Question 1

A floating 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 2

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 3

If the pound sterling appreciates against the dollar:

Accepted Answer

A)  British imports and exports have become more expensive. 
B)  U.S. imports and exports have become more expensive. 
C)  British imports and exports have become less expensive. 
D)  British exports have become more expensive but the price of U.S. exports to Britain has fallen. 
A)  British imports and exports have become more expensive. 
B)  U.S. imports and exports have become more expensive. 
C)  British imports and exports have become less expensive. 
D)  British exports have become more expensive but the price of U.S. exports to Britain has fallen.

Question 4

Which group would supply 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 5

"Foreign exchange controls" refers to the:

Accepted Answer

A)  fixed exchange rate system maintained by a country. 
B)  restrictions imposed by a country on the amount of foreign exchange that its central bank can hold. 
C)  system of a common currency used by several countries, such as the euro. 
D)  licensing systems that limit the rights of individuals to buy foreign currency. 
A)  fixed exchange rate system maintained by a country. 
B)  restrictions imposed by a country on the amount of foreign exchange that its central bank can hold. 
C)  system of a common currency used by several countries, such as the euro. 
D)  licensing systems that limit the rights of individuals to buy foreign currency.

Question 6

Foreign exchange controls may distort incentives for international trade.

Accepted Answer

A) True 
 B)False

Question 7

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

Accepted Answer

A) True 
 B)False

Question 8

A revaluation _____ exports and _____ imports.

Accepted Answer

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

Question 9

Which group would demand euros 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 10

The difference between a country's exports and imports of goods alone (not including services) is the:

Accepted Answer

A)  merchandise trade balance. 
B)  balance of payments on good and services. 
C)  balance of payments on current account. 
D)  current account. 
A)  merchandise trade balance. 
B)  balance of payments on good and services. 
C)  balance of payments on current account. 
D)  current account.

Question 11

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 outflows 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 12

When a currency depreciates, 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 13

The Bretton Woods agreement was abandoned in the early 1990s.

Accepted Answer

A) True 
 B)False

Question 14

Capital tends to:

Accepted Answer

A)  flow toward countries with high political risk. 
B)  flow toward countries with low political risk. 
C)  ignore political risk and focus on returns. 
D)  ignore political risk in the current time frame. 
A)  flow toward countries with high political risk. 
B)  flow toward countries with low political risk. 
C)  ignore political risk and focus on returns. 
D)  ignore political risk in the current time frame.

Question 15

As the balance of payments in the financial account_____, the balance of payments on current account increases and the U.S. dollar _____.

Accepted Answer

A)  increases; depreciates 
B)  decreases; depreciates 
C)  increases; appreciates 
D)  decreases; appreciates 
A)  increases; depreciates 
B)  decreases; depreciates 
C)  increases; appreciates 
D)  decreases; appreciates

Question 16

A reduction in the value of a floating currency is called a depreciation.

Accepted Answer

A) True 
 B)False

Question 17

Devaluation is reduction in the:

Accepted Answer

A)  value of a currency due to inflation. 
B)  value of a currency in a floating exchange rate system. 
C)  value of a currency in a fixed exchange rate system. 
D)  rate of inflation of a country. 
A)  value of a currency due to inflation. 
B)  value of a currency in a floating exchange rate system. 
C)  value of a currency in a fixed exchange rate system. 
D)  rate of inflation of a country.

Question 18

Suppose that a Ford costs $20,000 in the United States and £10,000 in Britain. Purchasing power parity is an exchange rate of £2 per dollar.

Accepted Answer

A) True 
 B)False

Question 19

Foreign exchange reserves are: I. stocks of foreign currency.
II) gold and silver.
III) bonds of foreign governments.

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 20

If the exchange rate is 8 yuan per U.S. dollar, the U.S. price index is 145, and the Chinese price index is 206, the real exchange rate is _____ yuan.

Accepted Answer

A)  11.36 
B)  7.62 
C)  5.63 
D)  0.08 
A)  11.36 
B)  7.62 
C)  5.63 
D)  0.08

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

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

If the pound sterling appreciates against the dollar:

Which group would supply 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

"Foreign exchange controls" refers to the:

Foreign exchange controls may distort incentives for international trade.

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

A revaluation _ exports and _ imports.

Which group would demand euros 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

The difference between a country's exports and imports of goods alone (not including services) is the:

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

The Bretton Woods agreement was abandoned in the early 1990s.

Capital tends to:

As the balance of payments in the financial account_, the balance of payments on current account increases and the U.S. dollar _.

A reduction in the value of a floating currency is called a depreciation.

Devaluation is reduction in the:

Suppose that a Ford costs $20,000 in the United States and £10,000 in Britain. Purchasing power parity is an exchange rate of £2 per dollar.

Foreign exchange reserves are: I. stocks of foreign currency. II) gold and silver. III) bonds of foreign governments.

If the exchange rate is 8 yuan per U.S. dollar, the U.S. price index is 145, and the Chinese price index is 206, the real exchange rate is _____ yuan.

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

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

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

If the pound sterling appreciates against the dollar:

Which group would supply 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

"Foreign exchange controls" refers to the:

Foreign exchange controls may distort incentives for international trade.

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

A revaluation _____ exports and _____ imports.

Which group would demand euros 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

The difference between a country's exports and imports of goods alone (not including services) is the:

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

The Bretton Woods agreement was abandoned in the early 1990s.

Capital tends to:

As the balance of payments in the financial account_____, the balance of payments on current account increases and the U.S. dollar _____.

A reduction in the value of a floating currency is called a depreciation.

Devaluation is reduction in the:

Suppose that a Ford costs $20,000 in the United States and £10,000 in Britain. Purchasing power parity is an exchange rate of £2 per dollar.

Foreign exchange reserves are: I. stocks of foreign currency. II) gold and silver. III) bonds of foreign governments.

If the exchange rate is 8 yuan per U.S. dollar, the U.S. price index is 145, and the Chinese price index is 206, the real exchange rate is _____ yuan.

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

A revaluation _ exports and _ imports.

As the balance of payments in the financial account_, the balance of payments on current account increases and the U.S. dollar _.