Question 1

Because of the accounting techniques used,the balance of payments shows that debits equal credits only if exports equal imports.

Accepted Answer

A) True 
 B)False

Question 2

When the international financial system operated under the gold standard,_____.

Accepted Answer

A) the currencies of most countries were convertible into gold 
B) all international transactions were financed with gold 
C) the price of gold was determined by the supply and demand for foreign exchange 
D) the quantity of money demanded was always the same 
E) there was very little inflation 
A) the currencies of most countries were convertible into gold 
B) all international transactions were financed with gold 
C) the price of gold was determined by the supply and demand for foreign exchange 
D) the quantity of money demanded was always the same 
E) there was very little inflation

Question 3

Exchange rates:

Accepted Answer

A) are always fixed between the currencies of two countries. 
B) fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied. 
C) fluctuate to equate imports and exports. 
D) fluctuate to equate interest rates in various countries. 
E) fluctuate according to agreements between the governments of various countries. 
A) are always fixed between the currencies of two countries. 
B) fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied. 
C) fluctuate to equate imports and exports. 
D) fluctuate to equate interest rates in various countries. 
E) fluctuate according to agreements between the governments of various countries.

Question 4

Foreign exchange rates tend toward equality around the world because of the actions of _____.

Accepted Answer

A) central banks 
B) stock markets 
C) commodity markets 
D) the World Bank 
E) arbitrageurs 
A) central banks 
B) stock markets 
C) commodity markets 
D) the World Bank 
E) arbitrageurs

Question 5

The current account records:

Accepted Answer

A) last year's flows of funds into and out of the country. 
B) the current flows of imports and exports of goods and services,net income earned by residents from foreign assets,and net transfer payments. 
C) all the foreign direct investment received by a country in a year. 
D) the purchase of financial assets,such as stocks and bonds,by the residents of a country in a year. 
E) the purchase of all real assets,such as land and housing by the citizens of a country in a year. 
A) last year's flows of funds into and out of the country. 
B) the current flows of imports and exports of goods and services,net income earned by residents from foreign assets,and net transfer payments. 
C) all the foreign direct investment received by a country in a year. 
D) the purchase of financial assets,such as stocks and bonds,by the residents of a country in a year. 
E) the purchase of all real assets,such as land and housing by the citizens of a country in a year.

Question 6

U.S.capital outflows occur when foreigners purchase U.S.assets.

Accepted Answer

A) True 
 B)False

Question 7

Since 1983,U.S.has typically run a financial account surplus.

Accepted Answer

A) True 
 B)False

Question 8

If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following will happen if country A's currency declines in value against other major currencies?

Accepted Answer

A) Country A's trade deficit will increase. 
B) Country A's trade deficit will be unaffected. 
C) Country A's trade deficit will decrease. 
D) Country A's products will become more expensive in foreign markets. 
E) Foreign goods will become cheaper in country A. 
A) Country A's trade deficit will increase. 
B) Country A's trade deficit will be unaffected. 
C) Country A's trade deficit will decrease. 
D) Country A's products will become more expensive in foreign markets. 
E) Foreign goods will become cheaper in country A.

Question 10

Which of the following would be represented as a debit in the U.S.balance of payments?

Accepted Answer

A) U.S.purchase of cars from Italy 
B) U.S.sale of beef to Israel 
C) Transfers received by the U.S.government from foreign governments 
D) Gifts received by U.S.residents from friends abroad 
E) Income received by U.S.residents from overseas investments 
A) U.S.purchase of cars from Italy 
B) U.S.sale of beef to Israel 
C) Transfers received by the U.S.government from foreign governments 
D) Gifts received by U.S.residents from friends abroad 
E) Income received by U.S.residents from overseas investments

Question 11

The statistical discrepancy:

Accepted Answer

A) is always positive but less than 1. 
B) is always negative and greater than −1. 
C) must be reduced to zero and eliminated from the balance of payments before the records become official. 
D) is a residual factor that indicates the net error in the balance of payments data. 
E) is a record of all transactions between residents of two countries over a specified period. 
A) is always positive but less than 1. 
B) is always negative and greater than −1. 
C) must be reduced to zero and eliminated from the balance of payments before the records become official. 
D) is a residual factor that indicates the net error in the balance of payments data. 
E) is a record of all transactions between residents of two countries over a specified period.

Question 12

If the U.S.dollar appreciates in the foreign exchange market,then:

Accepted Answer

A) American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans. 
B) American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans. 
C) more U.S.dollars will be required to buy a foreign currency. 
D) U.S.exports will increase. 
E) neither the price of U.S.exports nor the price of U.S.imports will change. 
A) American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans. 
B) American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans. 
C) more U.S.dollars will be required to buy a foreign currency. 
D) U.S.exports will increase. 
E) neither the price of U.S.exports nor the price of U.S.imports will change.

Question 13

The demand curve for foreign exchange:

Accepted Answer

A) slopes downward. 
B) slopes upward. 
C) is horizontal,because no individual country can influence the price of foreign exchange. 
D) is vertical,because no individual country can influence the price of foreign exchange. 
E) may slope downward or upward depending on the volume of imports and exports of the trading countries. 
A) slopes downward. 
B) slopes upward. 
C) is horizontal,because no individual country can influence the price of foreign exchange. 
D) is vertical,because no individual country can influence the price of foreign exchange. 
E) may slope downward or upward depending on the volume of imports and exports of the trading countries.

Question 14

The exchange rate is the price of a currency in terms of another currency for exchanges of goods and services but not for financial transactions.

Accepted Answer

A) True 
 B)False

Question 15

A rightward shift of the Mexican demand curve for U.S.dollars will:

Accepted Answer

A) decrease the price of dollars in terms of pesos. 
B) increase the value of pesos relative to dollars. 
C) make American goods less expensive in terms of pesos. 
D) make American goods more expensive in terms of pesos. 
E) make Mexican goods more expensive in terms of dollars. 
A) decrease the price of dollars in terms of pesos. 
B) increase the value of pesos relative to dollars. 
C) make American goods less expensive in terms of pesos. 
D) make American goods more expensive in terms of pesos. 
E) make Mexican goods more expensive in terms of dollars.

Question 16

A speculator in foreign exchange is a person who:

Accepted Answer

A) buys foreign currency,hoping to profit by selling it at a higher exchange rate at some later date. 
B) earns illegal profit by manipulating foreign exchange. 
C) causes differences in exchange rates in different geographic markets. 
D) simultaneously buys large amounts of a currency in one market and sells it in another market. 
E) takes no risks in foreign currency exchanges. 
A) buys foreign currency,hoping to profit by selling it at a higher exchange rate at some later date. 
B) earns illegal profit by manipulating foreign exchange. 
C) causes differences in exchange rates in different geographic markets. 
D) simultaneously buys large amounts of a currency in one market and sells it in another market. 
E) takes no risks in foreign currency exchanges.

Question 17

If Europe and the United States were the only two regions in the world,then U.S.government would buy euros to improve the U.S.balance of payments.

Accepted Answer

A) True 
 B)False

Question 18

One difference between arbitrageurs and speculators is that:

Accepted Answer

A) arbitrageurs buy and sell foreign exchange;speculators do not. 
B) speculators only buy foreign exchange but do not sell it. 
C) arbitrageurs take more risks than do speculators. 
D) speculators take more risks than do arbitrageurs. 
E) arbitrageurs buy foreign exchange in the hope that its value will increase. 
A) arbitrageurs buy and sell foreign exchange;speculators do not. 
B) speculators only buy foreign exchange but do not sell it. 
C) arbitrageurs take more risks than do speculators. 
D) speculators take more risks than do arbitrageurs. 
E) arbitrageurs buy foreign exchange in the hope that its value will increase.

Question 19

The gold standard:

Accepted Answer

A) has been in operation since the establishment of the Federal Reserve Board. 
B) has been in operation since shortly after World War I. 
C) has been in operation since the Bretton Woods agreement was signed. 
D) was in operation for about 35 years before World War I. 
E) was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S.dollar in 1971. 
A) has been in operation since the establishment of the Federal Reserve Board. 
B) has been in operation since shortly after World War I. 
C) has been in operation since the Bretton Woods agreement was signed. 
D) was in operation for about 35 years before World War I. 
E) was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S.dollar in 1971.

Question 20

The purchasing power parity (PPP)theory says that in the long run,the exchange rate between two currencies should move toward _____ the _____ in each country of an identical basket of internationally traded goods.

Accepted Answer

A) equalizing;cost 
B) minimizing;price 
C) maximizing;cost 
D) maximizing;price 
E) minimizing;cost 
A) equalizing;cost 
B) minimizing;price 
C) maximizing;cost 
D) maximizing;price 
E) minimizing;cost

Because of the accounting techniques used,the balance of payments shows that debits equal credits only if exports equal imports.

When the international financial system operated under the gold standard,_____.

Exchange rates:

Foreign exchange rates tend toward equality around the world because of the actions of _____.

The current account records:

U.S.capital outflows occur when foreigners purchase U.S.assets.

Since 1983,U.S.has typically run a financial account surplus.

If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Which of the following will happen if country A's currency declines in value against other major currencies?

Which of the following would be represented as a debit in the U.S.balance of payments?

The statistical discrepancy:

If the U.S.dollar appreciates in the foreign exchange market,then:

The demand curve for foreign exchange:

The exchange rate is the price of a currency in terms of another currency for exchanges of goods and services but not for financial transactions.

A rightward shift of the Mexican demand curve for U.S.dollars will:

A speculator in foreign exchange is a person who:

If Europe and the United States were the only two regions in the world,then U.S.government would buy euros to improve the U.S.balance of payments.

One difference between arbitrageurs and speculators is that:

The gold standard:

The purchasing power parity (PPP)theory says that in the long run,the exchange rate between two currencies should move toward _ the _ in each country of an identical basket of internationally traded goods.

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

Because of the accounting techniques used,the balance of payments shows that debits equal credits only if exports equal imports.

When the international financial system operated under the gold standard,_____.

Exchange rates:

Foreign exchange rates tend toward equality around the world because of the actions of _____.

The current account records:

U.S.capital outflows occur when foreigners purchase U.S.assets.

Since 1983,U.S.has typically run a financial account surplus.

If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Which of the following will happen if country A's currency declines in value against other major currencies?

Which of the following would be represented as a debit in the U.S.balance of payments?

The statistical discrepancy:

If the U.S.dollar appreciates in the foreign exchange market,then:

The demand curve for foreign exchange:

The exchange rate is the price of a currency in terms of another currency for exchanges of goods and services but not for financial transactions.

A rightward shift of the Mexican demand curve for U.S.dollars will:

A speculator in foreign exchange is a person who:

If Europe and the United States were the only two regions in the world,then U.S.government would buy euros to improve the U.S.balance of payments.

One difference between arbitrageurs and speculators is that:

The gold standard:

The purchasing power parity (PPP)theory says that in the long run,the exchange rate between two currencies should move toward _____ the _____ in each country of an identical basket of internationally traded goods.

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

The purchasing power parity (PPP)theory says that in the long run,the exchange rate between two currencies should move toward _ the _ in each country of an identical basket of internationally traded goods.