Question 1

The sum of the current, capital and official settlements accounts is always zero.

Accepted Answer

A) True 
 B)False

Question 2

If U.S. imports increase, the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

Accepted Answer

A)  becomes negative. 
B)  becomes positive. 
C)  becomes negative or positive depending on the government budget deficit or surplus. 
D)  does not change. 
A)  becomes negative. 
B)  becomes positive. 
C)  becomes negative or positive depending on the government budget deficit or surplus. 
D)  does not change.

Question 3

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

Accepted Answer

A) True 
 B)False

Question 4

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

Accepted Answer

A)  rise. 
B)  fall. 
C)  stay constant. 
D)  could rise, fall or stay constant. 
A)  rise. 
B)  fall. 
C)  stay constant. 
D)  could rise, fall or stay constant.

Question 5

The term "foreign currency" refers to foreign
I. coins
II. notes
III. bank deposits

Accepted Answer

A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III 
A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, and III

Question 6

When the United States imports goods and services from the rest of the world

Accepted Answer

A)  the U.S. receives payments from the rest of the world. 
B)  the U.S. makes payments to the rest of the world. 
C)  the U.S inflation rate increases. 
D)  the U.S inflation rate decreases. 
A)  the U.S. receives payments from the rest of the world. 
B)  the U.S. makes payments to the rest of the world. 
C)  the U.S inflation rate increases. 
D)  the U.S inflation rate decreases.

Question 7

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has

Accepted Answer

A)  negative net exports of $125 billion. 
B)  positive net exports of $125 billion. 
C)  a government budget surplus. 
D)  Both answers B and C are correct. 
A)  negative net exports of $125 billion. 
B)  positive net exports of $125 billion. 
C)  a government budget surplus. 
D)  Both answers B and C are correct.

Question 8

Suppose that the price of an identical sport-utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Based on this information what will happen to the exchange rate between the United States and Canada?

Accepted Answer

A)  The value of the U.S. dollar will fall as U.S. residents purchase SUVs in Canada. 
B)  The value of the Canadian dollar will fall as Canadians purchase SUVs in the United States. 
C)  The exchange rate will stay the same because purchasing power parity already holds. 
D)  The value of the Canadian dollar will fall because Canadian prices are lower than U.S. prices. 
A)  The value of the U.S. dollar will fall as U.S. residents purchase SUVs in Canada. 
B)  The value of the Canadian dollar will fall as Canadians purchase SUVs in the United States. 
C)  The exchange rate will stay the same because purchasing power parity already holds. 
D)  The value of the Canadian dollar will fall because Canadian prices are lower than U.S. prices.

Question 9

Which of the following transactions is NOT recorded in the capital and financial account?

Accepted Answer

A)  foreign investment in the United States 
B)  U.S. investment abroad 
C)  statistical discrepancy 
D)  net interest income 
A)  foreign investment in the United States 
B)  U.S. investment abroad 
C)  statistical discrepancy 
D)  net interest income

Question 10

In the foreign exchange market, the higher the dollar's exchange rate, the

Accepted Answer

A)  larger the supply of dollars. 
B)  smaller the quantity supplied of dollars. 
C)  smaller the supply of dollars. 
D)  larger the quantity supplied of dollars. 
A)  larger the supply of dollars. 
B)  smaller the quantity supplied of dollars. 
C)  smaller the supply of dollars. 
D)  larger the quantity supplied of dollars.

Question 11

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

Accepted Answer

A)  (X - M ) + (T - G ) + (S - I ) = 0 
B)  (X - M ) = (T - G ) + (S - I ) 
C)  (T - G ) + (X - M ) = (S - I ) 
D)  (T - G ) = (X - M ) + (S - I ) 
A)  (X - M ) + (T - G ) + (S - I ) = 0 
B)  (X - M ) = (T - G ) + (S - I ) 
C)  (T - G ) + (X - M ) = (S - I ) 
D)  (T - G ) = (X - M ) + (S - I )

Question 12

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

Accepted Answer

A)  the U.S. interest rate differential falls. 
B)  the expected future exchange rate falls. 
C)  the exchange rate for the dollar falls. 
D)  None of the above answers is correct. 
A)  the U.S. interest rate differential falls. 
B)  the expected future exchange rate falls. 
C)  the exchange rate for the dollar falls. 
D)  None of the above answers is correct.

Question 13

The quantity of U.S. dollars demanded by foreign nations increases as

Accepted Answer

A)  U.S. residents purchase more foreign goods. 
B)  foreigners purchase more U.S. goods. 
C)  more U.S. residents travel abroad. 
D)  U.S. exports fall. 
A)  U.S. residents purchase more foreign goods. 
B)  foreigners purchase more U.S. goods. 
C)  more U.S. residents travel abroad. 
D)  U.S. exports fall.

Question 14

The current account records all transactions below EXCEPT for

Accepted Answer

A)  net exports of goods and services. 
B)  net interest income. 
C)  net foreign investment. 
D)  net transfers. 
A)  net exports of goods and services. 
B)  net interest income. 
C)  net foreign investment. 
D)  net transfers.

Question 15

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

Accepted Answer

A)  -$20 billion. 
B)  $20 billion. 
C)  always 0. 
D)  impossible to determine with the information given. 
A)  -$20 billion. 
B)  $20 billion. 
C)  always 0. 
D)  impossible to determine with the information given.

Question 16

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

Accepted Answer

A)  US dollars. 
B)  yuan, the Chinese currency. 
C)  international monetary credits. 
D)  euros, or any other third currency. 
A)  US dollars. 
B)  yuan, the Chinese currency. 
C)  international monetary credits. 
D)  euros, or any other third currency.

Question 17

The government sector balance is equal to

Accepted Answer

A)  net taxes minus government purchases of goods and services. 
B)  tariffs minus imports. 
C)  saving minus investment. 
D)  exports minus imports. 
A)  net taxes minus government purchases of goods and services. 
B)  tariffs minus imports. 
C)  saving minus investment. 
D)  exports minus imports.

Question 18

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the Japanese yen ________ against the U.S dollar and the Euro ________ against the U.S. dollar.

Accepted Answer

A)  appreciated; appreciated 
B)  depreciated; appreciated 
C)  depreciated; depreciated 
D)  appreciated; depreciated 
A)  appreciated; appreciated 
B)  depreciated; appreciated 
C)  depreciated; depreciated 
D)  appreciated; depreciated

Question 19

The current account balance is equal to

Accepted Answer

A)  net exports + net interest income + net transfers. 
B)  net exports - net interest income - net transfers. 
C)  net exports + net interest income - net transfers. 
D)  net interest income + net transfers - net exports. 
A)  net exports + net interest income + net transfers. 
B)  net exports - net interest income - net transfers. 
C)  net exports + net interest income - net transfers. 
D)  net interest income + net transfers - net exports.

Question 20

The law of demand for U.S. dollars in the foreign exchange market refers to the relationship between the

Accepted Answer

A)  exchange rate and the quantity of U.S. dollars demanded. 
B)  interest rate and the exchange rate. 
C)  interest rate and the quantity of U.S. dollars demanded. 
D)  U.S. price level and the exchange rate. 
A)  exchange rate and the quantity of U.S. dollars demanded. 
B)  interest rate and the exchange rate. 
C)  interest rate and the quantity of U.S. dollars demanded. 
D)  U.S. price level and the exchange rate.

The sum of the current, capital and official settlements accounts is always zero.

If U.S. imports increase, the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits

When the United States imports goods and services from the rest of the world

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has

Which of the following transactions is NOT recorded in the capital and financial account?

In the foreign exchange market, the higher the dollar's exchange rate, the

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

The quantity of U.S. dollars demanded by foreign nations increases as

The current account records all transactions below EXCEPT for

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

The government sector balance is equal to

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the Japanese yen against the U.S dollar and the Euro against the U.S. dollar.

The current account balance is equal to

The law of demand for U.S. dollars in the foreign exchange market refers to the relationship between the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

The sum of the current, capital and official settlements accounts is always zero.

If U.S. imports increase, the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

If the nominal exchange rate rises and price levels stay constant, the real exchange rate will

The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits

When the United States imports goods and services from the rest of the world

Hong Kong has imports of $1,130 billion and exports of $1,255 billion. Hong Kong definitely has

Which of the following transactions is NOT recorded in the capital and financial account?

In the foreign exchange market, the higher the dollar's exchange rate, the

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance. What relationship exists among these variables?

The demand for dollars in the foreign exchange market will increase (so that the demand curve shifts rightward) if

The quantity of U.S. dollars demanded by foreign nations increases as

The current account records all transactions below EXCEPT for

If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is

If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with

The government sector balance is equal to

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the Japanese yen ________ against the U.S dollar and the Euro ________ against the U.S. dollar.

The current account balance is equal to

The law of demand for U.S. dollars in the foreign exchange market refers to the relationship between the

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the Japanese yen against the U.S dollar and the Euro against the U.S. dollar.