Question 1

When a currency appreciates, the prices of its imports from other countries will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly.

Question 2

Countries A and B are important trading partners. Country A is in a recession. Country B will be better insulated from the recession originating in country A if country _____ has a _____ exchange rate system.

Accepted Answer

A)  B; fixed 
B)  B; floating 
C)  A; fixed 
D)  A; floating 
A)  B; fixed 
B)  B; floating 
C)  A; fixed 
D)  A; floating

Question 3

If the euro depreciates, then a Mediterranean cruise will be cheaper for U.S. tourists.

Accepted Answer

A) True 
 B)False

Question 4

When a currency appreciates, the prices of its exports to other countries will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly.

Question 5

If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% and the Japanese interest rate is 2%, what will NOT occur?

Accepted Answer

A)  Financial inflows will reduce the U.S. interest rate. 
B)  Financial outflows will increase the Japanese interest rate. 
C)  The interest rate gap between the United States and Japan will diminish. 
D)  Loanable funds will be exported from the United States to Japan. 
A)  Financial inflows will reduce the U.S. interest rate. 
B)  Financial outflows will increase the Japanese interest rate. 
C)  The interest rate gap between the United States and Japan will diminish. 
D)  Loanable funds will be exported from the United States to Japan.

Question 6

If the exchange rate for the yen is $0.009784, $1 exchanges for ¥9.784.

Accepted Answer

A) True 
 B)False

Question 7

The current account responds to changes in both real and nominal exchange rates.

Accepted Answer

A) True 
 B)False

Question 8

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the:

Accepted Answer

A)  singular account. 
B)  euro-dollar account. 
C)  universal exchange account. 
D)  balance of payments. 
A)  singular account. 
B)  euro-dollar account. 
C)  universal exchange account. 
D)  balance of payments.

Question 9

An increase in U.S. interest rates causes a decrease in aggregate demand by _____ investment spending, _____ the dollar, and _____.

Accepted Answer

A)  increasing; appreciating; increasing imports 
B)  decreasing; appreciating; increasing imports 
C)  increasing; depreciating; increasing exports 
D)  decreasing; depreciating; decreasing exports 
A)  increasing; appreciating; increasing imports 
B)  decreasing; appreciating; increasing imports 
C)  increasing; depreciating; increasing exports 
D)  decreasing; depreciating; decreasing exports

Question 10

Licensing systems that limit the right of individuals to buy foreign currency are: I. floating exchange rate regimes.
II) foreign exchange controls.
III) exchange market interventions.

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 11

A fixed rate can be expensive because it requires that a country keep large amounts of foreign currency on hand; usually a low-return investment.

Accepted Answer

A) True 
 B)False

Question 12

If the exchange rate is $1 = ¥110, a $20,000 Ford truck costs _____ in Japan.

Accepted Answer

A)  ¥20,000 
B)  ¥18,182 
C)  ¥2.2 million 
D)  ¥3 million 
A)  ¥20,000 
B)  ¥18,182 
C)  ¥2.2 million 
D)  ¥3 million

Question 13

A devaluation can help reduce an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 14

A fixed 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 15

All other things equal, a depreciation of the domestic currency will cause aggregate demand to increase.

Accepted Answer

A) True 
 B)False

Question 16

Direct foreign investment means the purchase of:

Accepted Answer

A)  stock in foreign companies. 
B)  bonds of a foreign country. 
C)  bank loans in a foreign country. 
D)  factories in a foreign country. 
A)  stock in foreign companies. 
B)  bonds of a foreign country. 
C)  bank loans in a foreign country. 
D)  factories in a foreign country.

Question 17

The nominal exchange rate is the number of times that a unit of currency changes hands in a year.

Accepted Answer

A) True 
 B)False

Question 18

The advantage of a fixed exchange rate is that it:

Accepted Answer

A)  leaves monetary policy available for macroeconomic stabilization. 
B)  eliminates the possibility of the twin deficits. 
C)  eliminates uncertainty about the value of a currency. 
D)  tends to create trade surpluses. 
A)  leaves monetary policy available for macroeconomic stabilization. 
B)  eliminates the possibility of the twin deficits. 
C)  eliminates uncertainty about the value of a currency. 
D)  tends to create trade surpluses.

Question 19

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

Accepted Answer

A)  a computer made in the United States and exported to Britain 
B)  a computer made in Britain and imported into the United States 
C)  interest on a U.S. bond sold to someone living overseas 
D)  the value of a bond from a U.S. company sold to someone living in Britain 
A)  a computer made in the United States and exported to Britain 
B)  a computer made in Britain and imported into the United States 
C)  interest on a U.S. bond sold to someone living overseas 
D)  the value of a bond from a U.S. company sold to someone living in Britain

Question 20

Use the following to answer questions:  
-(Table: Balance of Payments) Refer to Table: Balance of Payments. In this case, the country's balance of payments on goods and services is:

Accepted Answer

A)  $375 billion. 
B)  -$375 billion. 
C)  $4,045 billion. 
D)  $355 billion. 
A)  $375 billion. 
B)  -$375 billion. 
C)  $4,045 billion. 
D)  $355 billion.

When a currency appreciates, the prices of its imports from other countries will:

Countries A and B are important trading partners. Country A is in a recession. Country B will be better insulated from the recession originating in country A if country _ has a _ exchange rate system.

If the euro depreciates, then a Mediterranean cruise will be cheaper for U.S. tourists.

When a currency appreciates, the prices of its exports to other countries will:

If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% and the Japanese interest rate is 2%, what will NOT occur?

If the exchange rate for the yen is $0.009784, $1 exchanges for ¥9.784.

The current account responds to changes in both real and nominal exchange rates.

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the:

An increase in U.S. interest rates causes a decrease in aggregate demand by ___ investment spending, _ the dollar, and ___.

Licensing systems that limit the right of individuals to buy foreign currency are: I. floating exchange rate regimes. II) foreign exchange controls. III) exchange market interventions.

A fixed rate can be expensive because it requires that a country keep large amounts of foreign currency on hand; usually a low-return investment.

If the exchange rate is $1 = ¥110, a $20,000 Ford truck costs _____ in Japan.

A devaluation can help reduce an inflationary gap.

A fixed exchange rate is:

All other things equal, a depreciation of the domestic currency will cause aggregate demand to increase.

Direct foreign investment means the purchase of:

The nominal exchange rate is the number of times that a unit of currency changes hands in a year.

The advantage of a fixed exchange rate is that it:

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

Use the following to answer questions: -(Table: Balance of Payments) Refer to Table: Balance of Payments. In this case, the country's balance of payments on goods and services is:

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

When a currency appreciates, the prices of its imports from other countries will:

Countries A and B are important trading partners. Country A is in a recession. Country B will be better insulated from the recession originating in country A if country _____ has a _____ exchange rate system.

If the euro depreciates, then a Mediterranean cruise will be cheaper for U.S. tourists.

When a currency appreciates, the prices of its exports to other countries will:

If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% and the Japanese interest rate is 2%, what will NOT occur?

If the exchange rate for the yen is $0.009784, $1 exchanges for ¥9.784.

The current account responds to changes in both real and nominal exchange rates.

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the:

An increase in U.S. interest rates causes a decrease in aggregate demand by _____ investment spending, _____ the dollar, and _____.

Licensing systems that limit the right of individuals to buy foreign currency are: I. floating exchange rate regimes. II) foreign exchange controls. III) exchange market interventions.

A fixed rate can be expensive because it requires that a country keep large amounts of foreign currency on hand; usually a low-return investment.

If the exchange rate is $1 = ¥110, a $20,000 Ford truck costs _____ in Japan.

A devaluation can help reduce an inflationary gap.

A fixed exchange rate is:

All other things equal, a depreciation of the domestic currency will cause aggregate demand to increase.

Direct foreign investment means the purchase of:

The nominal exchange rate is the number of times that a unit of currency changes hands in a year.

The advantage of a fixed exchange rate is that it:

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

Use the following to answer questions: -(Table: Balance of Payments) Refer to Table: Balance of Payments. In this case, the country's balance of payments on goods and services is:

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

Countries A and B are important trading partners. Country A is in a recession. Country B will be better insulated from the recession originating in country A if country _ has a _ exchange rate system.

An increase in U.S. interest rates causes a decrease in aggregate demand by ___ investment spending, _ the dollar, and ___.