Question 1

The supply of 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 2

Suppose that a country has floated its currency and the central bank sets a contractionary monetary policy. Which outcome is likely to occur?

Accepted Answer

A)  The country's currency will depreciate. 
B)  Interest rates will rise, the currency will appreciate, and any inflationary gap will shrink. 
C)  Interest rates will fall, which will reduce aggregate demand. 
D)  Net exports will be larger. 
A)  The country's currency will depreciate. 
B)  Interest rates will rise, the currency will appreciate, and any inflationary gap will shrink. 
C)  Interest rates will fall, which will reduce aggregate demand. 
D)  Net exports will be larger.

Question 3

If a country runs a deficit on its balance of payments for goods and services, to pay for its imports, it must:

Accepted Answer

A)  raise taxes. 
B)  print new money. 
C)  sell assets to foreigners. 
D)  decrease its exports. 
A)  raise taxes. 
B)  print new money. 
C)  sell assets to foreigners. 
D)  decrease its exports.

Question 4

The rule that governs a country's policy toward its exchange rate is known as:

Accepted Answer

A)  the fixed exchange rate system. 
B)  the floating exchange rate system. 
C)  the exchange rate regime. 
D)  the rules of exchange. 
A)  the fixed exchange rate system. 
B)  the floating exchange rate system. 
C)  the exchange rate regime. 
D)  the rules of exchange.

Question 5

If the U.S. dollar changes from $1 = ¥200 to $1 = ¥100, then:

Accepted Answer

A)  the dollar has depreciated relative to the yen. 
B)  the dollar has been fixed by the United States and Japan. 
C)  the dollar has appreciated relative to the yen. 
D)  U.S. goods are now more expensive in Japan. 
A)  the dollar has depreciated relative to the yen. 
B)  the dollar has been fixed by the United States and Japan. 
C)  the dollar has appreciated relative to the yen. 
D)  U.S. goods are now more expensive in Japan.

Question 6

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which explanation is likely?

Accepted Answer

A)  lack of restrictions on migration 
B)  the absence of political risks 
C)  higher political risks and restrictions on migration 
D)  greater economic integration in the present 
A)  lack of restrictions on migration 
B)  the absence of political risks 
C)  higher political risks and restrictions on migration 
D)  greater economic integration in the present

Question 7

Which asset would NOT be included in the U.S. financial account?

Accepted Answer

A)  a Japanese factory purchased by a U.S. company 
B)  U.S. stock sold to someone in Japan 
C)  a Japanese bond sold to someone in the United States 
D)  a Chinese video game imported into the United States 
A)  a Japanese factory purchased by a U.S. company 
B)  U.S. stock sold to someone in Japan 
C)  a Japanese bond sold to someone in the United States 
D)  a Chinese video game imported into the United States

Question 8

If the United States receives increased capital inflows from Europe, the dollar will depreciate.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Accepted Answer

A)  depreciation. 
B)  devaluation. 
C)  appreciation. 
D)  revaluation. 
A)  depreciation. 
B)  devaluation. 
C)  appreciation. 
D)  revaluation.

Question 10

Foreign exchange controls are the same thing as floating exchange rates.

Accepted Answer

A) True 
 B)False

Question 11

A floating exchange rate: I. leaves monetary policy available for domestic stabilization.
II) is less expensive to maintain than a fixed exchange rate.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  I and II 
D)  neither I nor II

Question 12

Which asset would be included in the U.S. current account?

Accepted Answer

A)  a factory in Japan purchased by a firm in the United States 
B)  stock in a U.S. company sold to someone in Japan 
C)  a dividend on stock in a U.S. company paid to someone in Japan 
D)  a bond issued by a firm in Japan sold to someone in the United States 
A)  a factory in Japan purchased by a firm in the United States 
B)  stock in a U.S. company sold to someone in Japan 
C)  a dividend on stock in a U.S. company paid to someone in Japan 
D)  a bond issued by a firm in Japan sold to someone in the United States

Question 13

Under fixed exchange rates, a devaluation:

Accepted Answer

A)  decreases aggregate demand. 
B)  increases aggregate demand. 
C)  decreases aggregate supply. 
D)  increases aggregate supply. 
A)  decreases aggregate demand. 
B)  increases aggregate demand. 
C)  decreases aggregate supply. 
D)  increases aggregate supply.

Question 14

If the government wants to decrease the value of its currency in foreign exchange markets, it can limit the ability of foreigners to buy its currency.

Accepted Answer

A) True 
 B)False

Question 15

Money flows into the United States from other countries as a result of:

Accepted Answer

A)  U.S. purchases of foreign goods and services. 
B)  payments to foreign owners of U.S. assets. 
C)  domestic purchases of U.S. goods and services. 
D)  transfer payments from foreign sources to U.S. residents. 
A)  U.S. purchases of foreign goods and services. 
B)  payments to foreign owners of U.S. assets. 
C)  domestic purchases of U.S. goods and services. 
D)  transfer payments from foreign sources to U.S. residents.

Question 16

A reduction in the value of a floating currency is called a devaluation.

Accepted Answer

A) True 
 B)False

Question 17

If the dollar appreciates because of a capital inflow from Asia, the balance on the U.S. financial account will increase and the balance on the current account will decrease.

Accepted Answer

A) True 
 B)False

Question 18

If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:

Accepted Answer

A)  the yen is depreciating and the dollar is appreciating. 
B)  U.S. goods become cheaper for Japanese consumers. 
C)  Japanese goods become cheaper for U.S. consumers. 
D)  U.S. services become more expensive for Japanese firms. 
A)  the yen is depreciating and the dollar is appreciating. 
B)  U.S. goods become cheaper for Japanese consumers. 
C)  Japanese goods become cheaper for U.S. consumers. 
D)  U.S. services become more expensive for Japanese firms.

Question 19

Exchange market intervention is government trading in the foreign exchange market to maintain a target exchange rate for its currency.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer questions:  
-(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is _____ the quantity of loanable funds demanded by U.S. borrowers.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  not related to 
A)  greater than 
B)  less than 
C)  equal to 
D)  not related to

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

Suppose that a country has floated its currency and the central bank sets a contractionary monetary policy. Which outcome is likely to occur?

If a country runs a deficit on its balance of payments for goods and services, to pay for its imports, it must:

The rule that governs a country's policy toward its exchange rate is known as:

If the U.S. dollar changes from $1 = ¥200 to $1 = ¥100, then:

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which explanation is likely?

Which asset would NOT be included in the U.S. financial account?

If the United States receives increased capital inflows from Europe, the dollar will depreciate.

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Foreign exchange controls are the same thing as floating exchange rates.

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II) is less expensive to maintain than a fixed exchange rate.

Which asset would be included in the U.S. current account?

Under fixed exchange rates, a devaluation:

If the government wants to decrease the value of its currency in foreign exchange markets, it can limit the ability of foreigners to buy its currency.

Money flows into the United States from other countries as a result of:

A reduction in the value of a floating currency is called a devaluation.

If the dollar appreciates because of a capital inflow from Asia, the balance on the U.S. financial account will increase and the balance on the current account will decrease.

If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:

Exchange market intervention is government trading in the foreign exchange market to maintain a target exchange rate for its currency.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is _____ the quantity of loanable funds demanded by U.S. borrowers.

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

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

Suppose that a country has floated its currency and the central bank sets a contractionary monetary policy. Which outcome is likely to occur?

If a country runs a deficit on its balance of payments for goods and services, to pay for its imports, it must:

The rule that governs a country's policy toward its exchange rate is known as:

If the U.S. dollar changes from $1 = ¥200 to $1 = ¥100, then:

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which explanation is likely?

Which asset would NOT be included in the U.S. financial account?

If the United States receives increased capital inflows from Europe, the dollar will depreciate.

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Foreign exchange controls are the same thing as floating exchange rates.

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II) is less expensive to maintain than a fixed exchange rate.

Which asset would be included in the U.S. current account?

Under fixed exchange rates, a devaluation:

If the government wants to decrease the value of its currency in foreign exchange markets, it can limit the ability of foreigners to buy its currency.

Money flows into the United States from other countries as a result of:

A reduction in the value of a floating currency is called a devaluation.

If the dollar appreciates because of a capital inflow from Asia, the balance on the U.S. financial account will increase and the balance on the current account will decrease.

If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:

Exchange market intervention is government trading in the foreign exchange market to maintain a target exchange rate for its currency.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows. At an interest rate of 4%, the quantity of loanable funds supplied by U.S. lenders is _____ the quantity of loanable funds demanded by U.S. borrowers.

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