Question 1

Figure 19.4
-Refer to Figure 19.4. Which of the following will shift the supply of pounds from S1 to S2?

Accepted Answer

A)  Fewer British firms want to invest in the United States. 
B)  More British citizens travel to the United States. 
C)  The price of U.S. bonds decreases relative to the price of British bonds. 
D)  The inflation rate in the United States decreases relative to the inflation rate in England. 
A)  Fewer British firms want to invest in the United States. 
B)  More British citizens travel to the United States. 
C)  The price of U.S. bonds decreases relative to the price of British bonds. 
D)  The inflation rate in the United States decreases relative to the inflation rate in England.

Question 2

If the income from investments by Americans abroad exceeds the income from investments by non- Americans in the U.S. , then net income from abroad is:

Accepted Answer

A)  negative. 
B)  decreasing. 
C)  zero. 
D)  positive. 
A)  negative. 
B)  decreasing. 
C)  zero. 
D)  positive.

Question 3

One drawback of a fixed exchange rate is that it:

Accepted Answer

A)  requires the coordination of economic policies between countries. 
B)  makes international transactions more expensive. 
C)  requires previous authorization of the IMF in order to be altered. 
D)  makes international transactions less efficient. 
A)  requires the coordination of economic policies between countries. 
B)  makes international transactions more expensive. 
C)  requires previous authorization of the IMF in order to be altered. 
D)  makes international transactions less efficient.

Question 4

An index that reflects the average of real exchange rates of the U.S. and its major trading partners is called:

Accepted Answer

A)  a multinational real exchange rate. 
B)  a multilateral exchange rate. 
C)  an average nominal exchange rate. 
D)  none of the above 
A)  a multinational real exchange rate. 
B)  a multilateral exchange rate. 
C)  an average nominal exchange rate. 
D)  none of the above

Question 5

Figure 19.1
-Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the yen causes a movement to Point _______.

Accepted Answer

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

Question 6

Suppose a pound of dry roasted coffee beans cost $3 in the United States and 6 pounds in England. The law of one price would predict that the exchange rate in the long- run is:

Accepted Answer

A)  $1 = 2 pounds. 
B)  1 pound = $4. 
C)  $1 = 3 pounds. 
D)  $1 = 1/2 pound. 
A)  $1 = 2 pounds. 
B)  1 pound = $4. 
C)  $1 = 3 pounds. 
D)  $1 = 1/2 pound.

Question 7

The system of accounts that measures transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is called the:

Accepted Answer

A)  current account. 
B)  exchange rate. 
C)  balance of payments. 
D)  financial account. 
A)  current account. 
B)  exchange rate. 
C)  balance of payments. 
D)  financial account.

Question 8

Which of the following is in the capital account?

Accepted Answer

A)  statistical discrepancy 
B)  net investment income 
C)  net exports 
D)  net purchases of foreign assets 
A)  statistical discrepancy 
B)  net investment income 
C)  net exports 
D)  net purchases of foreign assets

Question 9

With a fixed exchange rate system, the balance of payments of a country:

Accepted Answer

A)  is always negative. 
B)  always equals zero. 
C)  is always positive. 
D)  can be zero, positive or negative. 
A)  is always negative. 
B)  always equals zero. 
C)  is always positive. 
D)  can be zero, positive or negative.

Question 10

Recall Application 2, "World Savings and the U.S. Current Account Deficits," to answer the following questions:
-According to the application, the U.S. can continue having current account deficits only because:

Accepted Answer

A)  the rest of the world continues to sells U.S. assets. 
B)  Americans continue to buy U.S. assets. 
C)  Americans continue to buy foreign assets. 
D)  the rest of the world continues to buy U.S. assets. 
A)  the rest of the world continues to sells U.S. assets. 
B)  Americans continue to buy U.S. assets. 
C)  Americans continue to buy foreign assets. 
D)  the rest of the world continues to buy U.S. assets.

Question 11

An increase in U.S. interest rates relative to Canadian interest rates will cause the U.S. dollar to appreciate.

Accepted Answer

A) True 
 B)False

Question 12

If the prices in the United States decrease, we would expect:

Accepted Answer

A)  the supply of foreign currency in the United States to decrease. 
B)  the demand for dollars to decrease. 
C)  the demand for dollars to increase. 
D)  the demand for foreign currency in the United States to increase. 
A)  the supply of foreign currency in the United States to decrease. 
B)  the demand for dollars to decrease. 
C)  the demand for dollars to increase. 
D)  the demand for foreign currency in the United States to increase.

Question 13

An increase in the supply of dollars:

Accepted Answer

A)  increases the yen price of dollars. 
B)  decreases the dollar price of yen. 
C)  increases the dollar price of yen. 
D)  does not change the exchange rate between dollars and yen. 
A)  increases the yen price of dollars. 
B)  decreases the dollar price of yen. 
C)  increases the dollar price of yen. 
D)  does not change the exchange rate between dollars and yen.

Question 14

Flexible exchange rates require the coordination of economic policies between countries. 177)

Accepted Answer

A) True 
 B)False

Question 15

Recall Application 4, "The Argentine Financial Crisis," to answer the question below:
-Which of the following contributed to the collapse of the Argentine peso in 2002?

Accepted Answer

A)  the appreciation of the Argentine peso 
B)  Argentina's large current account deficits with its trading partners 
C)  the belief by investors that Argentina would not be able to keep the current fixed exchange rate 
D)  All of the above are correct. 
A)  the appreciation of the Argentine peso 
B)  Argentina's large current account deficits with its trading partners 
C)  the belief by investors that Argentina would not be able to keep the current fixed exchange rate 
D)  All of the above are correct.

Question 16

The real exchange rate between the U.S. and Japan is expressed as:

Accepted Answer

A)  the number of baskets of U.S. goods that you can buy with a yen. 
B)  the amount of dollars you can buy with a Japanese yen. 
C)  the number of baskets of Japanese goods that you can buy with a basket of goods in the U.S. 
D)  the number of baskets of Japanese goods that you can buy with a U.S. dollar. 
A)  the number of baskets of U.S. goods that you can buy with a yen. 
B)  the amount of dollars you can buy with a Japanese yen. 
C)  the number of baskets of Japanese goods that you can buy with a basket of goods in the U.S. 
D)  the number of baskets of Japanese goods that you can buy with a U.S. dollar.

Question 17

More German companies start to invest in the United States. This will lead to a(n):

Accepted Answer

A)  increase in the supply of dollars and a decrease in the demand for euros. 
B)  decrease in the demand for dollars and an increase in the demand for euros. 
C)  increase in the demand for dollars and a decrease in the supply of euros. 
D)  increase in the demand for dollars and an increase in the supply of euros. 
A)  increase in the supply of dollars and a decrease in the demand for euros. 
B)  decrease in the demand for dollars and an increase in the demand for euros. 
C)  increase in the demand for dollars and a decrease in the supply of euros. 
D)  increase in the demand for dollars and an increase in the supply of euros.

Question 18

The trade deficit in Mexico did not cause a problem prior to 1994 because:

Accepted Answer

A)  oil prices were high and Mexico was a net exporter of oil. 
B)  Mexicans abroad remitted huge sums of foreign currencies back to Mexico. 
C)  foreign investors willingly traded their foreign currencies for Mexican pesos to buy Mexican securities. 
D)  the Mexican peso was pegged to the U.S. dollar. 
A)  oil prices were high and Mexico was a net exporter of oil. 
B)  Mexicans abroad remitted huge sums of foreign currencies back to Mexico. 
C)  foreign investors willingly traded their foreign currencies for Mexican pesos to buy Mexican securities. 
D)  the Mexican peso was pegged to the U.S. dollar.

Question 19

In 1986, the U.S. net international investment position was $136 billion. This means that in 1986:

Accepted Answer

A)  the U.S. was a net lender. 
B)  foreign governments made $136 billion in investments in the US. 
C)  the U.S. government made $136 billion in investments abroad. 
D)  the U.S. was a net borrower. 
A)  the U.S. was a net lender. 
B)  foreign governments made $136 billion in investments in the US. 
C)  the U.S. government made $136 billion in investments abroad. 
D)  the U.S. was a net borrower.

Question 20

Which of the following affects a country's net international investment position?

Accepted Answer

A)  the costs of shipping goods and services across countries. 
B)  the amount of debt owed by one country to another. 
C)  the differences in the prices of services between two countries. 
D)  real interest rates paid on foreign assets 
A)  the costs of shipping goods and services across countries. 
B)  the amount of debt owed by one country to another. 
C)  the differences in the prices of services between two countries. 
D)  real interest rates paid on foreign assets

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S₁to S₂?

If the income from investments by Americans abroad exceeds the income from investments by non- Americans in the U.S. , then net income from abroad is:

One drawback of a fixed exchange rate is that it:

An index that reflects the average of real exchange rates of the U.S. and its major trading partners is called:

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the yen causes a movement to Point _______.

Suppose a pound of dry roasted coffee beans cost $3 in the United States and 6 pounds in England. The law of one price would predict that the exchange rate in the long- run is:

The system of accounts that measures transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is called the:

Which of the following is in the capital account?

With a fixed exchange rate system, the balance of payments of a country:

Recall Application 2, "World Savings and the U.S. Current Account Deficits," to answer the following questions: -According to the application, the U.S. can continue having current account deficits only because:

An increase in U.S. interest rates relative to Canadian interest rates will cause the U.S. dollar to appreciate.

If the prices in the United States decrease, we would expect:

An increase in the supply of dollars:

Flexible exchange rates require the coordination of economic policies between countries. 177)

Recall Application 4, "The Argentine Financial Crisis," to answer the question below: -Which of the following contributed to the collapse of the Argentine peso in 2002?

The real exchange rate between the U.S. and Japan is expressed as:

More German companies start to invest in the United States. This will lead to a(n):

The trade deficit in Mexico did not cause a problem prior to 1994 because:

In 1986, the U.S. net international investment position was $136 billion. This means that in 1986:

Which of the following affects a country's net international investment position?

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

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S1 to S2?

If the income from investments by Americans abroad exceeds the income from investments by non- Americans in the U.S. , then net income from abroad is:

One drawback of a fixed exchange rate is that it:

An index that reflects the average of real exchange rates of the U.S. and its major trading partners is called:

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the yen causes a movement to Point _______.

Suppose a pound of dry roasted coffee beans cost $3 in the United States and 6 pounds in England. The law of one price would predict that the exchange rate in the long- run is:

The system of accounts that measures transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is called the:

Which of the following is in the capital account?

With a fixed exchange rate system, the balance of payments of a country:

Recall Application 2, "World Savings and the U.S. Current Account Deficits," to answer the following questions: -According to the application, the U.S. can continue having current account deficits only because:

An increase in U.S. interest rates relative to Canadian interest rates will cause the U.S. dollar to appreciate.

If the prices in the United States decrease, we would expect:

An increase in the supply of dollars:

Flexible exchange rates require the coordination of economic policies between countries. 177)

Recall Application 4, "The Argentine Financial Crisis," to answer the question below: -Which of the following contributed to the collapse of the Argentine peso in 2002?

The real exchange rate between the U.S. and Japan is expressed as:

More German companies start to invest in the United States. This will lead to a(n):

The trade deficit in Mexico did not cause a problem prior to 1994 because:

In 1986, the U.S. net international investment position was $136 billion. This means that in 1986:

Which of the following affects a country's net international investment position?

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

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S₁to S₂?