Question 1

A small country is an international borrower if its real interest rate without foreign borrowing is ________ the world real interest rate.

Accepted Answer

A)  higher than 
B)  equal to 
C)  lower than 
D)  not comparable to 
A)  higher than 
B)  equal to 
C)  lower than 
D)  not comparable to

Question 2

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

Accepted Answer

Three factors are the exchange rate, the

Question 3

According to purchasing power parity, the foreign exchange market will

Accepted Answer

A)  undervalue the dollar if inflation in the United States is greater than it is elsewhere. 
B)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
C)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
D)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations. 
A)  undervalue the dollar if inflation in the United States is greater than it is elsewhere. 
B)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
C)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
D)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations.

Question 4

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

Accepted Answer

A)  -$146 billion 
B)  -$183 billion 
C)  -$99 billion 
D)  $142 billion 
A)  -$146 billion 
B)  -$183 billion 
C)  -$99 billion 
D)  $142 billion

Question 5

When the value of one currency falls relative to another currency, the exchange rate for the first currency has

Accepted Answer

A)  depreciated. 
B)  appreciated. 
C)  demanded. 
D)  revalued. 
A)  depreciated. 
B)  appreciated. 
C)  demanded. 
D)  revalued.

Question 6

A debtor nation means a nation

Accepted Answer

A)  whose imports exceeds its exports. 
B)  whose current account is less than its capital account. 
C)  who-through its history-has invested less in the rest of the world than other countries have invested in it. 
D)  whose current lending to the rest of the world exceeds its borrowing from the rest of the world. 
A)  whose imports exceeds its exports. 
B)  whose current account is less than its capital account. 
C)  who-through its history-has invested less in the rest of the world than other countries have invested in it. 
D)  whose current lending to the rest of the world exceeds its borrowing from the rest of the world.

Question 7

When the demand for a currency permanently increases, that nation's central bank can maintain its fixed exchange rate indefinitely.

Accepted Answer

A) True 
 B)False

Question 8

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

Accepted Answer

A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650. 
A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650.

Question 9

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the U.S. exchange rate? Why is there this response?

Accepted Answer

If the U.S. exchange rate falls, the qua

Question 10

Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. To keep the foreign exchange value of the omega fairly steady, the Bank of Epsilon will ________ enough omegas on the foreign exchange market so that the ________ omegas will ________.

Accepted Answer

A)  buy; demand for; increase 
B)  sell; supply of; increase 
C)  buy; demand for; decrease 
D)  buy; supply of; decrease 
A)  buy; demand for; increase 
B)  sell; supply of; increase 
C)  buy; demand for; decrease 
D)  buy; supply of; decrease

Question 11

Which of the following is recorded in the U.S. balance of payments account?
I. foreign investment in the United States
II. U.S. investment abroad
III. the U.S. government deficit or surplus

Accepted Answer

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

Question 12

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Accepted Answer

A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct. 
A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct.

Question 13

A country's balance of payments accounts record

Accepted Answer

A)  the country's net indebtedness to foreigners. 
B)  its international trading, borrowing, and lending. 
C)  the flow of human and nonhuman resources between it and its trading partners. 
D)  only its official transactions with other governments. 
A)  the country's net indebtedness to foreigners. 
B)  its international trading, borrowing, and lending. 
C)  the flow of human and nonhuman resources between it and its trading partners. 
D)  only its official transactions with other governments.

Question 14

If the official settlements account is zero, whenever the United States has a current account deficit, it must also have a capital account deficit.

Accepted Answer

A) True 
 B)False

Question 15

Over its history, Spain has loaned more money abroad than foreigners have lent to it. Spain is a

Accepted Answer

A)  net lender. 
B)  net borrower. 
C)  creditor nation. 
D)  debtor nation. 
A)  net lender. 
B)  net borrower. 
C)  creditor nation. 
D)  debtor nation.

Question 16

If U.S. net exports are positive

Accepted Answer

A)  other countries borrow from the United States to pay for some of the goods they purchase from the United States. 
B)  other countries make loans to the United States so that the United States can pay for some of the goods it purchases from other countries. 
C)  the United States sells some of the assets it owns in other countries to pay for some of the goods it sells to other countries. 
D)  the United States borrows from other countries to pay for some of the goods the United States purchases from them. 
A)  other countries borrow from the United States to pay for some of the goods they purchase from the United States. 
B)  other countries make loans to the United States so that the United States can pay for some of the goods it purchases from other countries. 
C)  the United States sells some of the assets it owns in other countries to pay for some of the goods it sells to other countries. 
D)  the United States borrows from other countries to pay for some of the goods the United States purchases from them.

Question 17

If the Fed wants to depreciate the U.S. dollar against the British pound, it will

Accepted Answer

A)  sell foreign exchange. 
B)  decrease the money supply. 
C)  sell British pounds. 
D)  sell U.S. dollars. 
A)  sell foreign exchange. 
B)  decrease the money supply. 
C)  sell British pounds. 
D)  sell U.S. dollars.

Question 18

What is purchasing power parity?

Accepted Answer

Purchasing power parity means

Question 19

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars ________ and the supply of U.S. dollars ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 20

A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________.

Accepted Answer

A)  increases; decreases 
B)  does not change; does not change 
C)  does not change; increases 
D)  increases; does not change 
A)  increases; decreases 
B)  does not change; does not change 
C)  does not change; increases 
D)  increases; does not change

A small country is an international borrower if its real interest rate without foreign borrowing is ________ the world real interest rate.

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

According to purchasing power parity, the foreign exchange market will

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

When the value of one currency falls relative to another currency, the exchange rate for the first currency has

A debtor nation means a nation

When the demand for a currency permanently increases, that nation's central bank can maintain its fixed exchange rate indefinitely.

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the U.S. exchange rate? Why is there this response?

Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. To keep the foreign exchange value of the omega fairly steady, the Bank of Epsilon will enough omegas on the foreign exchange market so that the omegas will .

Which of the following is recorded in the U.S. balance of payments account? I. foreign investment in the United States II. U.S. investment abroad III. the U.S. government deficit or surplus

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

A country's balance of payments accounts record

If the official settlements account is zero, whenever the United States has a current account deficit, it must also have a capital account deficit.

Over its history, Spain has loaned more money abroad than foreigners have lent to it. Spain is a

If U.S. net exports are positive

If the Fed wants to depreciate the U.S. dollar against the British pound, it will

What is purchasing power parity?

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars and the supply of U.S. dollars .

A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country and the country's international lending .

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

A small country is an international borrower if its real interest rate without foreign borrowing is ________ the world real interest rate.

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

According to purchasing power parity, the foreign exchange market will

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

When the value of one currency falls relative to another currency, the exchange rate for the first currency has

A debtor nation means a nation

When the demand for a currency permanently increases, that nation's central bank can maintain its fixed exchange rate indefinitely.

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

In the foreign exchange market, how does the quantity of U.S. dollars demanded respond to a change in the U.S. exchange rate? Why is there this response?

Which of the following is recorded in the U.S. balance of payments account? I. foreign investment in the United States II. U.S. investment abroad III. the U.S. government deficit or surplus

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

A country's balance of payments accounts record

If the official settlements account is zero, whenever the United States has a current account deficit, it must also have a capital account deficit.

Over its history, Spain has loaned more money abroad than foreigners have lent to it. Spain is a

If U.S. net exports are positive

If the Fed wants to depreciate the U.S. dollar against the British pound, it will

What is purchasing power parity?

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars ________ and the supply of U.S. dollars ________.

A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________.

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

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars and the supply of U.S. dollars .

A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country and the country's international lending .