Question 1

If the value of a country's merchandise exports is less than the value of its merchandise imports, it is said to have a

Accepted Answer

A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) capital account deficit. 
A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) capital account deficit.

Question 2

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will

Accepted Answer

A) cause the nation's currency to appreciate. 
B) make it more expensive for the nation to import goods. 
C) cause the nation's balance on current account to shift toward a surplus. 
D) make it less expensive for foreigners to buy the nation's goods. 
A) cause the nation's currency to appreciate. 
B) make it more expensive for the nation to import goods. 
C) cause the nation's balance on current account to shift toward a surplus. 
D) make it less expensive for foreigners to buy the nation's goods.

Question 3

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

Accepted Answer

A) an increase in inflation of the nation's trading partners 
B) an increase in the nation's domestic inflation rate 
C) a decrease in domestic real interest rates 
D) an increase in real interest rates abroad 
A) an increase in inflation of the nation's trading partners 
B) an increase in the nation's domestic inflation rate 
C) a decrease in domestic real interest rates 
D) an increase in real interest rates abroad

Question 4

Under a flexible exchange system, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Accepted Answer

A) an acceleration in the nation's inflation rate 
B) a balance of trade deficit 
C) a current account deficit 
D) a decline in the domestic inflation rate 
A) an acceleration in the nation's inflation rate 
B) a balance of trade deficit 
C) a current account deficit 
D) a decline in the domestic inflation rate

Question 5

Suppose a student group from your university tours the United Kingdom. As they purchase English goods, their actions will

Accepted Answer

A) create a demand for dollars and a supply of English pounds in the foreign exchange market. 
B) create a demand for English pounds and a supply of dollars in the foreign exchange market. 
C) cause the U.S.dollar to appreciate. 
D) cause the English pound to depreciate. 
A) create a demand for dollars and a supply of English pounds in the foreign exchange market. 
B) create a demand for English pounds and a supply of dollars in the foreign exchange market. 
C) cause the U.S.dollar to appreciate. 
D) cause the English pound to depreciate.

Question 6

A depreciation of the U.S. dollar on the foreign exchange market will

Accepted Answer

A) make U.S.exports cheaper to foreigners. 
B) make imports less expensive for U.S.consumers. 
C) make U.S.exports more expensive for foreign consumers. 
D) probably cause the United States to run a capital account surplus in the long run. 
A) make U.S.exports cheaper to foreigners. 
B) make imports less expensive for U.S.consumers. 
C) make U.S.exports more expensive for foreign consumers. 
D) probably cause the United States to run a capital account surplus in the long run.

Question 7

Figure 18-3    
-Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (A) is comprised of

Accepted Answer

A) U.S.citizens attempting to purchase Japanese-made goods. 
B) Japanese attempting to purchase U.S.-made goods. 
C) U.S.businesses attempting to sell to the Japanese. 
D) Japanese businesses attempting to sell to the U.S. 
E) the U.S.government attempting to unload dollars to the international market. 
A) U.S.citizens attempting to purchase Japanese-made goods. 
B) Japanese attempting to purchase U.S.-made goods. 
C) U.S.businesses attempting to sell to the Japanese. 
D) Japanese businesses attempting to sell to the U.S. 
E) the U.S.government attempting to unload dollars to the international market.

Question 8

If investment opportunities in the U.S. become more attractive to foreigners,

Accepted Answer

A) the exchange-rate value of the dollar will fall. 
B) the current-account balance will shift toward a deficit. 
C) the capital inflows to the U.S.will fall. 
D) all of the above are true. 
A) the exchange-rate value of the dollar will fall. 
B) the current-account balance will shift toward a deficit. 
C) the capital inflows to the U.S.will fall. 
D) all of the above are true.

Question 9

A nation's trade deficit will tend to shrink when its

Accepted Answer

A) economy is expanding. 
B) economy is shrinking. 
C) investment environment is attractive to foreigners. 
D) economy is growing at a normal rate. 
A) economy is expanding. 
B) economy is shrinking. 
C) investment environment is attractive to foreigners. 
D) economy is growing at a normal rate.

Question 10

The balance of payments is

Accepted Answer

A) the equilibrium result when two countries achieve purchasing power parity. 
B) an account that records changes in exchange rates between two countries. 
C) an account that records all economic transactions between a country and all other countries, usually within a year. 
D) all of the above. 
E) none of the above. 
A) the equilibrium result when two countries achieve purchasing power parity. 
B) an account that records changes in exchange rates between two countries. 
C) an account that records all economic transactions between a country and all other countries, usually within a year. 
D) all of the above. 
E) none of the above.

Question 11

Which one of the following would supply dollars to the foreign exchange market?

Accepted Answer

A) the sale of U.S.automobiles to a Mexican consumer 
B) the spending of British tourists in the United States 
C) the purchase of Canadian oil by a U.S.consumer 
D) the sale of a U.S.corporation to a Saudi Arabian investor 
A) the sale of U.S.automobiles to a Mexican consumer 
B) the spending of British tourists in the United States 
C) the purchase of Canadian oil by a U.S.consumer 
D) the sale of a U.S.corporation to a Saudi Arabian investor

Question 12

If the dollar appreciates,

Accepted Answer

A) imports to the United States become more expensive for foreigners. 
B) exports from the United States become more expensive for foreigners. 
C) imports become more expensive for U.S.citizens. 
D) exports from the United States become cheaper. 
E) the dollar will exchange for fewer units of a foreign currency. 
A) imports to the United States become more expensive for foreigners. 
B) exports from the United States become more expensive for foreigners. 
C) imports become more expensive for U.S.citizens. 
D) exports from the United States become cheaper. 
E) the dollar will exchange for fewer units of a foreign currency.

Question 13

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

Accepted Answer

A) an increase in domestic real interest rates 
B) an increase in exports coupled with a decline in imports 
C) an increase in the nation's inflation rate 
D) a balance of trade surplus 
A) an increase in domestic real interest rates 
B) an increase in exports coupled with a decline in imports 
C) an increase in the nation's inflation rate 
D) a balance of trade surplus

Question 14

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance

Accepted Answer

A) of payments. 
B) of merchandise trade. 
C) on current account. 
D) on capital account. 
A) of payments. 
B) of merchandise trade. 
C) on current account. 
D) on capital account.

Question 15

If the United States ran large budget deficits that push the federal debt to dangerously high levels, which of the following would be most likely to occur?

Accepted Answer

A) An increase in investor confidence, an inflow of capital, and expansion in the size of the trade deficit. 
B) Loss of investor confidence, a decline in the net inflow of capital, and shrinkage in the trade deficit. 
C) An increase in the attractiveness of investments in the United States, an increase in the inflow of capital, and a smaller trade deficit. 
D) An increase in the long-term growth rate of the U.S.economy. 
A) An increase in investor confidence, an inflow of capital, and expansion in the size of the trade deficit. 
B) Loss of investor confidence, a decline in the net inflow of capital, and shrinkage in the trade deficit. 
C) An increase in the attractiveness of investments in the United States, an increase in the inflow of capital, and a smaller trade deficit. 
D) An increase in the long-term growth rate of the U.S.economy.

Question 16

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound, there will be

Accepted Answer

A) more U.S.imports from Great Britain because the price of pounds has fallen. 
B) more exports to Great Britain because the price of pounds has risen. 
C) fewer exports to Great Britain because the price of the pound has risen. 
D) more U.S.exports to Great Britain since the price of the dollar has fallen. 
E) no change in either exports or imports. 
A) more U.S.imports from Great Britain because the price of pounds has fallen. 
B) more exports to Great Britain because the price of pounds has risen. 
C) fewer exports to Great Britain because the price of the pound has risen. 
D) more U.S.exports to Great Britain since the price of the dollar has fallen. 
E) no change in either exports or imports.

Question 17

Under a system of flexible exchange rates, which of the following would be most likely to cause a nation's currency to appreciate on the foreign exchange market?

Accepted Answer

A) stable domestic prices while the nation's trading partners are experiencing inflation 
B) a decrease in domestic interest rates 
C) an increase in foreign interest rates 
D) a domestic inflation rate of 10 percent while the nation's trading partners are experiencing stable prices 
A) stable domestic prices while the nation's trading partners are experiencing inflation 
B) a decrease in domestic interest rates 
C) an increase in foreign interest rates 
D) a domestic inflation rate of 10 percent while the nation's trading partners are experiencing stable prices

Question 18

If the exchange rate between the U.S. dollar and the Mexican peso went from $1 US = 9 peso to $1 US = 10 peso, then

Accepted Answer

A) American goods have become less expensive for Mexicans. 
B) Mexican goods have become more expensive for Americans. 
C) American goods have become more expensive for Mexicans. 
D) American exports to Mexico are likely to increase. 
A) American goods have become less expensive for Mexicans. 
B) Mexican goods have become more expensive for Americans. 
C) American goods have become more expensive for Mexicans. 
D) American exports to Mexico are likely to increase.

Question 19

What are the three categories of transactions in the balance of payments? Give an example of each.

Accepted Answer

The current account includes records of

Question 20

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

Accepted Answer

A) an increase in the nation's domestic inflation rate 
B) an increase in inflation of the nation's trading partners 
C) a decrease in the nation's domestic inflation rate 
D) an increase in domestic real interest rates 
A) an increase in the nation's domestic inflation rate 
B) an increase in inflation of the nation's trading partners 
C) a decrease in the nation's domestic inflation rate 
D) an increase in domestic real interest rates

If the value of a country's merchandise exports is less than the value of its merchandise imports, it is said to have a

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will

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

Under a flexible exchange system, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Suppose a student group from your university tours the United Kingdom. As they purchase English goods, their actions will

A depreciation of the U.S. dollar on the foreign exchange market will

Figure 18-3 -Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (A) is comprised of

If investment opportunities in the U.S. become more attractive to foreigners,

A nation's trade deficit will tend to shrink when its

The balance of payments is

Which one of the following would supply dollars to the foreign exchange market?

If the dollar appreciates,

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

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance

If the United States ran large budget deficits that push the federal debt to dangerously high levels, which of the following would be most likely to occur?

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound, there will be

Under a system of flexible exchange rates, which of the following would be most likely to cause a nation's currency to appreciate on the foreign exchange market?

If the exchange rate between the U.S. dollar and the Mexican peso went from $1 US = 9 peso to $1 US = 10 peso, then

What are the three categories of transactions in the balance of payments? Give an example of each.

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

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

If the value of a country's merchandise exports is less than the value of its merchandise imports, it is said to have a

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will

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

Under a flexible exchange system, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Suppose a student group from your university tours the United Kingdom. As they purchase English goods, their actions will

A depreciation of the U.S. dollar on the foreign exchange market will

Figure 18-3 -Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (A) is comprised of

If investment opportunities in the U.S. become more attractive to foreigners,

A nation's trade deficit will tend to shrink when its

The balance of payments is

Which one of the following would supply dollars to the foreign exchange market?

If the dollar appreciates,

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

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance

If the United States ran large budget deficits that push the federal debt to dangerously high levels, which of the following would be most likely to occur?

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound, there will be

Under a system of flexible exchange rates, which of the following would be most likely to cause a nation's currency to appreciate on the foreign exchange market?

If the exchange rate between the U.S. dollar and the Mexican peso went from $1 US = 9 peso to $1 US = 10 peso, then

What are the three categories of transactions in the balance of payments? Give an example of each.

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

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