Question 1

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance in the official settlements account?

Accepted Answer

A)  $405 billion 
B)  $62 billion 
C)  $99 billion 
D)  $37 billion 
A)  $405 billion 
B)  $62 billion 
C)  $99 billion 
D)  $37 billion

Question 2

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen currency and markets." (www.nytimes.com, October, 29, 2008) As a result, the ________ and demand curve for Icelandic krona shifted ________, holding all else the same.

Accepted Answer

A)  interest rate differential between U.S. and Icelandic interest rates increased; rightward 
B)  interest rate differential between U.S. and Icelandic interest rates decreased; leftward 
C)  dollar appreciated relative to the krona; rightward 
D)  value of U.S. exports to Iceland increased; leftward 
A)  interest rate differential between U.S. and Icelandic interest rates increased; rightward 
B)  interest rate differential between U.S. and Icelandic interest rates decreased; leftward 
C)  dollar appreciated relative to the krona; rightward 
D)  value of U.S. exports to Iceland increased; leftward

Question 3

Suppose $1 will buy 150 yen in January and 200 yen the following December. This change could have occurred if the

Accepted Answer

A)  demand curve for dollars shifted rightward. 
B)  demand curve for dollars shifted leftward. 
C)  supply curve of dollars shifted rightward. 
D)  demand curve for yen shifted rightward. 
A)  demand curve for dollars shifted rightward. 
B)  demand curve for dollars shifted leftward. 
C)  supply curve of dollars shifted rightward. 
D)  demand curve for yen shifted rightward.

Question 4

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely during that year

Accepted Answer

A)  it has a current account deficit. 
B)  it is a creditor nation. 
C)  it is a debtor nation. 
D)  it is a net lender. 
A)  it has a current account deficit. 
B)  it is a creditor nation. 
C)  it is a debtor nation. 
D)  it is a net lender.

Question 5

-The above table gives data for the nation of Sueland. What is the value of net exports?

Accepted Answer

A)  $43 billion 
B)  $234 billion 
C)  -$43 billion 
D)  $511 billion 
A)  $43 billion 
B)  $234 billion 
C)  -$43 billion 
D)  $511 billion

Question 6

Which of the following occurrences would NOT shift the demand curve for U.S. dollars in the foreign exchange market?

Accepted Answer

A)  an increase in the U.S. exchange rate 
B)  an increase in the expected future U.S. exchange rate 
C)  an increase in U.S. interest rates 
D)  an increase in foreign interest rates 
A)  an increase in the U.S. exchange rate 
B)  an increase in the expected future U.S. exchange rate 
C)  an increase in U.S. interest rates 
D)  an increase in foreign interest rates

Question 7

In the foreign exchange market, the supply curve for dollars slopes upwards because

Accepted Answer

A)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. 
B)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
C)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
D)  as the exchange rate rises, exports become cheaper and more dollars are supplied to pay for the exports. 
A)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. 
B)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
C)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
D)  as the exchange rate rises, exports become cheaper and more dollars are supplied to pay for the exports.

Question 8

In the foreign exchange market, which of the following results in a movement along the supply curve of dollars?

Accepted Answer

A)  a change in the expected future exchange rate 
B)  a change in the U.S. interest rate 
C)  a change in the current exchange rate 
D)  None of the above answers are correct. 
A)  a change in the expected future exchange rate 
B)  a change in the U.S. interest rate 
C)  a change in the current exchange rate 
D)  None of the above answers are correct.

Question 9

Net exports equals

Accepted Answer

A)  exports of goods and services minus imports of goods and services. 
B)  imports of goods and services minus exports of goods and services. 
C)  the government sector balance plus the private sector balance. 
D)  Both answers A and C are correct. 
A)  exports of goods and services minus imports of goods and services. 
B)  imports of goods and services minus exports of goods and services. 
C)  the government sector balance plus the private sector balance. 
D)  Both answers A and C are correct.

Question 10

If the value of a dollar rises in terms of yen, the dollar has ________ and the yen has ________.

Accepted Answer

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

Question 11

-In the above table, saving must be

Accepted Answer

A)  -$300 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  -$400 billion. 
A)  -$300 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  -$400 billion.

Question 12

If net exports increases, but neither government expenditure nor net taxes change, saving must increase.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

Accepted Answer

A)  the demand for dollars will increase. 
B)  the demand for dollars will decrease. 
C)  the demand for euros will increase. 
D)  None of the above answers is correct. 
A)  the demand for dollars will increase. 
B)  the demand for dollars will decrease. 
C)  the demand for euros will increase. 
D)  None of the above answers is correct.

Question 14

When a country has a negative current account, that country is

Accepted Answer

A)  borrowing from the rest of the world. 
B)  lending to the rest of the world. 
C)  running a government budget surplus. 
D)  None of the above is correct. 
A)  borrowing from the rest of the world. 
B)  lending to the rest of the world. 
C)  running a government budget surplus. 
D)  None of the above is correct.

Question 15

If there are equal rates of return between assets in two currencies, then there is

Accepted Answer

A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity. 
A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity.

Question 16

The real exchange rate is

Accepted Answer

A)  the relative price of U.S. produced goods to foreign produced goods. 
B)  the nominal exchange rate multiplied by the ratio of the foreign price level to the U.S. price level. 
C)  the money price of foreign produced goods relative to the money price of U.S. produced goods. 
D)  a measure of how much currency exchanges for a unit of another currency. 
A)  the relative price of U.S. produced goods to foreign produced goods. 
B)  the nominal exchange rate multiplied by the ratio of the foreign price level to the U.S. price level. 
C)  the money price of foreign produced goods relative to the money price of U.S. produced goods. 
D)  a measure of how much currency exchanges for a unit of another currency.

Question 17

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

Accepted Answer

A)  375 fish 
B)  -375 fish 
C)  25 fish 
D)  -25 fish 
A)  375 fish 
B)  -375 fish 
C)  25 fish 
D)  -25 fish

Question 18

If a country's central bank does not intervene in the foreign exchange market, the country has

Accepted Answer

A)  a crawling peg exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a flexible exchange rate policy. 
D)  no exchange rate policy. 
A)  a crawling peg exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a flexible exchange rate policy. 
D)  no exchange rate policy.

Question 19

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

Accepted Answer

A)  financial capital stops moving. 
B)  a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States. 
C)  investors expect the yen to appreciate against the dollar. 
D)  investors expect the yen to depreciate against the dollar. 
A)  financial capital stops moving. 
B)  a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States. 
C)  investors expect the yen to appreciate against the dollar. 
D)  investors expect the yen to depreciate against the dollar.

Question 20

Which international account is used to record payments for imports, receipts from exports, net interest paid abroad and net transfers?

Accepted Answer

A)  the capital and financial account 
B)  the current account 
C)  the official settlements account 
D)  the trade account 
A)  the capital and financial account 
B)  the current account 
C)  the official settlements account 
D)  the trade account

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance in the official settlements account?

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen currency and markets." (www.nytimes.com, October, 29, 2008) As a result, the and demand curve for Icelandic krona shifted , holding all else the same.

Suppose $1 will buy 150 yen in January and 200 yen the following December. This change could have occurred if the

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely during that year

-The above table gives data for the nation of Sueland. What is the value of net exports?

Which of the following occurrences would NOT shift the demand curve for U.S. dollars in the foreign exchange market?

In the foreign exchange market, the supply curve for dollars slopes upwards because

In the foreign exchange market, which of the following results in a movement along the supply curve of dollars?

Net exports equals

If the value of a dollar rises in terms of yen, the dollar has and the yen has .

-In the above table, saving must be

If net exports increases, but neither government expenditure nor net taxes change, saving must increase.

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

When a country has a negative current account, that country is

If there are equal rates of return between assets in two currencies, then there is

The real exchange rate is

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

If a country's central bank does not intervene in the foreign exchange market, the country has

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

Which international account is used to record payments for imports, receipts from exports, net interest paid abroad and net transfers?

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 above table shows some of the balance of payments accounts for Urland. What is Urland's balance in the official settlements account?

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen currency and markets." (www.nytimes.com, October, 29, 2008) As a result, the ________ and demand curve for Icelandic krona shifted ________, holding all else the same.

Suppose $1 will buy 150 yen in January and 200 yen the following December. This change could have occurred if the

If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely during that year

-The above table gives data for the nation of Sueland. What is the value of net exports?

Which of the following occurrences would NOT shift the demand curve for U.S. dollars in the foreign exchange market?

In the foreign exchange market, the supply curve for dollars slopes upwards because

In the foreign exchange market, which of the following results in a movement along the supply curve of dollars?

Net exports equals

If the value of a dollar rises in terms of yen, the dollar has ________ and the yen has ________.

-In the above table, saving must be

If net exports increases, but neither government expenditure nor net taxes change, saving must increase.

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

When a country has a negative current account, that country is

If there are equal rates of return between assets in two currencies, then there is

The real exchange rate is

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

If a country's central bank does not intervene in the foreign exchange market, the country has

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

Which international account is used to record payments for imports, receipts from exports, net interest paid abroad and net transfers?

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

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen currency and markets." (www.nytimes.com, October, 29, 2008) As a result, the and demand curve for Icelandic krona shifted , holding all else the same.

If the value of a dollar rises in terms of yen, the dollar has and the yen has .