S. dollars in Europe, who is a demander in that market?

Which of the following is not included in the U.S. financial account?

Figure 19.5 -From Figure 19.5 above, suppose the U.S. is currently fixing its exchange rate at $1.25 per euro. If the U.S. wants to attain equilibrium in the foreign exchange market, it must:

If it takes more U.S. dollars to get a euro, then:

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

All other things equal, an appreciation of the U.S. real exchange rate causes consumers to buy _domestic goods and _ foreign goods.

A balance of payments surplus occurs when a country experiences a _ that is not matched by additional purchases of _ by the private sector.