Question 1

An arbitrageur in foreign exchange is a person who _____

Accepted Answer

A)  buys foreign currency hoping to profit by selling it at a higher exchange rate at some later date. 
B)  earns illegal profit by manipulating foreign exchange. 
C)  causes differences in exchange rates in different geographic markets. 
D)  simultaneously buys large amounts of a currency in one market and sells it in another market. 
E)  mediates disputes when there is no agreement on exchange rates in international currency markets. 
A)  buys foreign currency hoping to profit by selling it at a higher exchange rate at some later date. 
B)  earns illegal profit by manipulating foreign exchange. 
C)  causes differences in exchange rates in different geographic markets. 
D)  simultaneously buys large amounts of a currency in one market and sells it in another market. 
E)  mediates disputes when there is no agreement on exchange rates in international currency markets. D

Question 2

Prior to World War I, the international financial system had operated under _____

Accepted Answer

A)  a floating exchange rate system. 
B)  a managed exchange rate system. 
C)  a laissez-faire exchange rate system. 
D)  the gold standard. 
E)  the dollar standard. 
A)  a floating exchange rate system. 
B)  a managed exchange rate system. 
C)  a laissez-faire exchange rate system. 
D)  the gold standard. 
E)  the dollar standard. D

Question 3

Spending on U.S. merchandise imports is a _____ in the balance-of-payments account.

Accepted Answer

A)  credit 
B)  debit 
C)  payment 
D)  investment 
E)  unilateral transfer 
A)  credit 
B)  debit 
C)  payment 
D)  investment 
E)  unilateral transfer B

Question 4

The debit side of the current account includes the imports of _____

Accepted Answer

A)  goods only. 
B)  goods and services. 
C)  services only. 
D)  services and resources only. 
E)  financial assets. 
A)  goods only. 
B)  goods and services. 
C)  services only. 
D)  services and resources only. 
E)  financial assets.

Question 5

A leftward shift of a country's demand curve for foreign exchange will _____

Accepted Answer

A)  decrease the price of foreign exchange in the country. 
B)  increase the price of foreign exchange in the country. 
C)  decrease the value of its currency. 
D)  make foreign goods more expensive in the country. 
E)  make its goods cheaper in the foreign market. 
A)  decrease the price of foreign exchange in the country. 
B)  increase the price of foreign exchange in the country. 
C)  decrease the value of its currency. 
D)  make foreign goods more expensive in the country. 
E)  make its goods cheaper in the foreign market.

Question 6

The exchange rate is the _____

Accepted Answer

A)  ratio of exports to imports. 
B)  interest rate the U.S. government charges on international loans. 
C)  percentage of domestic goods that are exported. 
D)  cost of one nation's currency in terms of another nation's currency. 
E)  rate that central banks charge commercial banks for currency exchanges. 
A)  ratio of exports to imports. 
B)  interest rate the U.S. government charges on international loans. 
C)  percentage of domestic goods that are exported. 
D)  cost of one nation's currency in terms of another nation's currency. 
E)  rate that central banks charge commercial banks for currency exchanges.

Question 7

Which of the following is not considered a unilateral transfer?

Accepted Answer

A)  income earned from foreign investments 
B)  foreign aid 
C)  personal gifts to friends or family abroad 
D)  institutional charitable donations 
E)  government transfers to foreign residents 
A)  income earned from foreign investments 
B)  foreign aid 
C)  personal gifts to friends or family abroad 
D)  institutional charitable donations 
E)  government transfers to foreign residents

Question 8

Net unilateral transfers in the United States have been _____

Accepted Answer

A)  positive every year since 1950. 
B)  negative every year since 1950. 
C)  positive every year since 1950, except in 1991 during the Persian Gulf War. 
D)  negative every year since 1950, except in 1991 during the Persian Gulf War. 
E)  positive about half the time and negative about half the time since 1950. 
A)  positive every year since 1950. 
B)  negative every year since 1950. 
C)  positive every year since 1950, except in 1991 during the Persian Gulf War. 
D)  negative every year since 1950, except in 1991 during the Persian Gulf War. 
E)  positive about half the time and negative about half the time since 1950.

Question 9

One feature of the gold standard was that _____

Accepted Answer

A)  countries had almost complete control over their own monetary policies. 
B)  a surplus of gold caused the money supply to decrease. 
C)  slow gold production led to deflation. 
D)  exchange rates were highly unstable. 
E)  each currency was worth the same as other currencies. 
A)  countries had almost complete control over their own monetary policies. 
B)  a surplus of gold caused the money supply to decrease. 
C)  slow gold production led to deflation. 
D)  exchange rates were highly unstable. 
E)  each currency was worth the same as other currencies.

Question 10

Which of the following statements is true?

Accepted Answer

A)  The demand for foreign currency in the United States increases as the volume of imports increases. 
B)  The demand for foreign currency in the United States increases as the volume of exports increases. 
C)  The demand for foreign currency in the United States decreases with a decrease in the inflation rate abroad. 
D)  The demand for foreign currency in the United States decreases as foreign interest rates rise. 
E)  The demand for foreign currency in the United States is unaffected by U.S. demand for foreign goods and services. 
A)  The demand for foreign currency in the United States increases as the volume of imports increases. 
B)  The demand for foreign currency in the United States increases as the volume of exports increases. 
C)  The demand for foreign currency in the United States decreases with a decrease in the inflation rate abroad. 
D)  The demand for foreign currency in the United States decreases as foreign interest rates rise. 
E)  The demand for foreign currency in the United States is unaffected by U.S. demand for foreign goods and services.

Question 11

The demand curve for euros shows _____

Accepted Answer

A)  a direct relationship between the dollar price of the euro and the quantity of euros demanded. 
B)  an inverse relation between the dollar price of the euro and the quantity of euros demanded. 
C)  that the higher the dollar price of the euro, the greater the quantity of euros demanded. 
D)  that the more expensive it is to buy euros, the larger the quantity of European goods demanded by Americans. 
E)  that the dollar price of the euro is fixed by the European Union. 
A)  a direct relationship between the dollar price of the euro and the quantity of euros demanded. 
B)  an inverse relation between the dollar price of the euro and the quantity of euros demanded. 
C)  that the higher the dollar price of the euro, the greater the quantity of euros demanded. 
D)  that the more expensive it is to buy euros, the larger the quantity of European goods demanded by Americans. 
E)  that the dollar price of the euro is fixed by the European Union.

Question 12

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the _____

Accepted Answer

A)  U.S. demand curve for Mexican pesos will shift rightward. 
B)  U.S. demand curve for Mexican pesos will shift leftward. 
C)  U.S. supply curve of Mexican pesos will shift leftward. 
D)  U.S. supply curve of Mexican pesos will shift rightward. 
E)  U.S. supply curve of Mexican pesos will become perfectly inelastic. 
A)  U.S. demand curve for Mexican pesos will shift rightward. 
B)  U.S. demand curve for Mexican pesos will shift leftward. 
C)  U.S. supply curve of Mexican pesos will shift leftward. 
D)  U.S. supply curve of Mexican pesos will shift rightward. 
E)  U.S. supply curve of Mexican pesos will become perfectly inelastic.

Question 13

If Europe and the United States were the only two regions in the world, then the U.S. government would buy euros to improve the U.S. balance of payments.

Accepted Answer

A) True 
 B)False

Question 14

In order for the balance of payments to balance, the _____

Accepted Answer

A)  current account balance must equal the capital account balance. 
B)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a negative value. 
C)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a positive value. 
D)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must equal zero. 
E)  the sum of the current account balance, the capital account balance, and the net flow of international reserves must be greater than the statistical discrepancy. 
A)  current account balance must equal the capital account balance. 
B)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a negative value. 
C)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a positive value. 
D)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must equal zero. 
E)  the sum of the current account balance, the capital account balance, and the net flow of international reserves must be greater than the statistical discrepancy.

Question 15

When the international financial system operated under the gold standard, _____

Accepted Answer

A)  the currencies of most countries were convertible into gold. 
B)  all international transactions were financed with gold. 
C)  the price of gold was determined by the supply and demand for foreign exchange. 
D)  the quantity of money demanded was always the same. 
E)  there was very little inflation. 
A)  the currencies of most countries were convertible into gold. 
B)  all international transactions were financed with gold. 
C)  the price of gold was determined by the supply and demand for foreign exchange. 
D)  the quantity of money demanded was always the same. 
E)  there was very little inflation.

Question 16

Which of the following would increase the U.S. demand for foreign currency?

Accepted Answer

A)  an increase in the U.S. demand for foreign goods 
B)  an increase in incomes abroad 
C)  a decrease in U.S. income 
D)  a decrease in the U.S. demand for foreign goods 
E)  an increase in U.S. real interest rate 
A)  an increase in the U.S. demand for foreign goods 
B)  an increase in incomes abroad 
C)  a decrease in U.S. income 
D)  a decrease in the U.S. demand for foreign goods 
E)  an increase in U.S. real interest rate

Question 17

The current international financial system is a managed float system.

Accepted Answer

A) True 
 B)False

Question 18

Current account transactions are records of the incomes and expenditures from exports and imports, plus international financial investments and borrowing.

Accepted Answer

A) True 
 B)False

Question 19

In 2014, the United States' balance-of-trade deficit with China was about 10 times as large as the balance-of-trade deficit with Canada.

Accepted Answer

A) True 
 B)False

Question 20

The Bretton Woods system collapsed because _____

Accepted Answer

A)  the world economy was unhealthy. 
B)  the collapse of world gold production undermined the operation of the system. 
C)  the U.S. dollar was undervalued. 
D)  the U.S. dollar was overvalued. 
E)  the ten richest countries in the world refused to cooperate. 
A)  the world economy was unhealthy. 
B)  the collapse of world gold production undermined the operation of the system. 
C)  the U.S. dollar was undervalued. 
D)  the U.S. dollar was overvalued. 
E)  the ten richest countries in the world refused to cooperate.

An arbitrageur in foreign exchange is a person who _____

Prior to World War I, the international financial system had operated under _____

Spending on U.S. merchandise imports is a _____ in the balance-of-payments account.

The debit side of the current account includes the imports of _____

A leftward shift of a country's demand curve for foreign exchange will _____

The exchange rate is the _____

Which of the following is not considered a unilateral transfer?

Net unilateral transfers in the United States have been _____

One feature of the gold standard was that _____

Which of the following statements is true?

The demand curve for euros shows _____

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the _____

If Europe and the United States were the only two regions in the world, then the U.S. government would buy euros to improve the U.S. balance of payments.

In order for the balance of payments to balance, the _____

When the international financial system operated under the gold standard, _____

Which of the following would increase the U.S. demand for foreign currency?

The current international financial system is a managed float system.

Current account transactions are records of the incomes and expenditures from exports and imports, plus international financial investments and borrowing.

In 2014, the United States' balance-of-trade deficit with China was about 10 times as large as the balance-of-trade deficit with Canada.

The Bretton Woods system collapsed because _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

Economic Development.

Filters

Exam 18: International Finance.

An arbitrageur in foreign exchange is a person who _____

Prior to World War I, the international financial system had operated under _____

Spending on U.S. merchandise imports is a _____ in the balance-of-payments account.

The debit side of the current account includes the imports of _____

A leftward shift of a country's demand curve for foreign exchange will _____

The exchange rate is the _____

Which of the following is not considered a unilateral transfer?

Net unilateral transfers in the United States have been _____

One feature of the gold standard was that _____

Which of the following statements is true?

The demand curve for euros shows _____

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the _____

If Europe and the United States were the only two regions in the world, then the U.S. government would buy euros to improve the U.S. balance of payments.

In order for the balance of payments to balance, the _____

When the international financial system operated under the gold standard, _____

Which of the following would increase the U.S. demand for foreign currency?

The current international financial system is a managed float system.

Current account transactions are records of the incomes and expenditures from exports and imports, plus international financial investments and borrowing.

In 2014, the United States' balance-of-trade deficit with China was about 10 times as large as the balance-of-trade deficit with Canada.

The Bretton Woods system collapsed because _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

Economic Development.

Filters