Question 1

An increase in U.S.official reserve assets is entered in the U.S.balance of payments accounts as a

Accepted Answer

A) credit. 
B) debit. 
C) current account item. 
D) None of the above 
A) credit. 
B) debit. 
C) current account item. 
D) None of the above

Question 2

A trade surplus could be balanced by all of the following except

Accepted Answer

A) borrowing from domestic citizens. 
B) selling domestic assets to foreigners. 
C) borrowing from foreigners. 
D) selling foreign assets already owned by U.S.citizens to foreigners. 
A) borrowing from domestic citizens. 
B) selling domestic assets to foreigners. 
C) borrowing from foreigners. 
D) selling foreign assets already owned by U.S.citizens to foreigners.

Question 3

The higher the exchange rate,the

Accepted Answer

A) the lower the dollar cost of imported goods and the higher the demand for foreign exchange. 
B) higher the dollar cost of imported goods and the lower the demand for foreign exchange. 
C) higher both the dollar cost of imported goods and the demand for foreign exchange. 
D) the lower both the dollar cost of imported goods and the demand for foreign exchange. 
A) the lower the dollar cost of imported goods and the higher the demand for foreign exchange. 
B) higher the dollar cost of imported goods and the lower the demand for foreign exchange. 
C) higher both the dollar cost of imported goods and the demand for foreign exchange. 
D) the lower both the dollar cost of imported goods and the demand for foreign exchange.

Question 4

Assuming a flexible exchange rate,then an expansionary monetary policy in the foreign exchange market will shift

Accepted Answer

A) the demand curve for foreign exchange to the right 
B) the demand curve for foreign exchange to the right and the supply curve of foreign exchange to the left. 
C) both the demand curve for foreign exchange and the supply curve of foreign exchange to the right. 
D) both the demand curve for foreign exchange to the left. 
E) none of the above. 
A) the demand curve for foreign exchange to the right 
B) the demand curve for foreign exchange to the right and the supply curve of foreign exchange to the left. 
C) both the demand curve for foreign exchange and the supply curve of foreign exchange to the right. 
D) both the demand curve for foreign exchange to the left. 
E) none of the above.

Question 5

In a system of flexible exchange rates,a reduction in the money supply will cause

Accepted Answer

A) a rise in the value of the dollar relative to foreign currencies. 
B) a fall in the value of the dollar relative to foreign currencies. 
C) no change in the value of the dollar relative to foreign currencies. 
D) a change in the value of the dollar relative to foreign currencies but the direction of the change is uncertain. 
A) a rise in the value of the dollar relative to foreign currencies. 
B) a fall in the value of the dollar relative to foreign currencies. 
C) no change in the value of the dollar relative to foreign currencies. 
D) a change in the value of the dollar relative to foreign currencies but the direction of the change is uncertain.

Question 6

What is the main cost of maintaining a fixed exchange rate? Provide two reasons,then,why countries fix their exchange rates.

Accepted Answer

The cost of maintaining a fixed exchange

Question 7

Assume that the fixed exchange rate system of 100 pesos = 1 dollar is above the equilibrium exchange rate of 90 pesos= 1 dollar in a flexible exchange rate system.Then the dollar would be

Accepted Answer

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

Question 8

An decrease in domestic savings

Accepted Answer

A) decreases foreign borrowing. 
B) will improve the trade balance. 
C) will increase exports. 
D) will increase foreign borrowing. 
A) decreases foreign borrowing. 
B) will improve the trade balance. 
C) will increase exports. 
D) will increase foreign borrowing.

Question 9

To maintain a fixed exchange rate,in response to an increase in the government budget deficit 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 10

The United States balance of payments accounts

Accepted Answer

A) records all earnings from the foreign activities of U.S.residents. 
B) records all expenditures of U.S.citizens' abroad. 
C) records all earnings from the foreign activities of foreign governments. 
D) Both a and b 
E) All of the above 
A) records all earnings from the foreign activities of U.S.residents. 
B) records all expenditures of U.S.citizens' abroad. 
C) records all earnings from the foreign activities of foreign governments. 
D) Both a and b 
E) All of the above

Question 11

The current international monetary system is best described as a

Accepted Answer

A) fixed rate system. 
B) completely flexible rate system. 
C) gold standard. 
D) mercantilist system. 
E) managed floating rate system. 
A) fixed rate system. 
B) completely flexible rate system. 
C) gold standard. 
D) mercantilist system. 
E) managed floating rate system.

Question 12

What impact does an increase in the money supply have on a countries exchange rate in a floating exchange rate system? Provide a graph of the foreign exchange market to illustrate.

Accepted Answer

An increase in the money suppl

Question 13

The Bretton Woods system

Accepted Answer

A) established fixed par values for currencies in terms of gold. 
B) was to be a system of adjustable pegs to the dollar. 
C) expected countries with persistent surpluses to devalue their currencies. 
D) was after the Great Depression in order to end the downturn. 
A) established fixed par values for currencies in terms of gold. 
B) was to be a system of adjustable pegs to the dollar. 
C) expected countries with persistent surpluses to devalue their currencies. 
D) was after the Great Depression in order to end the downturn.

Question 14

Capital inflows 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.government bonds by foreigners. 
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.government bonds by foreigners.

Question 15

In a floating exchange rate system,when national savings falls then the equilibrium exchange rate

Accepted Answer

A) falls and the trade balance falls. 
B) falls and the trade balance rises. 
C) rises and the trade balance falls. 
D) rises and the trade balance rises. 
A) falls and the trade balance falls. 
B) falls and the trade balance rises. 
C) rises and the trade balance falls. 
D) rises and the trade balance rises.

Question 16

Which of the following are advantages of greater exchange rate flexibility?

Accepted Answer

A) The alleviation of potential conflicts that arise between the internal balance and the external balance. 
B) The insulation of the domestic economy from economic shocks. 
C) An expansion abroad would have contractionary effects on the domestic economy. 
D) Both a and b 
E) Both a and c 
A) The alleviation of potential conflicts that arise between the internal balance and the external balance. 
B) The insulation of the domestic economy from economic shocks. 
C) An expansion abroad would have contractionary effects on the domestic economy. 
D) Both a and b 
E) Both a and c

Question 17

In a floating exchange rate system,an appreciation of the exchange rate could be caused by

Accepted Answer

A) a cut in taxes. 
B) a decrease in government spending. 
C) an increase in the domestic money supply. 
D) a decrease in the foreign demand for U.S.goods. 
A) a cut in taxes. 
B) a decrease in government spending. 
C) an increase in the domestic money supply. 
D) a decrease in the foreign demand for U.S.goods.

An increase in U.S.official reserve assets is entered in the U.S.balance of payments accounts as a

A trade surplus could be balanced by all of the following except

The higher the exchange rate,the

Assuming a flexible exchange rate,then an expansionary monetary policy in the foreign exchange market will shift

In a system of flexible exchange rates,a reduction in the money supply will cause

What is the main cost of maintaining a fixed exchange rate? Provide two reasons,then,why countries fix their exchange rates.

Assume that the fixed exchange rate system of 100 pesos = 1 dollar is above the equilibrium exchange rate of 90 pesos= 1 dollar in a flexible exchange rate system.Then the dollar would be

An decrease in domestic savings

To maintain a fixed exchange rate,in response to an increase in the government budget deficit the central bank must

The United States balance of payments accounts

The current international monetary system is best described as a

What impact does an increase in the money supply have on a countries exchange rate in a floating exchange rate system? Provide a graph of the foreign exchange market to illustrate.

The Bretton Woods system

Capital inflows in the balance of payments accounts include

In a floating exchange rate system,when national savings falls then the equilibrium exchange rate

Which of the following are advantages of greater exchange rate flexibility?

In a floating exchange rate system,an appreciation of the exchange rate could be caused by

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

An increase in U.S.official reserve assets is entered in the U.S.balance of payments accounts as a

A trade surplus could be balanced by all of the following except

The higher the exchange rate,the

Assuming a flexible exchange rate,then an expansionary monetary policy in the foreign exchange market will shift

In a system of flexible exchange rates,a reduction in the money supply will cause

What is the main cost of maintaining a fixed exchange rate? Provide two reasons,then,why countries fix their exchange rates.

Assume that the fixed exchange rate system of 100 pesos = 1 dollar is above the equilibrium exchange rate of 90 pesos= 1 dollar in a flexible exchange rate system.Then the dollar would be

An decrease in domestic savings

To maintain a fixed exchange rate,in response to an increase in the government budget deficit the central bank must

The United States balance of payments accounts

The current international monetary system is best described as a

What impact does an increase in the money supply have on a countries exchange rate in a floating exchange rate system? Provide a graph of the foreign exchange market to illustrate.

The Bretton Woods system

Capital inflows in the balance of payments accounts include

In a floating exchange rate system,when national savings falls then the equilibrium exchange rate

Which of the following are advantages of greater exchange rate flexibility?

In a floating exchange rate system,an appreciation of the exchange rate could be caused by

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