Question 1

The capital and financial account measures

Accepted Answer

A)  foreign investment in the United States minus U.S. investment abroad. 
B)  capital produced outside of the United States minus capital produced inside the United States. 
C)  capital used inside the United States but manufactured outside the United States. 
D)  capital used outside the United States but manufactured inside the United States. 
A)  foreign investment in the United States minus U.S. investment abroad. 
B)  capital produced outside of the United States minus capital produced inside the United States. 
C)  capital used inside the United States but manufactured outside the United States. 
D)  capital used outside the United States but manufactured inside the United States.

Question 2

What role can the Fed play in the foreign exchange market?

Accepted Answer

The Federal Reserve can intervene in the

Question 3

In June 2016, $1 bought 0.5 pounds and in October, $1 bought 0.65 pounds. As a result of this change, ________ between June and October.

Accepted Answer

A)  the demand for dollars increased 
B)  the dollar appreciated and the quantity of dollars demanded decreased 
C)  the dollar depreciated and the quantity of dollars demanded decreased 
D)  the demand for dollars decreased 
A)  the demand for dollars increased 
B)  the dollar appreciated and the quantity of dollars demanded decreased 
C)  the dollar depreciated and the quantity of dollars demanded decreased 
D)  the demand for dollars decreased

Question 4

Which of the following is NOT included in the U.S. current account?

Accepted Answer

A)  U.S. investment abroad 
B)  net interest income 
C)  net transfers 
D)  imports of goods and services 
A)  U.S. investment abroad 
B)  net interest income 
C)  net transfers 
D)  imports of goods and services

Question 5

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

Accepted Answer

A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates fall. 
A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates fall.

Question 6

"Currency appreciation" means the price of the currency is decreasing.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

Accepted Answer

A)  sell dollars. 
B)  buy dollars. 
C)  violate interest rate parity. 
D)  violate purchasing power parity. 
A)  sell dollars. 
B)  buy dollars. 
C)  violate interest rate parity. 
D)  violate purchasing power parity.

Question 8

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso ________ against the dollar

Accepted Answer

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

Question 9

The account that records changes in the U.S. government's holdings of foreign currency is the

Accepted Answer

A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account. 
A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account.

Question 10

-Using the table above, if the current market value of the dollar is 70 francs

Accepted Answer

A)  investor A expects dollar appreciation, but B and C expect depreciation. 
B)  investor A expects dollar depreciation, but B and C expect appreciation. 
C)  all three investors expect the dollar to appreciate. 
D)  all three investors expect the dollar to depreciate. 
A)  investor A expects dollar appreciation, but B and C expect depreciation. 
B)  investor A expects dollar depreciation, but B and C expect appreciation. 
C)  all three investors expect the dollar to appreciate. 
D)  all three investors expect the dollar to depreciate.

Question 11

The price of a computer in the United States is $1,000. The price of a car in Germany is 10,000 euros. The current exchange rate is 0.9 euros per dollar.
a) If a computer is exported from the United States to Germany with no barriers to trade, what will be the price of the computer in Germany?
b) If a car is imported to the United States from Germany with no barriers to trade, what will be the price of the car in the United States?
c) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a computer exported from the United States change in Germany?
d) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a car imported to the United States from Germany change in the United States?

Accepted Answer

a) The price of an American computer in

Question 12

In 2007, Japan reported that its overseas assets totaled more than $4.6 trillion. This implies that Japan

Accepted Answer

A)  is debtor nation. 
B)  has a current account deficit. 
C)  has a capital account deficit. 
D)  is a creditor nation. 
A)  is debtor nation. 
B)  has a current account deficit. 
C)  has a capital account deficit. 
D)  is a creditor nation.

Question 13

-In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as

Accepted Answer

A)  point B. 
B)  point C. 
C)  point D. 
D)  point E. 
A)  point B. 
B)  point C. 
C)  point D. 
D)  point E.

Question 14

An increase in the U.S. demand for imports will ________ the supply of dollars and lead the dollar to ________.

Accepted Answer

A)  increase; appreciate 
B)  decrease; appreciate 
C)  increase; depreciate 
D)  decrease; depreciate 
A)  increase; appreciate 
B)  decrease; appreciate 
C)  increase; depreciate 
D)  decrease; depreciate

Question 15

Relative to the yen, from 2007-2012 the U.S. dollar

Accepted Answer

A)  appreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
B)  appreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
C)  depreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
D)  depreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
A)  appreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
B)  appreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
C)  depreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
D)  depreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate.

Question 16

The value of net exports increases when the value of

Accepted Answer

A)  exports of goods and services minus imports of goods and services decreases. 
B)  imports of goods and services increase. 
C)  imports of goods and services decrease. 
D)  exports of goods and services decrease. 
A)  exports of goods and services minus imports of goods and services decreases. 
B)  imports of goods and services increase. 
C)  imports of goods and services decrease. 
D)  exports of goods and services decrease.

Question 17

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

Accepted Answer

A)  increases the demand for U.S. dollars today. 
B)  decreases the demand for U.S. dollars today. 
C)  decreases the demand for Canadian dollars today. 
D)  decreases the value of exports to Canada. 
A)  increases the demand for U.S. dollars today. 
B)  decreases the demand for U.S. dollars today. 
C)  decreases the demand for Canadian dollars today. 
D)  decreases the value of exports to Canada.

Question 18

-The data in the table above illustrates items from the U.S. balance of payments accounts. If there is no statistical discrepancy, what is the balance in the official settlements account?

Accepted Answer

A)  $150 billion 
B)  -$150 billion 
C)  $50 billion 
D)  $0 
A)  $150 billion 
B)  -$150 billion 
C)  $50 billion 
D)  $0

Question 19

Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from the U.S. Steel company. As a result, the demand curve for U.S. Dollars ________ and the demand curve for South Korean Won (i.e. the South Korean currency) ________.

Accepted Answer

A)  shifts rightward; does not shift 
B)  shifts rightward; shifts leftward 
C)  does not shift; shifts leftward 
D)  shifts leftward; shifts rightward 
A)  shifts rightward; does not shift 
B)  shifts rightward; shifts leftward 
C)  does not shift; shifts leftward 
D)  shifts leftward; shifts rightward

Question 20

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

Accepted Answer

A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise. 
A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise.

The capital and financial account measures

What role can the Fed play in the foreign exchange market?

In June 2016, $1 bought 0.5 pounds and in October, $1 bought 0.65 pounds. As a result of this change, ________ between June and October.

Which of the following is NOT included in the U.S. current account?

-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₂ could occur when

"Currency appreciation" means the price of the currency is decreasing.

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar against the peso, and the peso against the dollar

The account that records changes in the U.S. government's holdings of foreign currency is the

-Using the table above, if the current market value of the dollar is 70 francs

In 2007, Japan reported that its overseas assets totaled more than $4.6 trillion. This implies that Japan

-In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as

An increase in the U.S. demand for imports will the supply of dollars and lead the dollar to .

Relative to the yen, from 2007-2012 the U.S. dollar

The value of net exports increases when the value of

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

-The data in the table above illustrates items from the U.S. balance of payments accounts. If there is no statistical discrepancy, what is the balance in the official settlements account?

Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from the U.S. Steel company. As a result, the demand curve for U.S. Dollars and the demand curve for South Korean Won (i.e. the South Korean currency) .

-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₂ could occur when

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 capital and financial account measures

What role can the Fed play in the foreign exchange market?

In June 2016, $1 bought 0.5 pounds and in October, $1 bought 0.65 pounds. As a result of this change, ________ between June and October.

Which of the following is NOT included in the U.S. current account?

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

"Currency appreciation" means the price of the currency is decreasing.

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso ________ against the dollar

The account that records changes in the U.S. government's holdings of foreign currency is the

-Using the table above, if the current market value of the dollar is 70 francs

In 2007, Japan reported that its overseas assets totaled more than $4.6 trillion. This implies that Japan

-In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as

An increase in the U.S. demand for imports will ________ the supply of dollars and lead the dollar to ________.

Relative to the yen, from 2007-2012 the U.S. dollar

The value of net exports increases when the value of

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

-The data in the table above illustrates items from the U.S. balance of payments accounts. If there is no statistical discrepancy, what is the balance in the official settlements account?

Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from the U.S. Steel company. As a result, the demand curve for U.S. Dollars ________ and the demand curve for South Korean Won (i.e. the South Korean currency) ________.

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

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 the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₂ could occur when

Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar against the peso, and the peso against the dollar

An increase in the U.S. demand for imports will the supply of dollars and lead the dollar to .

Hyundai is a large South Korean company that produces finished steel products. Hyundai plans to buy raw steel from the U.S. Steel company. As a result, the demand curve for U.S. Dollars and the demand curve for South Korean Won (i.e. the South Korean currency) .

-In the figure above, the shift in the demand curve for U.S. dollars from D₀ to D₂ could occur when