Question 1

Expansionary 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

China's exchange rate policy:

Accepted Answer

A)  led to current account deficits in the early 2000s. 
B)  led to the supply of yuan exceeding the demand for yuan. 
C)  is floating rate policy. 
D)  is a fixed rate policy. 
A)  led to current account deficits in the early 2000s. 
B)  led to the supply of yuan exceeding the demand for yuan. 
C)  is floating rate policy. 
D)  is a fixed rate policy.

Question 3

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The exchange rate for the dollar has changed from:

Accepted Answer

A)  €0.25 to €0.50. 
B)  €1.25 to €1.50. 
C)  €0.80 to €0.67. 
D)  €0.67 to €0.80. 
A)  €0.25 to €0.50. 
B)  €1.25 to €1.50. 
C)  €0.80 to €0.67. 
D)  €0.67 to €0.80.

Question 4

Foreign currencies are traded in the _____ market.

Accepted Answer

A)  stock 
B)  bond 
C)  commodities 
D)  foreign exchange 
A)  stock 
B)  bond 
C)  commodities 
D)  foreign exchange

Question 5

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. The change from D1 to D2 will occur, all other things being equal, if:

Accepted Answer

A)  interest rates are higher in Europe. 
B)  interest rates are higher in the United States. 
C)  interest rates in the United States and Europe are equal. 
D)  inflation is higher in Europe. 
A)  interest rates are higher in Europe. 
B)  interest rates are higher in the United States. 
C)  interest rates in the United States and Europe are equal. 
D)  inflation is higher in Europe.

Question 6

If the current account is in surplus, the financial account must also be in surplus.

Accepted Answer

A) True 
 B)False

Question 7

Scenario: Exchange Rate between the United States and India Suppose that initially the nominal exchange rate was 40 rupees per dollar but it is now 50 rupees per dollar. If the nominal exchange rate is 50 rupees per dollar and the inflation rate in India is 25%, while the aggregate price level has remained unchanged in the United States, the real exchange rate between the U.S. dollar and the Indian rupee:

Accepted Answer

A)  remains unchanged at 40. 
B)  remains unchanged at 50. 
C)  increases from 40 to 50. 
D)  increases by more than 25%. 
A)  remains unchanged at 40. 
B)  remains unchanged at 50. 
C)  increases from 40 to 50. 
D)  increases by more than 25%.

Question 8

A deficit in the current account means there will be:

Accepted Answer

A)  a surplus in the financial account. 
B)  a deficit in the financial account. 
C)  a balanced financial account. 
D)  either a surplus or a deficit in the financial account. 
A)  a surplus in the financial account. 
B)  a deficit in the financial account. 
C)  a balanced financial account. 
D)  either a surplus or a deficit in the financial account.

Question 9

The difference between a country's balance of payments on goods and services and the merchandise trade balance is that:

Accepted Answer

A)  the merchandise trade balance does not include exports and imports of services. 
B)  the balance of payments does not include exports and imports of services. 
C)  the merchandise trade balance does not include imports of goods and services. 
D)  the balance of payments does not include imports of goods and services. 
A)  the merchandise trade balance does not include exports and imports of services. 
B)  the balance of payments does not include exports and imports of services. 
C)  the merchandise trade balance does not include imports of goods and services. 
D)  the balance of payments does not include imports of goods and services.

Question 10

Capital tends to move from:

Accepted Answer

A)  less developed to more developed countries. 
B)  poorer countries to wealthier countries. 
C)  slow-growing countries to fast-growing countries. 
D)  fast-growing countries to slow-growing countries. 
A)  less developed to more developed countries. 
B)  poorer countries to wealthier countries. 
C)  slow-growing countries to fast-growing countries. 
D)  fast-growing countries to slow-growing countries.

Question 11

If foreign countries are increasing their demand for U.S. financial assets, then we can expect the U.S. dollar to _____ and the current account balance to _____, all other things equal.

Accepted Answer

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

Question 12

The global savings glut of the early 2000s was caused primarily by:

Accepted Answer

A)  financial crises in the late 1990s and early 2000s that led to an increase in savings in some relatively poor countries. 
B)  the high price of oil. 
C)  the impact of global warming on agriculture. 
D)  trade restrictions. 
A)  financial crises in the late 1990s and early 2000s that led to an increase in savings in some relatively poor countries. 
B)  the high price of oil. 
C)  the impact of global warming on agriculture. 
D)  trade restrictions.

Question 13

According to the principle of purchasing power parity, if a 20-ml bottle of Diet Coke costs €0.80 in Paris, £0.50 in London, and $1.10 in Chicago, the exchange rate between the:

Accepted Answer

A)  euro and the pound should be €0.40 = £1. 
B)  U.S. dollar and the euro should be $0.72 = €1. 
C)  U.S. dollar and the pound should be $0.45 = £1. 
D)  euro and the pound should be €1.60 = £1. 
A)  euro and the pound should be €0.40 = £1. 
B)  U.S. dollar and the euro should be $0.72 = €1. 
C)  U.S. dollar and the pound should be $0.45 = £1. 
D)  euro and the pound should be €1.60 = £1.

Question 14

The Cuban peso is on a fixed rate. If the government of Cuba uses foreign exchange controls to change the exchange rate of the peso from $1 to $1.20, the Cuban peso has been revalued.

Accepted Answer

A) True 
 B)False

Question 15

If Europeans begin to view the United States as a more attractive investment opportunity, the outcome will be a(n) _____ of the dollar, which will _____.

Accepted Answer

A)  depreciation; raise U.S. exports 
B)  appreciation; discourage Europeans from buying U.S. goods and services 
C)  depreciation; lower U.S. exports 
D)  depreciation; persuade Europeans to buy more U.S. products 
A)  depreciation; raise U.S. exports 
B)  appreciation; discourage Europeans from buying U.S. goods and services 
C)  depreciation; lower U.S. exports 
D)  depreciation; persuade Europeans to buy more U.S. products

Question 16

Which country switched from fixed to floating exchange rates? I. Britain
II) Argentina

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 17

In the absence of international capital flows, the equilibrium interest rate in the U.S. market for loanable funds is 3%, while in Germany it is 7%. International borrowing and lending between the United States and Germany could result in a common interest rate of _____% and _____.

Accepted Answer

A)  5; capital inflows to the United States matching the capital outflows from Germany 
B)  3; massive capital inflows from Germany to the United States 
C)  4; capital outflows from the United States matching the capital inflows to Germany 
D)  7; massive capital inflows from the United States to Germany 
A)  5; capital inflows to the United States matching the capital outflows from Germany 
B)  3; massive capital inflows from Germany to the United States 
C)  4; capital outflows from the United States matching the capital inflows to Germany 
D)  7; massive capital inflows from the United States to Germany

Question 18

A Japanese banker buys some newly issued U.S. Treasury bonds. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

Accepted Answer

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

Question 19

The pound sterling floats. If its exchange rate changes from $1.68 to $1.75, the pound has:

Accepted Answer

A)  depreciated. 
B)  been devalued. 
C)  appreciated. 
D)  been revalued. 
A)  depreciated. 
B)  been devalued. 
C)  appreciated. 
D)  been revalued.

Question 20

If the United States imports more goods from Japan than it exports to Japan, how will the difference be financed?

Accepted Answer

A)  U.S. consumers will borrow money from domestic banks. 
B)  The United States will buy more Japanese assets. 
C)  The United States will sell assets, generating a liability that obligates Americans to pay for those imports in the future. 
D)  The United States will sell assets to the Japanese, which would reduce its liabilities. 
A)  U.S. consumers will borrow money from domestic banks. 
B)  The United States will buy more Japanese assets. 
C)  The United States will sell assets, generating a liability that obligates Americans to pay for those imports in the future. 
D)  The United States will sell assets to the Japanese, which would reduce its liabilities.

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

China's exchange rate policy:

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The exchange rate for the dollar has changed from:

Foreign currencies are traded in the _____ market.

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. The change from D₁ to D₂ will occur, all other things being equal, if:

If the current account is in surplus, the financial account must also be in surplus.

A deficit in the current account means there will be:

The difference between a country's balance of payments on goods and services and the merchandise trade balance is that:

Capital tends to move from:

If foreign countries are increasing their demand for U.S. financial assets, then we can expect the U.S. dollar to _ and the current account balance to _, all other things equal.

The global savings glut of the early 2000s was caused primarily by:

According to the principle of purchasing power parity, if a 20-ml bottle of Diet Coke costs €0.80 in Paris, £0.50 in London, and $1.10 in Chicago, the exchange rate between the:

The Cuban peso is on a fixed rate. If the government of Cuba uses foreign exchange controls to change the exchange rate of the peso from $1 to $1.20, the Cuban peso has been revalued.

If Europeans begin to view the United States as a more attractive investment opportunity, the outcome will be a(n) _ of the dollar, which will _.

Which country switched from fixed to floating exchange rates? I. Britain II) Argentina

In the absence of international capital flows, the equilibrium interest rate in the U.S. market for loanable funds is 3%, while in Germany it is 7%. International borrowing and lending between the United States and Germany could result in a common interest rate of _% and _.

A Japanese banker buys some newly issued U.S. Treasury bonds. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

The pound sterling floats. If its exchange rate changes from $1.68 to $1.75, the pound has:

If the United States imports more goods from Japan than it exports to Japan, how will the difference be financed?

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

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

China's exchange rate policy:

Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. The exchange rate for the dollar has changed from:

Foreign currencies are traded in the _____ market.

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. The change from D1 to D2 will occur, all other things being equal, if:

If the current account is in surplus, the financial account must also be in surplus.

A deficit in the current account means there will be:

The difference between a country's balance of payments on goods and services and the merchandise trade balance is that:

Capital tends to move from:

If foreign countries are increasing their demand for U.S. financial assets, then we can expect the U.S. dollar to _____ and the current account balance to _____, all other things equal.

The global savings glut of the early 2000s was caused primarily by:

According to the principle of purchasing power parity, if a 20-ml bottle of Diet Coke costs €0.80 in Paris, £0.50 in London, and $1.10 in Chicago, the exchange rate between the:

The Cuban peso is on a fixed rate. If the government of Cuba uses foreign exchange controls to change the exchange rate of the peso from $1 to $1.20, the Cuban peso has been revalued.

If Europeans begin to view the United States as a more attractive investment opportunity, the outcome will be a(n) _____ of the dollar, which will _____.

Which country switched from fixed to floating exchange rates? I. Britain II) Argentina

In the absence of international capital flows, the equilibrium interest rate in the U.S. market for loanable funds is 3%, while in Germany it is 7%. International borrowing and lending between the United States and Germany could result in a common interest rate of _____% and _____.

A Japanese banker buys some newly issued U.S. Treasury bonds. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

The pound sterling floats. If its exchange rate changes from $1.68 to $1.75, the pound has:

If the United States imports more goods from Japan than it exports to Japan, how will the difference be financed?

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. The change from D₁ to D₂ will occur, all other things being equal, if:

If foreign countries are increasing their demand for U.S. financial assets, then we can expect the U.S. dollar to _ and the current account balance to _, all other things equal.

If Europeans begin to view the United States as a more attractive investment opportunity, the outcome will be a(n) _ of the dollar, which will _.

In the absence of international capital flows, the equilibrium interest rate in the U.S. market for loanable funds is 3%, while in Germany it is 7%. International borrowing and lending between the United States and Germany could result in a common interest rate of _% and _.

A Japanese banker buys some newly issued U.S. Treasury bonds. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.