Question 1

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

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)  American goods will become more expensive for foreign buyers and foreign goods will be more expensive for Americans. 
D)  American goods will become cheaper for foreign buyers and foreign goods will be cheaper for Americans. 
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)  American goods will become more expensive for foreign buyers and foreign goods will be more expensive for Americans. 
D)  American goods will become cheaper for foreign buyers and foreign goods will be cheaper for Americans. 
E)  neither the price of U.S. exports nor the price of U.S. imports will change.

Question 2

A country such as the United States, which has a low saving rate and attractive investment opportunities, will tend to experience a long-term

Accepted Answer

A)  inflow of capital and a current account surplus. 
B)  inflow of capital and a current account deficit. 
C)  outflow of capital and a current account surplus. 
D)  outflow of capital and a current account deficit. 
A)  inflow of capital and a current account surplus. 
B)  inflow of capital and a current account deficit. 
C)  outflow of capital and a current account surplus. 
D)  outflow of capital and a current account deficit.

Question 3

Which of the following is most likely to cause the dollar to depreciate?

Accepted Answer

A)  higher domestic interest rates 
B)  an increase in the rate of inflation abroad 
C)  a shift by the Fed to a more expansionary monetary policy 
D)  a decrease in foreign interest rates 
A)  higher domestic interest rates 
B)  an increase in the rate of inflation abroad 
C)  a shift by the Fed to a more expansionary monetary policy 
D)  a decrease in foreign interest rates

Question 4

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

Accepted Answer

A)  It will increase demand for U.S. dollars. 
B)  It will decrease demand for U.S. dollars. 
C)  It will increase supply of U.S. dollars. 
D)  It will decrease supply of U.S. dollars. 
A)  It will increase demand for U.S. dollars. 
B)  It will decrease demand for U.S. dollars. 
C)  It will increase supply of U.S. dollars. 
D)  It will decrease supply of U.S. dollars.

Question 5

Because the United States has a flexible exchange rate system, one would expect that

Accepted Answer

A)  U.S. exports and imports would be in balance. 
B)  the U.S. current account would be in balance. 
C)  U.S. exports to China would be in balance with U.S. imports from China. 
D)  all of the above are true. 
E)  none of the above are true. 
A)  U.S. exports and imports would be in balance. 
B)  the U.S. current account would be in balance. 
C)  U.S. exports to China would be in balance with U.S. imports from China. 
D)  all of the above are true. 
E)  none of the above are true.

Question 6

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

Accepted Answer

A)  the dollar will depreciate on the foreign exchange market and imports will grow relative to exports. 
B)  the dollar will appreciate on the foreign exchange market, and exports will grow relative to imports. 
C)  the dollar will depreciate on the foreign exchange market, and exports will grow relative to imports. 
D)  the dollar will appreciate on the foreign exchange market, and imports will grow relative to exports. 
A)  the dollar will depreciate on the foreign exchange market and imports will grow relative to exports. 
B)  the dollar will appreciate on the foreign exchange market, and exports will grow relative to imports. 
C)  the dollar will depreciate on the foreign exchange market, and exports will grow relative to imports. 
D)  the dollar will appreciate on the foreign exchange market, and imports will grow relative to exports.

Question 7

A currency board is an entity that

Accepted Answer

A)  issues a currency with a floating value relative to a widely accepted currency. 
B)  promises to continue to redeem the issued currency at the prevailing market rate. 
C)  controls the domestic supply of money by buying and selling bonds and other liquid assets. 
D)  provides 100% backing for all currency issued. 
A)  issues a currency with a floating value relative to a widely accepted currency. 
B)  promises to continue to redeem the issued currency at the prevailing market rate. 
C)  controls the domestic supply of money by buying and selling bonds and other liquid assets. 
D)  provides 100% backing for all currency issued.

Question 8

(I)  The U.S. trade deficit is a financial obligation of the federal government, and if it is not paid off, foreigners will be reluctant to loan money to the U.S. government.
(II)  When a nation runs a current account deficit due to a merchandise trade deficit, it must also be true that the nation has a surplus on its capital account due to an inflow of foreign capital.

Accepted Answer

A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false. 
A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false.

Question 9

During 1981-1985, the United States pursued a restrictive monetary policy that sharply lowered inflation. At the same time, large budget deficits helped push real interest rates to an all-time high. What would you expect to happen to the value of the dollar on the foreign exchange market?

Accepted Answer

Both the lower inflation rate

Question 10

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

Accepted Answer

A)  higher domestic interest rates 
B)  a reduction in the rate of inflation abroad 
C)  a shift to a more expansionary monetary policy 
D)  rapid growth of income in the United States 
A)  higher domestic interest rates 
B)  a reduction in the rate of inflation abroad 
C)  a shift to a more expansionary monetary policy 
D)  rapid growth of income in the United States

Question 11

An appreciation in the U.S. dollar benefits which of the following groups of people?

Accepted Answer

A)  All people living in the United States. 
B)  U.S. producers who export farm equipment to other countries. 
C)  U.S. consumers who buy imported automobiles. 
D)  Foreigners who wish to travel to the United States. 
E)  U.S. consumers who buy only goods made entirely in the United States. 
A)  All people living in the United States. 
B)  U.S. producers who export farm equipment to other countries. 
C)  U.S. consumers who buy imported automobiles. 
D)  Foreigners who wish to travel to the United States. 
E)  U.S. consumers who buy only goods made entirely in the United States.

Question 12

A depreciation of the U.S. dollar on the foreign exchange market will

Accepted Answer

A)  make U.S. exports cheaper to foreigners. 
B)  make imports less expensive for U.S. consumers. 
C)  make U.S. exports more expensive for foreign consumers. 
D)  probably cause the United States to run a capital account surplus in the long run. 
A)  make U.S. exports cheaper to foreigners. 
B)  make imports less expensive for U.S. consumers. 
C)  make U.S. exports more expensive for foreign consumers. 
D)  probably cause the United States to run a capital account surplus in the long run.

Question 13

A depreciation of one's currency means that

Accepted Answer

A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency. 
A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency.

Question 14

A nation has a merchandise trade deficit when

Accepted Answer

A)  it has a surplus in its balance of payments. 
B)  it has a deficit in its balance of payments. 
C)  the value of its imports of goods is greater than the value of its exports of goods. 
D)  its current account is in surplus and its capital account is in deficit. 
A)  it has a surplus in its balance of payments. 
B)  it has a deficit in its balance of payments. 
C)  the value of its imports of goods is greater than the value of its exports of goods. 
D)  its current account is in surplus and its capital account is in deficit.

Question 15

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

Accepted Answer

A)  exports to Japan will likely decrease. 
B)  Japanese tourists will be more likely to visit the United States. 
C)  U.S. businesses will be more likely to use Japanese shipping lines to transport their products. 
D)  U.S. consumers will be more likely to buy Japanese-made automobiles. 
A)  exports to Japan will likely decrease. 
B)  Japanese tourists will be more likely to visit the United States. 
C)  U.S. businesses will be more likely to use Japanese shipping lines to transport their products. 
D)  U.S. consumers will be more likely to buy Japanese-made automobiles.

Question 16

If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,

Accepted Answer

A)  both the U.S. dollar and the yen have appreciated. 
B)  both the U.S. dollar and the yen have depreciated. 
C)  the U.S. dollar has appreciated and the yen has depreciated. 
D)  the U.S. dollar has depreciated and the yen has appreciated. 
A)  both the U.S. dollar and the yen have appreciated. 
B)  both the U.S. dollar and the yen have depreciated. 
C)  the U.S. dollar has appreciated and the yen has depreciated. 
D)  the U.S. dollar has depreciated and the yen has appreciated.

Question 17

Under a flexible exchange rate system, which of the following will be most likely to cause a depreciation in the exchange rate value of the dollar (relative to the English pound)?

Accepted Answer

A)  An economic boom occurs in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products. 
B)  Real interest rates in the United States fall lower than real interest rates in England. 
C)  Restrictive monetary policy in the United States causes inflation to be lower than in England. 
D)  Attractive investment opportunities in the United States induce English investors to buy stock in U.S. firms. 
A)  An economic boom occurs in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products. 
B)  Real interest rates in the United States fall lower than real interest rates in England. 
C)  Restrictive monetary policy in the United States causes inflation to be lower than in England. 
D)  Attractive investment opportunities in the United States induce English investors to buy stock in U.S. firms.

Question 18

Which of the following would most likely cause a nation's currency to depreciate?

Accepted Answer

A)  an increase in the nation's domestic inflation rate 
B)  an increase in inflation of the nation's trading partners 
C)  a decrease in the nation's domestic inflation rate 
D)  an increase in domestic real interest rates 
A)  an increase in the nation's domestic inflation rate 
B)  an increase in inflation of the nation's trading partners 
C)  a decrease in the nation's domestic inflation rate 
D)  an increase in domestic real interest rates

Question 19

If restrictive monetary policy results in a slowdown in the domestic inflation rate and higher real interest rates, other things constant, the

Accepted Answer

A)  nation's currency will appreciate. 
B)  nation's currency will depreciate. 
C)  nation will run a balance of trade surplus. 
D)  nation will run a capital account deficit. 
A)  nation's currency will appreciate. 
B)  nation's currency will depreciate. 
C)  nation will run a balance of trade surplus. 
D)  nation will run a capital account deficit.

Question 20

Although popular opinion frequently portrays trade deficits (actually, account deficits) as "bad," can you present economic reasons why a trade deficit might be considered "good"?

Accepted Answer

A current account deficit simply means t

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

A country such as the United States, which has a low saving rate and attractive investment opportunities, will tend to experience a long-term

Which of the following is most likely to cause the dollar to depreciate?

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

Because the United States has a flexible exchange rate system, one would expect that

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

A currency board is an entity that

During 1981-1985, the United States pursued a restrictive monetary policy that sharply lowered inflation. At the same time, large budget deficits helped push real interest rates to an all-time high. What would you expect to happen to the value of the dollar on the foreign exchange market?

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

An appreciation in the U.S. dollar benefits which of the following groups of people?

A depreciation of the U.S. dollar on the foreign exchange market will

A depreciation of one's currency means that

A nation has a merchandise trade deficit when

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,

Under a flexible exchange rate system, which of the following will be most likely to cause a depreciation in the exchange rate value of the dollar (relative to the English pound)?

Which of the following would most likely cause a nation's currency to depreciate?

If restrictive monetary policy results in a slowdown in the domestic inflation rate and higher real interest rates, other things constant, the

Although popular opinion frequently portrays trade deficits (actually, account deficits) as "bad," can you present economic reasons why a trade deficit might be considered "good"?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Special Topics

Filters

Exam 19: International Finance and the Foreign Exchange Market

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

A country such as the United States, which has a low saving rate and attractive investment opportunities, will tend to experience a long-term

Which of the following is most likely to cause the dollar to depreciate?

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

Because the United States has a flexible exchange rate system, one would expect that

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

A currency board is an entity that

During 1981-1985, the United States pursued a restrictive monetary policy that sharply lowered inflation. At the same time, large budget deficits helped push real interest rates to an all-time high. What would you expect to happen to the value of the dollar on the foreign exchange market?

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

An appreciation in the U.S. dollar benefits which of the following groups of people?

A depreciation of the U.S. dollar on the foreign exchange market will

A depreciation of one's currency means that

A nation has a merchandise trade deficit when

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,

Under a flexible exchange rate system, which of the following will be most likely to cause a depreciation in the exchange rate value of the dollar (relative to the English pound)?

Which of the following would most likely cause a nation's currency to depreciate?

If restrictive monetary policy results in a slowdown in the domestic inflation rate and higher real interest rates, other things constant, the

Although popular opinion frequently portrays trade deficits (actually, account deficits) as "bad," can you present economic reasons why a trade deficit might be considered "good"?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Special Topics

Filters