Question 1

Contractionary monetary policy in the United States will cause the dollar to:

Accepted Answer

A)  appreciate. 
B)  be revalued. 
C)  depreciate. 
D)  be devalued. 
A)  appreciate. 
B)  be revalued. 
C)  depreciate. 
D)  be devalued.

Question 2

Scenario: Gizmovia II The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.75. If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50, it should _____ interest rates, which will _____ capital inflows of gizmos.

Accepted Answer

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

Question 3

Use the following to answer questions:  
-(Figure: Change in the Demand for U.S. Dollars) Refer to Figure: Change in the Demand for U.S. Dollars. A movement from E1 to E2 in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

Accepted Answer

A)  the same amount of 
B)  fewer 
C)  more 
D)  The answer cannot be determined from the information provided. 
A)  the same amount of 
B)  fewer 
C)  more 
D)  The answer cannot be determined from the information provided.

Question 4

A country has a financial account surplus if the balance on the:

Accepted Answer

A)  financial account is negative. 
B)  financial account is positive. 
C)  current account is zero. 
D)  current account is positive. 
A)  financial account is negative. 
B)  financial account is positive. 
C)  current account is zero. 
D)  current account is positive.

Question 5

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, which statement would NOT be true?

Accepted Answer

A)  The demand curve for dollars will shift to the left. 
B)  The Japanese will buy more U.S. goods. 
C)  Americans will buy more Japanese goods. 
D)  The exchange rate of yen per U.S. dollar will fall. 
A)  The demand curve for dollars will shift to the left. 
B)  The Japanese will buy more U.S. goods. 
C)  Americans will buy more Japanese goods. 
D)  The exchange rate of yen per U.S. dollar will fall.

Question 6

When the dollar appreciates relative to the Canadian dollar:

Accepted Answer

A)  Canadian goods become more expensive in the United States. 
B)  U.S. goods become more expensive in Canada. 
C)  U.S. residents tend to buy more from Canada, since the United States has a weak currency. 
D)  the United States sells more goods to Canada. 
A)  Canadian goods become more expensive in the United States. 
B)  U.S. goods become more expensive in Canada. 
C)  U.S. residents tend to buy more from Canada, since the United States has a weak currency. 
D)  the United States sells more goods to Canada.

Question 7

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

A)  current account; from 
B)  current account; to 
C)  financial account; from 
D)  financial account; to 
A)  current account; from 
B)  current account; to 
C)  financial account; from 
D)  financial account; to

Question 8

Use the following to answer questions:  
-(Table: Balance of Payments) Refer to Table: Balance of Payments. The country's balance of payments on current account is:

Accepted Answer

A)  $355 billion. 
B)  -$395 billion. 
C)  $375 billion. 
D)  -$355 billion. 
A)  $355 billion. 
B)  -$395 billion. 
C)  $375 billion. 
D)  -$355 billion.

Question 9

A system in which exchange rates are set by government policy is a(n) _____ system.

Accepted Answer

A)  universal exchange 
B)  floating exchange rate 
C)  commodity standard 
D)  fixed exchange rate 
A)  universal exchange 
B)  floating exchange rate 
C)  commodity standard 
D)  fixed exchange rate

Question 10

Which argument was made against Britain's adopting the euro? I. Using the same currency as many other European countries would discourage trade and decrease productivity.
II) Using the euro would decrease the effectiveness of monetary policy.

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 11

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The dollar has:

Accepted Answer

A)  depreciated. 
B)  appreciated. 
C)  been revalued. 
D)  not been affected for use in international trade. 
A)  depreciated. 
B)  appreciated. 
C)  been revalued. 
D)  not been affected for use in international trade.

Question 12

Adopting a floating exchange rate regime:

Accepted Answer

A)  makes the domestic economy less susceptible to business cycles abroad. 
B)  limits the use of monetary policy to stabilize the economy. 
C)  makes the domestic economy more susceptible to business cycles abroad. 
D)  commits the country to maintaining low inflation rates. 
A)  makes the domestic economy less susceptible to business cycles abroad. 
B)  limits the use of monetary policy to stabilize the economy. 
C)  makes the domestic economy more susceptible to business cycles abroad. 
D)  commits the country to maintaining low inflation rates.

Question 13

A floating exchange rate: I. leaves monetary policy available for domestic stabilization.
II) reduces the uncertainty of international trade.

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 14

Economists usually use GDP rather than GNP because they are tracking:

Accepted Answer

A)  only transactions on the current account. 
B)  only transactions on the financial account. 
C)  production rather than income. 
D)  income rather than production. 
A)  only transactions on the current account. 
B)  only transactions on the financial account. 
C)  production rather than income. 
D)  income rather than production.

Question 15

An increase in the value of a fixed rate currency is called an appreciation.

Accepted Answer

A) True 
 B)False

Question 16

All other things equal, an expansionary monetary policy will cause the domestic currency to appreciate.

Accepted Answer

A) True 
 B)False

Question 17

Which country did NOT adopt the euro? I. Britain
II) Switzerland
III) Sweden

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  III only 
D)  I, II, and III

Question 18

A current account deficit exists when:

Accepted Answer

A)  the balance on current account is negative. 
B)  spending flowing out of the country is less than spending flowing into the country. 
C)  net exports are positive. 
D)  an economy buys less from foreigners than it sells to them. 
A)  the balance on current account is negative. 
B)  spending flowing out of the country is less than spending flowing into the country. 
C)  net exports are positive. 
D)  an economy buys less from foreigners than it sells to them.

Question 19

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates, such as rates that are managed by the government to avoid wide swings.

Accepted Answer

A) True 
 B)False

Question 20

Which method would NOT maintain a fixed exchange rate?

Accepted Answer

A)  trading currency in the foreign exchange market 
B)  changing monetary policy to shift the supply and demand curves for its own currency 
C)  implementing foreign exchange controls 
D)  passing a law requiring that the exchange rate remain fixed 
A)  trading currency in the foreign exchange market 
B)  changing monetary policy to shift the supply and demand curves for its own currency 
C)  implementing foreign exchange controls 
D)  passing a law requiring that the exchange rate remain fixed

Contractionary monetary policy in the United States will cause the dollar to:

Use the following to answer questions: -(Figure: Change in the Demand for U.S. Dollars) Refer to Figure: Change in the Demand for U.S. Dollars. A movement from E₁ to E₂ in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

A country has a financial account surplus if the balance on the:

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, which statement would NOT be true?

When the dollar appreciates relative to the Canadian dollar:

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.

Use the following to answer questions: -(Table: Balance of Payments) Refer to Table: Balance of Payments. The country's balance of payments on current account is:

A system in which exchange rates are set by government policy is a(n) _____ system.

Which argument was made against Britain's adopting the euro? I. Using the same currency as many other European countries would discourage trade and decrease productivity. II) Using the euro would decrease the effectiveness of monetary policy.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The dollar has:

Adopting a floating exchange rate regime:

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II) reduces the uncertainty of international trade.

Economists usually use GDP rather than GNP because they are tracking:

An increase in the value of a fixed rate currency is called an appreciation.

All other things equal, an expansionary monetary policy will cause the domestic currency to appreciate.

Which country did NOT adopt the euro? I. Britain II) Switzerland III) Sweden

A current account deficit exists when:

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates, such as rates that are managed by the government to avoid wide swings.

Which method would NOT maintain a fixed exchange rate?

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

Contractionary monetary policy in the United States will cause the dollar to:

Use the following to answer questions: -(Figure: Change in the Demand for U.S. Dollars) Refer to Figure: Change in the Demand for U.S. Dollars. A movement from E1 to E2 in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

A country has a financial account surplus if the balance on the:

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, which statement would NOT be true?

When the dollar appreciates relative to the Canadian dollar:

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Use the following to answer questions: -(Table: Balance of Payments) Refer to Table: Balance of Payments. The country's balance of payments on current account is:

A system in which exchange rates are set by government policy is a(n) _____ system.

Which argument was made against Britain's adopting the euro? I. Using the same currency as many other European countries would discourage trade and decrease productivity. II) Using the euro would decrease the effectiveness of monetary policy.

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The dollar has:

Adopting a floating exchange rate regime:

A floating exchange rate: I. leaves monetary policy available for domestic stabilization. II) reduces the uncertainty of international trade.

Economists usually use GDP rather than GNP because they are tracking:

An increase in the value of a fixed rate currency is called an appreciation.

All other things equal, an expansionary monetary policy will cause the domestic currency to appreciate.

Which country did NOT adopt the euro? I. Britain II) Switzerland III) Sweden

A current account deficit exists when:

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates, such as rates that are managed by the government to avoid wide swings.

Which method would NOT maintain a fixed exchange rate?

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

Use the following to answer questions: -(Figure: Change in the Demand for U.S. Dollars) Refer to Figure: Change in the Demand for U.S. Dollars. A movement from E₁ to E₂ in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.