Question 1

The relationship between a country's balance of payments on current account (CA) and its balance of payments on financial account (FA) is NOT described by:

Accepted Answer

A)  CA + FA = 0. 
B)  CA = FA. 
C)  CA = -FA. 
D)  FA = -CA. 
A)  CA + FA = 0. 
B)  CA = FA. 
C)  CA = -FA. 
D)  FA = -CA.

Question 2

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

Accepted Answer

A) True 
 B)False

Question 3

The real exchange rate between the U.S. dollar and the Canadian dollar will remain constant if an increase in the value of the U.S. dollar against the Canadian dollar is offset by:

Accepted Answer

A)  inflation in the United States. 
B)  inflation in Canada. 
C)  worldwide deflation. 
D)  inflation in the United States and in Canada. 
A)  inflation in the United States. 
B)  inflation in Canada. 
C)  worldwide deflation. 
D)  inflation in the United States and in Canada.

Question 4

If a country's currency depreciates, all other things equal, 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 5

If a government fixes the exchange rate above the market equilibrium rate, there will be a surplus of its currency.

Accepted Answer

A) True 
 B)False

Question 6

All other things unchanged, an increase in the value of the dollar against the euro _____ U.S. net exports and shifts the aggregate demand curve to the _____.

Accepted Answer

A)  increases; right 
B)  decreases; right 
C)  increases; left 
D)  decreases; left 
A)  increases; right 
B)  decreases; right 
C)  increases; left 
D)  decreases; left

Question 7

After the Bretton Woods agreement broke down in 1971, the United States and most industrialized countries adopted:

Accepted Answer

A)  the euro. 
B)  the bitcoin. 
C)  a system of fixed exchange rates. 
D)  a system of floating exchange rates. 
A)  the euro. 
B)  the bitcoin. 
C)  a system of fixed exchange rates. 
D)  a system of floating exchange rates.

Question 8

Use the following to answer questions:  
-(Table: International Transactions) Refer to Table: International Transactions. What additional capital inflows are needed to equilibrate the balance of payments?

Accepted Answer

A)  -$29,000 
B)  $20,000 
C)  $29,000 
D)  $80,000 
A)  -$29,000 
B)  $20,000 
C)  $29,000 
D)  $80,000

Question 9

A devaluation can help reduce shortages of domestic currency.

Accepted Answer

A) True 
 B)False

Question 10

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 flow of capital from Europe to the United States would cause a movement in this foreign exchange market that is best represented by the shift from:

Accepted Answer

A)  D2 to D1. 
B)  E2 to E1. 
C)  D1 to D2. 
D)  E1 to E2. 
A)  D2 to D1. 
B)  E2 to E1. 
C)  D1 to D2. 
D)  E1 to E2.

Question 11

Microsoft, a Seattle software company, purchases a new office building in Vancouver, Canada. 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; financial 
C)  to; current 
D)  from; financial 
A)  from; current 
B)  to; financial 
C)  to; current 
D)  from; financial

Question 12

If the U.S. dollar appreciates, we do NOT expect that:

Accepted Answer

A)  Americans will buy more foreign currency. 
B)  Americans will buy more goods from abroad. 
C)  U.S. exports to other countries will decline. 
D)  Americans will buy fewer goods from abroad. 
A)  Americans will buy more foreign currency. 
B)  Americans will buy more goods from abroad. 
C)  U.S. exports to other countries will decline. 
D)  Americans will buy fewer goods from abroad.

Question 13

The Japanese yen is a floating currency. If the exchange rate for the yen changes from $0.0098 to $0.01, the yen has appreciated.

Accepted Answer

A) True 
 B)False

Question 14

With a fixed exchange rate regime, monetary policy is:

Accepted Answer

A)  fully flexible. 
B)  limited in its ability to shift aggregate demand to the right. 
C)  limited in its ability to shift aggregate supply to the right. 
D)  independent of exchange rate issues. 
A)  fully flexible. 
B)  limited in its ability to shift aggregate demand to the right. 
C)  limited in its ability to shift aggregate supply to the right. 
D)  independent of exchange rate issues.

Question 15

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

Accepted Answer

A)  current account. 
B)  financial account. 
C)  universal exchange position. 
D)  statistical discrepancy. 
A)  current account. 
B)  financial account. 
C)  universal exchange position. 
D)  statistical discrepancy.

Question 16

Use the following to answer questions:  
-(Table: International Transactions) Refer to Table: International Transactions. The merchandise trade balance is:

Accepted Answer

A)  $51,000. 
B)  $48,000. 
C)  $46,000. 
D)  $2,000. 
A)  $51,000. 
B)  $48,000. 
C)  $46,000. 
D)  $2,000.

Question 17

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. The real exchange rate will change by the greatest amount when the U.S. inflation rate is _____ and the Indian inflation rate is _____.

Accepted Answer

A)  zero; zero 
B)  5%; 2% 
C)  2%; 12% 
D)  5%; 5% 
A)  zero; zero 
B)  5%; 2% 
C)  2%; 12% 
D)  5%; 5%

Question 18

If the government wants to decrease the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 19

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

Accepted Answer

A) True 
 B)False

Question 20

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

Accepted Answer

A)  the North American Free Trade Agreement. 
B)  a system of floating exchange rates. 
C)  a system of fixed exchange rates. 
D)  the Treaty of Ghent. 
A)  the North American Free Trade Agreement. 
B)  a system of floating exchange rates. 
C)  a system of fixed exchange rates. 
D)  the Treaty of Ghent.

The relationship between a country's balance of payments on current account (CA) and its balance of payments on financial account (FA) is NOT described by:

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

The real exchange rate between the U.S. dollar and the Canadian dollar will remain constant if an increase in the value of the U.S. dollar against the Canadian dollar is offset by:

If a country's currency depreciates, all other things equal, exports _ and imports _.

If a government fixes the exchange rate above the market equilibrium rate, there will be a surplus of its currency.

All other things unchanged, an increase in the value of the dollar against the euro _ U.S. net exports and shifts the aggregate demand curve to the _.

After the Bretton Woods agreement broke down in 1971, the United States and most industrialized countries adopted:

Use the following to answer questions: -(Table: International Transactions) Refer to Table: International Transactions. What additional capital inflows are needed to equilibrate the balance of payments?

A devaluation can help reduce shortages of domestic currency.

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 flow of capital from Europe to the United States would cause a movement in this foreign exchange market that is best represented by the shift from:

Microsoft, a Seattle software company, purchases a new office building in Vancouver, Canada. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

If the U.S. dollar appreciates, we do NOT expect that:

The Japanese yen is a floating currency. If the exchange rate for the yen changes from $0.0098 to $0.01, the yen has appreciated.

With a fixed exchange rate regime, monetary policy is:

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

Use the following to answer questions: -(Table: International Transactions) Refer to Table: International Transactions. The merchandise trade balance is:

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. The real exchange rate will change by the greatest amount when the U.S. inflation rate is _ and the Indian inflation rate is _.

If the government wants to decrease the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

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 relationship between a country's balance of payments on current account (CA) and its balance of payments on financial account (FA) is NOT described by:

Included in the financial account is the income U.S. residents earn on assets owned in other countries.

The real exchange rate between the U.S. dollar and the Canadian dollar will remain constant if an increase in the value of the U.S. dollar against the Canadian dollar is offset by:

If a country's currency depreciates, all other things equal, exports _____ and imports _____.

If a government fixes the exchange rate above the market equilibrium rate, there will be a surplus of its currency.

All other things unchanged, an increase in the value of the dollar against the euro _____ U.S. net exports and shifts the aggregate demand curve to the _____.

After the Bretton Woods agreement broke down in 1971, the United States and most industrialized countries adopted:

Use the following to answer questions: -(Table: International Transactions) Refer to Table: International Transactions. What additional capital inflows are needed to equilibrate the balance of payments?

A devaluation can help reduce shortages of domestic currency.

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 flow of capital from Europe to the United States would cause a movement in this foreign exchange market that is best represented by the shift from:

Microsoft, a Seattle software company, purchases a new office building in Vancouver, Canada. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

If the U.S. dollar appreciates, we do NOT expect that:

The Japanese yen is a floating currency. If the exchange rate for the yen changes from $0.0098 to $0.01, the yen has appreciated.

With a fixed exchange rate regime, monetary policy is:

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

Use the following to answer questions: -(Table: International Transactions) Refer to Table: International Transactions. The merchandise trade balance is:

If the government wants to decrease the value of its currency in foreign exchange markets, it can sell its domestic currency in the foreign exchange market.

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

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

If a country's currency depreciates, all other things equal, exports _ and imports _.

All other things unchanged, an increase in the value of the dollar against the euro _ U.S. net exports and shifts the aggregate demand curve to the _.

Microsoft, a Seattle software company, purchases a new office building in Vancouver, Canada. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.