Question 1

If the surplus in the capital account are greater than the deficit in the current account,then

Accepted Answer

A) the current account must be positive in the long-run. 
B) the current account must be negative in the long-run. 
C) exports must be less than imports. 
D) official reserve transactions must be negative. 
A) the current account must be positive in the long-run. 
B) the current account must be negative in the long-run. 
C) exports must be less than imports. 
D) official reserve transactions must be negative. D

Question 2

Which of the following statements is (are)correct?

Accepted Answer

A) Under a fixed exchange rate system,potential conflicts arise between the goals of internal balance and external balance. 
B) With a fixed exchange rate system,a central bank has to give up control over domestic interest rates but retains control over inflation. 
C) Countries may find that expansionary policies,which might be desired in order to reduce the unemployment rate,may lead to income levels that are too low to balance the trade account and could lead to balance of payments surpluses. 
D) Both a and c 
E) Both b and c 
A) Under a fixed exchange rate system,potential conflicts arise between the goals of internal balance and external balance. 
B) With a fixed exchange rate system,a central bank has to give up control over domestic interest rates but retains control over inflation. 
C) Countries may find that expansionary policies,which might be desired in order to reduce the unemployment rate,may lead to income levels that are too low to balance the trade account and could lead to balance of payments surpluses. 
D) Both a and c 
E) Both b and c A

Question 3

In a floating exchange rate system,an increase in the value of the exchange rate could be caused by

Accepted Answer

A) an increase in taxes. 
B) an decrease in government spending. 
C) a decrease in the domestic money supply. 
D) a decrease in exports. 
A) an increase in taxes. 
B) an decrease in government spending. 
C) a decrease in the domestic money supply. 
D) a decrease in exports. C

Question 4

What is a major advantage of flexible exchange rates?

Accepted Answer

A flexible exchange rate system will eli

Question 5

Capital outflows in the balance of payments accounts include

Accepted Answer

A) purchases of financial assets by U.S.residents. 
B) direct investments in foreign countries. 
C) indirect investments in foreign countries. 
D) purchases of U.S.real estate by foreigners. 
E) all of the above 
A) purchases of financial assets by U.S.residents. 
B) direct investments in foreign countries. 
C) indirect investments in foreign countries. 
D) purchases of U.S.real estate by foreigners. 
E) all of the above

Question 6

The statistical discrepancy is

Accepted Answer

A) also known as the "errors and omissions term." 
B) the amount that must be added to balance the total balance of payments to make it equal to zero. 
C) the adjusted amount to balance the capital account. 
D) the adjusted amount to balance the current account. 
E) Both a and b 
A) also known as the "errors and omissions term." 
B) the amount that must be added to balance the total balance of payments to make it equal to zero. 
C) the adjusted amount to balance the capital account. 
D) the adjusted amount to balance the current account. 
E) Both a and b

Question 7

A decline in the exchange rate means that

Accepted Answer

A) the price of foreign exchange has declined. 
B) foreign currency has appreciated while the dollar has depreciated. 
C) foreign currency has depreciated while the dollar has appreciated. 
D) either a or c 
A) the price of foreign exchange has declined. 
B) foreign currency has appreciated while the dollar has depreciated. 
C) foreign currency has depreciated while the dollar has appreciated. 
D) either a or c

Question 8

In the U.S.balance of payments,exports to Europe are recorded as a

Accepted Answer

A) a use of funds in the current account. 
B) negative item in the current account. 
C) capital inflow item. 
D) capital outflow item. 
E) None of the above 
A) a use of funds in the current account. 
B) negative item in the current account. 
C) capital inflow item. 
D) capital outflow item. 
E) None of the above

Question 9

Within a system of perfectly flexible exchange rates,an decrease in the United States demand for imports would result in a

Accepted Answer

A) rise in the exchange rate. 
B) fall in the exchange rate. 
C) balance of payments deficit. 
D) balance of payments surplus. 
A) rise in the exchange rate. 
B) fall in the exchange rate. 
C) balance of payments deficit. 
D) balance of payments surplus.

Question 10

One explanation for the fall in the value of the U.S.dollar since 2001is

Accepted Answer

A) the mix of an tight fiscal/tight monetary policy over the period. 
B) the relative weakness of the U.S.economy over the period. 
C) a higher degree of accommodation of supply shocks in the United States relative to our trading partners. 
D) the disintegration of the Bretton Woods system during these years. 
A) the mix of an tight fiscal/tight monetary policy over the period. 
B) the relative weakness of the U.S.economy over the period. 
C) a higher degree of accommodation of supply shocks in the United States relative to our trading partners. 
D) the disintegration of the Bretton Woods system during these years.

Question 11

The exchange rate between the dollar and the euro is

Accepted Answer

A) the price of European goods relative to U.S.goods. 
B) the price of U.S.goods relative to European goods. 
C) the number of euros you get for lending one dollar to a European for a year. 
D) the number of euros you get for one dollar. 
A) the price of European goods relative to U.S.goods. 
B) the price of U.S.goods relative to European goods. 
C) the number of euros you get for lending one dollar to a European for a year. 
D) the number of euros you get for one dollar.

Question 12

To maintain a fixed exchange rate,when the exchange rate moves above the target level,the central bank must

Accepted Answer

A) sell foreign currency from reserves. 
B) buy foreign currency. 
C) raise taxes. 
D) raise government spending. 
E) pass a law that increases the exchange rate. 
A) sell foreign currency from reserves. 
B) buy foreign currency. 
C) raise taxes. 
D) raise government spending. 
E) pass a law that increases the exchange rate.

Question 13

A supply of foreign exchange occurs in the United States when

Accepted Answer

A) a U.S.citizen wants sells stock on a European stock exchange. 
B) the United States exports steel to Japan. 
C) United States citizens travel abroad. 
D) All of the above 
A) a U.S.citizen wants sells stock on a European stock exchange. 
B) the United States exports steel to Japan. 
C) United States citizens travel abroad. 
D) All of the above

Question 14

An advantage of a flexible exchange rate system relative to a fixed system is that in a flexible rate system

Accepted Answer

A) currency speculation will be reduced. 
B) balance of payments surpluses and deficits can be dealt with using fiscal policy,not monetary policy. 
C) inflation will be minimized by the "discipline of the balance of payments." 
D) the price of imported goods will be kept relatively low. 
E) none of the above. 
A) currency speculation will be reduced. 
B) balance of payments surpluses and deficits can be dealt with using fiscal policy,not monetary policy. 
C) inflation will be minimized by the "discipline of the balance of payments." 
D) the price of imported goods will be kept relatively low. 
E) none of the above.

Question 15

The current account in a nation's balance of payments accounts includes

Accepted Answer

A) exports of U.S.computers 
B) imports of German automobiles. 
C) purchases of foreign stocks. 
D) Both a and b 
E) All of the above 
A) exports of U.S.computers 
B) imports of German automobiles. 
C) purchases of foreign stocks. 
D) Both a and b 
E) All of the above

Question 16

A current account deficit in a nation's balance of payments accounts implies that

Accepted Answer

A) imports are equal to exports. 
B) exports exceed imports. 
C) expenditures are more than income. 
D) income is more than expenditures. 
A) imports are equal to exports. 
B) exports exceed imports. 
C) expenditures are more than income. 
D) income is more than expenditures.

Question 17

Assume that the fixed exchange rate system of 1.1 euros = 1 dollar is below the equilibrium exchange rate of 1.3 euros = 1 dollar in a flexible exchange rate system.Then,at the fixed exchange rate,the dollar would be

Accepted Answer

A) undervalued and the euro would be overvalued. 
B) overvalued and the euro would be undervalued. 
C) revalued and the euro would be devalued. 
D) depreciated and the euro would be appreciated. 
A) undervalued and the euro would be overvalued. 
B) overvalued and the euro would be undervalued. 
C) revalued and the euro would be devalued. 
D) depreciated and the euro would be appreciated.

Question 18

Can a central bank control domestic interest rates and fix their exchange rate at the same time? Explain,focusing on the implications for the use of stabilization policy.

Accepted Answer

No.To fix an exchange rate,a central ban

Question 19

A system of exchange rate determination with no central bank intervention is a

Accepted Answer

A) fixed exchange rate system. 
B) flexible exchange rate system. 
C) floating exchange rate system. 
D) either a flexible or a floating exchange rate system. 
A) fixed exchange rate system. 
B) flexible exchange rate system. 
C) floating exchange rate system. 
D) either a flexible or a floating exchange rate system.

Question 20

Capital outflows in the balance of payments accounts include

Accepted Answer

A) the sale of financial assets by U.S.residents to foreign citizens. 
B) direct investments in the U.S.by foreign corporations. 
C) indirect investments in the U.S.by foreign corporations. 
D) purchases of U.S.government bonds by foreigners. 
A) the sale of financial assets by U.S.residents to foreign citizens. 
B) direct investments in the U.S.by foreign corporations. 
C) indirect investments in the U.S.by foreign corporations. 
D) purchases of U.S.government bonds by foreigners.

If the surplus in the capital account are greater than the deficit in the current account,then

Which of the following statements is (are)correct?

In a floating exchange rate system,an increase in the value of the exchange rate could be caused by

What is a major advantage of flexible exchange rates?

Capital outflows in the balance of payments accounts include

The statistical discrepancy is

A decline in the exchange rate means that

In the U.S.balance of payments,exports to Europe are recorded as a

Within a system of perfectly flexible exchange rates,an decrease in the United States demand for imports would result in a

One explanation for the fall in the value of the U.S.dollar since 2001is

The exchange rate between the dollar and the euro is

To maintain a fixed exchange rate,when the exchange rate moves above the target level,the central bank must

A supply of foreign exchange occurs in the United States when

An advantage of a flexible exchange rate system relative to a fixed system is that in a flexible rate system

The current account in a nation's balance of payments accounts includes

A current account deficit in a nation's balance of payments accounts implies that

Assume that the fixed exchange rate system of 1.1 euros = 1 dollar is below the equilibrium exchange rate of 1.3 euros = 1 dollar in a flexible exchange rate system.Then,at the fixed exchange rate,the dollar would be

Can a central bank control domestic interest rates and fix their exchange rate at the same time? Explain,focusing on the implications for the use of stabilization policy.

A system of exchange rate determination with no central bank intervention is a

Capital outflows in the balance of payments accounts include

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 14: Exchange Rates and the International Monetary System

If the surplus in the capital account are greater than the deficit in the current account,then

Which of the following statements is (are)correct?

In a floating exchange rate system,an increase in the value of the exchange rate could be caused by

What is a major advantage of flexible exchange rates?

Capital outflows in the balance of payments accounts include

The statistical discrepancy is

A decline in the exchange rate means that

In the U.S.balance of payments,exports to Europe are recorded as a

Within a system of perfectly flexible exchange rates,an decrease in the United States demand for imports would result in a

One explanation for the fall in the value of the U.S.dollar since 2001is

The exchange rate between the dollar and the euro is

To maintain a fixed exchange rate,when the exchange rate moves above the target level,the central bank must

A supply of foreign exchange occurs in the United States when

An advantage of a flexible exchange rate system relative to a fixed system is that in a flexible rate system

The current account in a nation's balance of payments accounts includes

A current account deficit in a nation's balance of payments accounts implies that

Assume that the fixed exchange rate system of 1.1 euros = 1 dollar is below the equilibrium exchange rate of 1.3 euros = 1 dollar in a flexible exchange rate system.Then,at the fixed exchange rate,the dollar would be

Can a central bank control domestic interest rates and fix their exchange rate at the same time? Explain,focusing on the implications for the use of stabilization policy.

A system of exchange rate determination with no central bank intervention is a

Capital outflows in the balance of payments accounts include

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Optimal Monetary Policy

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters