Question 1

Under the gold standard,gold discoveries in Alaska and South America led to severe deflation in the U.S.economy.

Accepted Answer

A) True 
 B)False

Question 2

The present international exchange rate system operates on the gold standard.

Accepted Answer

A) True 
 B)False

Question 3

When supply and demand analysis is used to study the exchange rate,foreign exchange is treated just like _____.

Accepted Answer

A) a normal good 
B) a debt 
C) fiat money 
D) commodity money 
E) an investment 
A) a normal good 
B) a debt 
C) fiat money 
D) commodity money 
E) an investment

Question 4

The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

Accepted Answer

A) True 
 B)False

Question 5

A leftward shift of a country's demand curve for foreign exchange will:

Accepted Answer

A) decrease the price of foreign exchange in the country. 
B) increase the price of foreign exchange in the country. 
C) decrease the value of its currency. 
D) make foreign goods more expensive in the country. 
E) make its goods cheaper in the foreign market. 
A) decrease the price of foreign exchange in the country. 
B) increase the price of foreign exchange in the country. 
C) decrease the value of its currency. 
D) make foreign goods more expensive in the country. 
E) make its goods cheaper in the foreign market.

Question 6

The purchasing power parity theory:

Accepted Answer

A) is more a predictor of a long-run tendency than of the day-to-day relationship between changes in the price level and the exchange rate. 
B) predicts that exchange rates between two currencies will adjust in the short run so that the price level is equal to the exchange rate between two countries. 
C) is more a predictor of a short-run phenomenon than of a long-run relationship between the price level and the exchange rate between two countries. 
D) is helpful in explaining long-run trends,even though trade barriers and central bank intervention may hinder the usefulness of the theory. 
E) tells us that a country's currency generally will appreciate if its inflation rate is higher than that of the rest of the world. 
A) is more a predictor of a long-run tendency than of the day-to-day relationship between changes in the price level and the exchange rate. 
B) predicts that exchange rates between two currencies will adjust in the short run so that the price level is equal to the exchange rate between two countries. 
C) is more a predictor of a short-run phenomenon than of a long-run relationship between the price level and the exchange rate between two countries. 
D) is helpful in explaining long-run trends,even though trade barriers and central bank intervention may hinder the usefulness of the theory. 
E) tells us that a country's currency generally will appreciate if its inflation rate is higher than that of the rest of the world.

Question 7

Which of the following statements defines trade balance?

Accepted Answer

A) The trade balance is the sum of the services balance,the current account balance,and the capital account balance. 
B) The trade balance is merchandise exports minus merchandise imports. 
C) The trade balance is the sum of the current account balance and the capital account balance. 
D) The trade balance is foreign purchases of domestic assets minus domestic purchases of foreign assets. 
E) The trade balance is the sum of the services balance and the capital account balance. 
A) The trade balance is the sum of the services balance,the current account balance,and the capital account balance. 
B) The trade balance is merchandise exports minus merchandise imports. 
C) The trade balance is the sum of the current account balance and the capital account balance. 
D) The trade balance is foreign purchases of domestic assets minus domestic purchases of foreign assets. 
E) The trade balance is the sum of the services balance and the capital account balance.

Question 8

The foreign exchange rate is:

Accepted Answer

A) an entry in the current account. 
B) the price of a foreign good in the world market. 
C) an entry in the capital account. 
D) an entry in the balance of trade. 
E) the cost of one currency in terms of another. 
A) an entry in the current account. 
B) the price of a foreign good in the world market. 
C) an entry in the capital account. 
D) an entry in the balance of trade. 
E) the cost of one currency in terms of another.

Question 9

The value of a country's exports is listed in its balance of payments account as a(n)_____.

Accepted Answer

A) credit 
B) debit 
C) payment 
D) investment 
E) unilateral transfer 
A) credit 
B) debit 
C) payment 
D) investment 
E) unilateral transfer

Question 10

A rightward shift of a country's demand curve for foreign exchange will:

Accepted Answer

A) decrease the price of foreign exchange in the country. 
B) decrease the value of its currency. 
C) increase the value of its currency. 
D) make foreign goods less expensive in the domestic market. 
E) make its goods more expensive in foreign markets. 
A) decrease the price of foreign exchange in the country. 
B) decrease the value of its currency. 
C) increase the value of its currency. 
D) make foreign goods less expensive in the domestic market. 
E) make its goods more expensive in foreign markets.

Question 11

Which of the following is not considered a unilateral transfer?

Accepted Answer

A) Income earned from foreign investments 
B) Foreign aid 
C) Personal gifts to friends or family abroad 
D) Institutional charitable donations 
E) Government transfers to foreign residents 
A) Income earned from foreign investments 
B) Foreign aid 
C) Personal gifts to friends or family abroad 
D) Institutional charitable donations 
E) Government transfers to foreign residents

Question 12

The Bretton Woods agreement established the gold standard.

Accepted Answer

A) True 
 B)False

Question 13

Under a floating rate system,exchange rates are determined by supply and demand in the foreign exchange market without government intervention.

Accepted Answer

A) True 
 B)False

Question 14

The exchange rate is:

Accepted Answer

A) the price of foreign exchange determined by the interaction of supply and demand. 
B) an interest rate for foreign loans determined by the interaction of supply and demand. 
C) fixed by each government separately. 
D) always fixed for any two currencies by the two nations involved,regardless of any agreements made with other nations. 
E) fixed by GATT. 
A) the price of foreign exchange determined by the interaction of supply and demand. 
B) an interest rate for foreign loans determined by the interaction of supply and demand. 
C) fixed by each government separately. 
D) always fixed for any two currencies by the two nations involved,regardless of any agreements made with other nations. 
E) fixed by GATT.

Question 15

Between 1917 and 1982,U.S.ran a financial account deficit.

Accepted Answer

A) True 
 B)False

Question 16

Devaluation of a domestic currency:

Accepted Answer

A) is also called revaluation. 
B) refers to an increase in a floating exchange rate. 
C) refers to a decrease in a floating exchange rate. 
D) refers to an increase in a fixed exchange rate. 
E) refers to a decrease in a fixed exchange rate. 
A) is also called revaluation. 
B) refers to an increase in a floating exchange rate. 
C) refers to a decrease in a floating exchange rate. 
D) refers to an increase in a fixed exchange rate. 
E) refers to a decrease in a fixed exchange rate.

Question 17

The merchandise trade balance:

Accepted Answer

A) reflects trade in intangibles like insurance and tourism. 
B) includes personal gifts to friends abroad. 
C) records the flow of financial assets like stocks and bonds. 
D) equals the value of imports in goods and services minus the value of exports in goods and services. 
E) equals the value of tangible products exported minus the value of tangible products imported. 
A) reflects trade in intangibles like insurance and tourism. 
B) includes personal gifts to friends abroad. 
C) records the flow of financial assets like stocks and bonds. 
D) equals the value of imports in goods and services minus the value of exports in goods and services. 
E) equals the value of tangible products exported minus the value of tangible products imported.

Question 18

Which of the following best describes circumstances surrounding the breakdown of the Bretton Woods system?

Accepted Answer

A) The United States was enjoying a persistent trade surplus. 
B) There was too much dependence on the dollar because no other country had a stable currency. 
C) Germany,with its strong currency,refused to defend the dollar. 
D) Speculators were betting on the depreciation of the U.S.dollar and they started selling dollars in the foreign exchange market. 
E) The member countries began restricting free trade by introducing tariffs. 
A) The United States was enjoying a persistent trade surplus. 
B) There was too much dependence on the dollar because no other country had a stable currency. 
C) Germany,with its strong currency,refused to defend the dollar. 
D) Speculators were betting on the depreciation of the U.S.dollar and they started selling dollars in the foreign exchange market. 
E) The member countries began restricting free trade by introducing tariffs.

Question 19

If the current account is in deficit,imports of goods and services exceed exports of goods and services,plus net unilateral transfers.

Accepted Answer

A) True 
 B)False

Question 20

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____.

Accepted Answer

A) speculators 
B) hedgers 
C) entrepreneurs 
D) arbitrageurs 
E) underwriters 
A) speculators 
B) hedgers 
C) entrepreneurs 
D) arbitrageurs 
E) underwriters

Under the gold standard,gold discoveries in Alaska and South America led to severe deflation in the U.S.economy.

The present international exchange rate system operates on the gold standard.

When supply and demand analysis is used to study the exchange rate,foreign exchange is treated just like _____.

The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

A leftward shift of a country's demand curve for foreign exchange will:

The purchasing power parity theory:

Which of the following statements defines trade balance?

The foreign exchange rate is:

The value of a country's exports is listed in its balance of payments account as a(n)_____.

A rightward shift of a country's demand curve for foreign exchange will:

Which of the following is not considered a unilateral transfer?

The Bretton Woods agreement established the gold standard.

Under a floating rate system,exchange rates are determined by supply and demand in the foreign exchange market without government intervention.

The exchange rate is:

Between 1917 and 1982,U.S.ran a financial account deficit.

Devaluation of a domestic currency:

The merchandise trade balance:

Which of the following best describes circumstances surrounding the breakdown of the Bretton Woods system?

If the current account is in deficit,imports of goods and services exceed exports of goods and services,plus net unilateral transfers.

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

Economic Development

Filters

Exam 18: International Finance

Under the gold standard,gold discoveries in Alaska and South America led to severe deflation in the U.S.economy.

The present international exchange rate system operates on the gold standard.

When supply and demand analysis is used to study the exchange rate,foreign exchange is treated just like _____.

The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

A leftward shift of a country's demand curve for foreign exchange will:

The purchasing power parity theory:

Which of the following statements defines trade balance?

The foreign exchange rate is:

The value of a country's exports is listed in its balance of payments account as a(n)_____.

A rightward shift of a country's demand curve for foreign exchange will:

Which of the following is not considered a unilateral transfer?

The Bretton Woods agreement established the gold standard.

Under a floating rate system,exchange rates are determined by supply and demand in the foreign exchange market without government intervention.

The exchange rate is:

Between 1917 and 1982,U.S.ran a financial account deficit.

Devaluation of a domestic currency:

The merchandise trade balance:

Which of the following best describes circumstances surrounding the breakdown of the Bretton Woods system?

If the current account is in deficit,imports of goods and services exceed exports of goods and services,plus net unilateral transfers.

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

Economic Development

Filters