Question 1

The difference between a country's exports and its imports of goods and services is known as the:

Accepted Answer

A)  trade balance. 
B)  balance of payments on goods and services. 
C)  balance of payments on current account. 
D)  balance of exchange. 
A)  trade balance. 
B)  balance of payments on goods and services. 
C)  balance of payments on current account. 
D)  balance of exchange.

Question 2

All countries must have either a fixed or floating exchange rate, since there are no possible compromises between the two policies.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions:  
-(Figure: The Loanable Funds Model in the U.S. Market) Refer to Figure: The Loanable Funds Model in the U.S. Market. If the actual interest rate is higher than 4% in the U.S. market, then the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to 
A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to

Question 4

The United States exports corn to other nations. 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)  from; financial 
C)  to; current 
D)  to; financial 
A)  from; current 
B)  from; financial 
C)  to; current 
D)  to; financial

Question 5

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

Accepted Answer

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

Question 6

Governments can use foreign exchange controls to help them fix the value of their currency.

Accepted Answer

A) True 
 B)False

Question 7

All other things equal, an expansionary monetary policy in Britain will decrease British interest rates and increase the demand for and decrease the supply of the pound sterling.

Accepted Answer

A) True 
 B)False

Question 8

A revaluation can help reduce an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 9

Scenario: Gizmovia 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 $0.40. If Gizmovia uses foreign exchange controls, it should require licenses to _____ gizmos and _____ dollars.

Accepted Answer

A)  buy; buy 
B)  buy; sell 
C)  sell; sell 
D)  sell; buy 
A)  buy; buy 
B)  buy; sell 
C)  sell; sell 
D)  sell; buy

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 movement from E2 to E1 in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

Accepted Answer

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

Question 11

A country has a floating exchange rate if the government lets the exchange rate go wherever the market may take it.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

The first country to adopt the euro was Great Britain.

Accepted Answer

A) True 
 B)False

Question 14

Which group would demand dollars in the foreign exchange market? I. Americans who want to buy U.S. goods, services, and assets
II) Americans who want to buy European goods, services, and assets
III) Europeans who want to buy U.S. goods, services, and assets

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 15

If the government wants to increase 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 16

The euro was devised in 1944.

Accepted Answer

A) True 
 B)False

Question 17

A recession in the United States could begin with our trading partners.

Accepted Answer

A) True 
 B)False

Question 18

The behavior of the financial accounts is determined in the international _____ market.

Accepted Answer

A)  goods and services 
B)  loanable funds 
C)  money 
D)  stock 
A)  goods and services 
B)  loanable funds 
C)  money 
D)  stock

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. What is the purchasing power parity of the pound?

Accepted Answer

A)  $5 
B)  $2.50 
C)  $1.25 
D)  $0.80 
A)  $5 
B)  $2.50 
C)  $1.25 
D)  $0.80

The difference between a country's exports and its imports of goods and services is known as the:

All countries must have either a fixed or floating exchange rate, since there are no possible compromises between the two policies.

The United States exports corn to other nations. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

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

Governments can use foreign exchange controls to help them fix the value of their currency.

All other things equal, an expansionary monetary policy in Britain will decrease British interest rates and increase the demand for and decrease the supply of the pound sterling.

A revaluation can help reduce an inflationary gap.

Scenario: Gizmovia 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 $0.40. If Gizmovia uses foreign exchange controls, it should require licenses to _ gizmos and _ dollars.

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 E₂ to E₁ in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

A country has a floating exchange rate if the government lets the exchange rate go wherever the market may take it.

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

The first country to adopt the euro was Great Britain.

Which group would demand dollars in the foreign exchange market? I. Americans who want to buy U.S. goods, services, and assets II) Americans who want to buy European goods, services, and assets III) Europeans who want to buy U.S. goods, services, and assets

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

The euro was devised in 1944.

A recession in the United States could begin with our trading partners.

The behavior of the financial accounts is determined in the international _____ market.

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

Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. What is the purchasing power parity of the pound?

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 difference between a country's exports and its imports of goods and services is known as the:

All countries must have either a fixed or floating exchange rate, since there are no possible compromises between the two policies.

The United States exports corn to other nations. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

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

Governments can use foreign exchange controls to help them fix the value of their currency.

All other things equal, an expansionary monetary policy in Britain will decrease British interest rates and increase the demand for and decrease the supply of the pound sterling.

A revaluation can help reduce an inflationary gap.

Scenario: Gizmovia 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 $0.40. If Gizmovia uses foreign exchange controls, it should require licenses to _____ gizmos and _____ dollars.

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 E2 to E1 in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

A country has a floating exchange rate if the government lets the exchange rate go wherever the market may take it.

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

The first country to adopt the euro was Great Britain.

Which group would demand dollars in the foreign exchange market? I. Americans who want to buy U.S. goods, services, and assets II) Americans who want to buy European goods, services, and assets III) Europeans who want to buy U.S. goods, services, and assets

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

The euro was devised in 1944.

A recession in the United States could begin with our trading partners.

The behavior of the financial accounts is determined in the international _____ market.

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

Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. What is the purchasing power parity of the pound?

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

The United States exports corn to other nations. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

Scenario: Gizmovia 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 $0.40. If Gizmovia uses foreign exchange controls, it should require licenses to _ gizmos and _ dollars.

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 E₂ to E₁ in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.