Question 1

A decrease in U.S. interest rates causes the dollar to _____ and aggregate demand to _____.

Accepted Answer

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

Question 2

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

Accepted Answer

A)  political unrest in developing African nations. 
B)  the war against terror. 
C)  the decreasing productivity of U.S. workers. 
D)  a global savings glut that decreased interest rates and led to an excess of investment over savings in the United States. 
A)  political unrest in developing African nations. 
B)  the war against terror. 
C)  the decreasing productivity of U.S. workers. 
D)  a global savings glut that decreased interest rates and led to an excess of investment over savings in the United States.

Question 3

A devaluation will make exports less expensive and imports more expensive.

Accepted Answer

A) True 
 B)False

Question 4

Many of China's trading partners feel that the yuan is undervalued.

Accepted Answer

A) True 
 B)False

Question 5

A current account surplus is generally a result of:

Accepted Answer

A)  imports exceeding exports. 
B)  sales of stock in U.S. companies to citizens of foreign countries. 
C)  a large influx of foreign investment income. 
D)  exports exceeding imports. 
A)  imports exceeding exports. 
B)  sales of stock in U.S. companies to citizens of foreign countries. 
C)  a large influx of foreign investment income. 
D)  exports exceeding imports.

Question 6

A country's balance of payments on financial account is the:

Accepted Answer

A)  difference between the dollar value of a country's exports and its imports of goods and services. 
B)  difference between the dollar value of a country's exports and its imports of goods only. 
C)  difference between the country's sale of assets to foreigners and its purchases of assets from foreigners. 
D)  same value as the country's merchandise trade balance. 
A)  difference between the dollar value of a country's exports and its imports of goods and services. 
B)  difference between the dollar value of a country's exports and its imports of goods only. 
C)  difference between the country's sale of assets to foreigners and its purchases of assets from foreigners. 
D)  same value as the country's merchandise trade balance.

Question 7

When the dollar depreciates, exports _____ and imports _____ .

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 8

Fixed exchange rates lead to more stable conditions for international trade.

Accepted Answer

A) True 
 B)False

Question 9

Demand for pounds sterling in the foreign exchange market might come from people in Britain who want to buy U.S. goods, services, and assets.

Accepted Answer

A) True 
 B)False

Question 10

A floating exchange rate is:

Accepted Answer

A)  determined by the market. 
B)  set by government. 
C)  set by the International Monetary Fund. 
D)  determined by the United Nations. 
A)  determined by the market. 
B)  set by government. 
C)  set by the International Monetary Fund. 
D)  determined by the United Nations.

Question 11

If the merchandise trade balance is -$15, net international transfer payments and net international factor income are $4, the balance of payments on goods and services is -$25, and the balance of payments on the financial account is $18, then the statistical discrepancy in the financial account is:

Accepted Answer

A)  $15. 
B)  $3. 
C)  -$3. 
D)  -$1. 
A)  $15. 
B)  $3. 
C)  -$3. 
D)  -$1.

Question 12

According to purchasing power parity, if the price of a Big Mac is lower in India and China than in Europe, then the currencies of India and China are undervalued.

Accepted Answer

A) True 
 B)False

Question 13

In the early twenty-first century, the United States has had a current account:

Accepted Answer

A)  surplus. 
B)  deficit. 
C)  balance equal to zero. 
D)  deficit and a capital account deficit. 
A)  surplus. 
B)  deficit. 
C)  balance equal to zero. 
D)  deficit and a capital account deficit.

Question 14

Currencies can be exchanged for each other in the _____ market.

Accepted Answer

A)  loanable funds 
B)  foreign exchange 
C)  resource 
D)  goods and services 
A)  loanable funds 
B)  foreign exchange 
C)  resource 
D)  goods and services

Question 15

If the target exchange rate of a fixed currency is below the equilibrium exchange rate, to reach the target rate, the government should sell that currency and buy foreign currencies.

Accepted Answer

A) True 
 B)False

Question 16

To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies.

Accepted Answer

A) True 
 B)False

Question 17

The exchange rate is the _____ between countries.

Accepted Answer

A)  interest rate differential 
B)  balance of trade differential 
C)  relative price of currencies 
D)  relative price of gold 
A)  interest rate differential 
B)  balance of trade differential 
C)  relative price of currencies 
D)  relative price of gold

Question 18

All else equal, if the Federal Reserve decreases the money supply, interest rates will _____ and the dollar will _____ against other currencies.

Accepted Answer

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

Question 19

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _____ and imports will _____.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease

Question 20

Floating exchange rates lead to more stable conditions for international trade.

Accepted Answer

A) True 
 B)False

A decrease in U.S. interest rates causes the dollar to _ and aggregate demand to _.

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

A devaluation will make exports less expensive and imports more expensive.

Many of China's trading partners feel that the yuan is undervalued.

A current account surplus is generally a result of:

A country's balance of payments on financial account is the:

When the dollar depreciates, exports _ and imports _ .

Fixed exchange rates lead to more stable conditions for international trade.

Demand for pounds sterling in the foreign exchange market might come from people in Britain who want to buy U.S. goods, services, and assets.

A floating exchange rate is:

If the merchandise trade balance is -$15, net international transfer payments and net international factor income are $4, the balance of payments on goods and services is -$25, and the balance of payments on the financial account is $18, then the statistical discrepancy in the financial account is:

According to purchasing power parity, if the price of a Big Mac is lower in India and China than in Europe, then the currencies of India and China are undervalued.

In the early twenty-first century, the United States has had a current account:

Currencies can be exchanged for each other in the _____ market.

If the target exchange rate of a fixed currency is below the equilibrium exchange rate, to reach the target rate, the government should sell that currency and buy foreign currencies.

To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies.

The exchange rate is the _____ between countries.

All else equal, if the Federal Reserve decreases the money supply, interest rates will _ and the dollar will _ against other currencies.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _ and imports will _.

Floating exchange rates lead to more stable conditions for international trade.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

Exam 18: International Macroeconomics

A decrease in U.S. interest rates causes the dollar to _____ and aggregate demand to _____.

According to Ben Bernanke, the primary cause of the U.S. current account deficit of the early 2000s was:

A devaluation will make exports less expensive and imports more expensive.

Many of China's trading partners feel that the yuan is undervalued.

A current account surplus is generally a result of:

A country's balance of payments on financial account is the:

When the dollar depreciates, exports _____ and imports _____ .

Fixed exchange rates lead to more stable conditions for international trade.

Demand for pounds sterling in the foreign exchange market might come from people in Britain who want to buy U.S. goods, services, and assets.

A floating exchange rate is:

If the merchandise trade balance is -$15, net international transfer payments and net international factor income are $4, the balance of payments on goods and services is -$25, and the balance of payments on the financial account is $18, then the statistical discrepancy in the financial account is:

According to purchasing power parity, if the price of a Big Mac is lower in India and China than in Europe, then the currencies of India and China are undervalued.

In the early twenty-first century, the United States has had a current account:

Currencies can be exchanged for each other in the _____ market.

If the target exchange rate of a fixed currency is below the equilibrium exchange rate, to reach the target rate, the government should sell that currency and buy foreign currencies.

To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies.

The exchange rate is the _____ between countries.

All else equal, if the Federal Reserve decreases the money supply, interest rates will _____ and the dollar will _____ against other currencies.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _____ and imports will _____.

Floating exchange rates lead to more stable conditions for international trade.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

A decrease in U.S. interest rates causes the dollar to _ and aggregate demand to _.

When the dollar depreciates, exports _ and imports _ .

All else equal, if the Federal Reserve decreases the money supply, interest rates will _ and the dollar will _ against other currencies.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _ and imports will _.