Question 1

Which of the following would be a debit in the U.S. balance of payments?

Accepted Answer

A) the purchase of air service from a U.S.airline by a Japanese traveler 
B) the purchase of a German car by an American 
C) a short-term loan to a Japanese manufacturer by a U.S.bank 
D) the purchase of U.S.grain by a Japanese firm 
A) the purchase of air service from a U.S.airline by a Japanese traveler 
B) the purchase of a German car by an American 
C) a short-term loan to a Japanese manufacturer by a U.S.bank 
D) the purchase of U.S.grain by a Japanese firm

Question 2

If the exchange rate value of one U.S. dollar changes from 120 Japanese yen to 140 yen,

Accepted Answer

A) the U.S.dollar has appreciated relative to the yen. 
B) the Japanese yen has depreciated relative to the dollar. 
C) the U.S.dollar has depreciated relative to the yen. 
D) both a and b have occurred. 
A) the U.S.dollar has appreciated relative to the yen. 
B) the Japanese yen has depreciated relative to the dollar. 
C) the U.S.dollar has depreciated relative to the yen. 
D) both a and b have occurred.

Question 3

An appreciation in the value of the dollar would

Accepted Answer

A) make U.S.goods less expensive to foreigners. 
B) encourage U.S.consumers to buy more foreign goods. 
C) increase the number of dollars that could be purchased with a Mexican peso. 
D) discourage U.S.consumers from traveling abroad. 
A) make U.S.goods less expensive to foreigners. 
B) encourage U.S.consumers to buy more foreign goods. 
C) increase the number of dollars that could be purchased with a Mexican peso. 
D) discourage U.S.consumers from traveling abroad.

Question 4

In the balance of payments accounts, a net importer of capital is a nation that

Accepted Answer

A) sells more goods in foreign countries than it imports. 
B) must be running a trade surplus. 
C) sells more assets to individuals in other countries than the assets it buys from them. 
D) buys more assets from individuals in other countries than the assets it sells to them. 
A) sells more goods in foreign countries than it imports. 
B) must be running a trade surplus. 
C) sells more assets to individuals in other countries than the assets it buys from them. 
D) buys more assets from individuals in other countries than the assets it sells to them.

Question 5

A Japanese automobile manufacturer building an auto plant in the United States creates a

Accepted Answer

A) supply of dollars and demand for yen in the foreign exchange market. 
B) demand for dollars and a supply of yen in the foreign exchange market. 
C) demand for both dollars and yen in the foreign exchange market. 
D) supply of both dollars and yen in the foreign exchange market. 
A) supply of dollars and demand for yen in the foreign exchange market. 
B) demand for dollars and a supply of yen in the foreign exchange market. 
C) demand for both dollars and yen in the foreign exchange market. 
D) supply of both dollars and yen in the foreign exchange market.

Question 6

If the U.S. continually runs a bilateral trade deficit with Japan, then

Accepted Answer

A) Japan's trade policies must be unfair to the United States. 
B) the United States is worse off as the result of its trade with Japan. 
C) Japan is the low-cost supplier of goods that we import intensively. 
D) both a and b are true. 
A) Japan's trade policies must be unfair to the United States. 
B) the United States is worse off as the result of its trade with Japan. 
C) Japan is the low-cost supplier of goods that we import intensively. 
D) both a and b are true.

Question 7

Which of the following operate under a fixed-rate unified currency system?

Accepted Answer

A) the 12 countries of the European Monetary Union 
B) the 50 states of the United States 
C) Hong Kong, Panama, and the United States 
D) all of the above 
A) the 12 countries of the European Monetary Union 
B) the 50 states of the United States 
C) Hong Kong, Panama, and the United States 
D) all of the above

Question 8

A currency board

Accepted Answer

A) issues domestic currency in exchange for foreign currency at an exchange rate of its choosing. 
B) is responsible for the conduct of the nation's monetary policy. 
C) promises to continue redeeming the issued currency at a fixed rate. 
D) does all of the above. 
A) issues domestic currency in exchange for foreign currency at an exchange rate of its choosing. 
B) is responsible for the conduct of the nation's monetary policy. 
C) promises to continue redeeming the issued currency at a fixed rate. 
D) does all of the above.

Question 9

Under a flexible exchange rate system, which of the following will be most likely to cause an appreciation in the exchange rate of the dollar relative to the English pound?

Accepted Answer

A) an economic boom in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products 
B) higher real interest rates in England 
C) inflation in the United States while prices are stable in England 
D) attractive investment opportunities in England, inducing U.S.investors to buy stock in English firms 
A) an economic boom in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products 
B) higher real interest rates in England 
C) inflation in the United States while prices are stable in England 
D) attractive investment opportunities in England, inducing U.S.investors to buy stock in English firms

Question 10

Which of the following will enter as a credit in the U.S. balance of payments capital account?

Accepted Answer

A) the purchase of a Japanese automobile by a U.S.consumer 
B) the sale of Japanese electronics to an American 
C) the sale of an American baseball team to a Japanese industrialist 
D) the purchase of a Japanese electronics plant by an American industrialist 
A) the purchase of a Japanese automobile by a U.S.consumer 
B) the sale of Japanese electronics to an American 
C) the sale of an American baseball team to a Japanese industrialist 
D) the purchase of a Japanese electronics plant by an American industrialist

Question 11

A depreciation in the value of the U.S. dollar would

Accepted Answer

A) encourage foreigners to travel on American owned airlines. 
B) make U.S.goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S.citizens to travel abroad. 
A) encourage foreigners to travel on American owned airlines. 
B) make U.S.goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S.citizens to travel abroad.

Question 12

If a German pension fund decides to purchase U.S. government bonds, what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 13

Under a system of flexible exchange rates, in the long run, a nation's balance on current account and capital account transactions will

Accepted Answer

A) increase continuously. 
B) decrease continuously. 
C) tend to net out to zero, indicating a balance between the debits and credits. 
D) tend to increase if the nation is running a balance of trade surplus and decrease if it is running a balance of trade deficit. 
A) increase continuously. 
B) decrease continuously. 
C) tend to net out to zero, indicating a balance between the debits and credits. 
D) tend to increase if the nation is running a balance of trade surplus and decrease if it is running a balance of trade deficit.

Question 14

Which of the following would most likely cause a nation's currency to depreciate?

Accepted Answer

A) an increase in exports coupled with a decline in imports 
B) a slower inflation rate than those of its trading partners 
C) lower domestic real interest rates 
D) lower real interest rates abroad 
A) an increase in exports coupled with a decline in imports 
B) a slower inflation rate than those of its trading partners 
C) lower domestic real interest rates 
D) lower real interest rates abroad

Question 15

For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must

Accepted Answer

A) maintain a relatively high rate of inflation. 
B) balance the government budget each year. 
C) give up the independence of its monetary policy. 
D) run a trade deficit. 
A) maintain a relatively high rate of inflation. 
B) balance the government budget each year. 
C) give up the independence of its monetary policy. 
D) run a trade deficit.

Question 16

Explain how an increase in the American demand for German goods leads to a change in the German Mark relative to the U.S. dollar.

Accepted Answer

Americans who wish to buy more German go

Question 17

A depreciation of one's currency means that

Accepted Answer

A) the country's exports will become more expensive. 
B) the country's imports will become more expensive. 
C) the country's imports will become less expensive. 
D) it now requires less of this currency in exchange for one unit of another currency. 
E) it now requires more units of other currencies in exchange for one unit of this currency. 
A) the country's exports will become more expensive. 
B) the country's imports will become more expensive. 
C) the country's imports will become less expensive. 
D) it now requires less of this currency in exchange for one unit of another currency. 
E) it now requires more units of other currencies in exchange for one unit of this currency.

Question 18

Because the United States has a flexible exchange rate system, one would expect that

Accepted Answer

A) U.S.exports and imports would be in balance. 
B) the U.S.current account would be in balance. 
C) U.S.exports to China would be in balance with U.S.imports from China. 
D) all of the above are true. 
E) none of the above are true. 
A) U.S.exports and imports would be in balance. 
B) the U.S.current account would be in balance. 
C) U.S.exports to China would be in balance with U.S.imports from China. 
D) all of the above are true. 
E) none of the above are true.

Question 19

Explain how the following will affect the relative values of the dollar and the English pound.
a.Income growth is higher in the United States than in England.
b.Inflation is higher in England than in the United States.
c.Real interest rates are higher in the United States than in England.

Accepted Answer

a.
The dollar will depreciate

Question 20

The prospect of a recession in the United States would probably cause the dollar to

Accepted Answer

A) depreciate because interest rates would be expected to rise. 
B) depreciate because imports would be expected to rise. 
C) appreciate because imports would be expected to fall. 
D) appreciate because interest rates would be expected to decrease. 
A) depreciate because interest rates would be expected to rise. 
B) depreciate because imports would be expected to rise. 
C) appreciate because imports would be expected to fall. 
D) appreciate because interest rates would be expected to decrease.

Which of the following would be a debit in the U.S. balance of payments?

If the exchange rate value of one U.S. dollar changes from 120 Japanese yen to 140 yen,

An appreciation in the value of the dollar would

In the balance of payments accounts, a net importer of capital is a nation that

A Japanese automobile manufacturer building an auto plant in the United States creates a

If the U.S. continually runs a bilateral trade deficit with Japan, then

Which of the following operate under a fixed-rate unified currency system?

A currency board

Under a flexible exchange rate system, which of the following will be most likely to cause an appreciation in the exchange rate of the dollar relative to the English pound?

Which of the following will enter as a credit in the U.S. balance of payments capital account?

A depreciation in the value of the U.S. dollar would

If a German pension fund decides to purchase U.S. government bonds, what is the effect in the foreign exchange market?

Under a system of flexible exchange rates, in the long run, a nation's balance on current account and capital account transactions will

Which of the following would most likely cause a nation's currency to depreciate?

For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must

Explain how an increase in the American demand for German goods leads to a change in the German Mark relative to the U.S. dollar.

A depreciation of one's currency means that

Because the United States has a flexible exchange rate system, one would expect that

Explain how the following will affect the relative values of the dollar and the English pound. a.Income growth is higher in the United States than in England. b.Inflation is higher in England than in the United States. c.Real interest rates are higher in the United States than in England.

The prospect of a recession in the United States would probably cause the dollar to

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Filters

Exam 19: International Finance and the Foreign Exchange Market

Which of the following would be a debit in the U.S. balance of payments?

If the exchange rate value of one U.S. dollar changes from 120 Japanese yen to 140 yen,

An appreciation in the value of the dollar would

In the balance of payments accounts, a net importer of capital is a nation that

A Japanese automobile manufacturer building an auto plant in the United States creates a

If the U.S. continually runs a bilateral trade deficit with Japan, then

Which of the following operate under a fixed-rate unified currency system?

A currency board

Under a flexible exchange rate system, which of the following will be most likely to cause an appreciation in the exchange rate of the dollar relative to the English pound?

Which of the following will enter as a credit in the U.S. balance of payments capital account?

A depreciation in the value of the U.S. dollar would

If a German pension fund decides to purchase U.S. government bonds, what is the effect in the foreign exchange market?

Under a system of flexible exchange rates, in the long run, a nation's balance on current account and capital account transactions will

Which of the following would most likely cause a nation's currency to depreciate?

For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must

Explain how an increase in the American demand for German goods leads to a change in the German Mark relative to the U.S. dollar.

A depreciation of one's currency means that

Because the United States has a flexible exchange rate system, one would expect that

Explain how the following will affect the relative values of the dollar and the English pound. a.Income growth is higher in the United States than in England. b.Inflation is higher in England than in the United States. c.Real interest rates are higher in the United States than in England.

The prospect of a recession in the United States would probably cause the dollar to

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Filters