Question 1

When gold production did not keep pace with the growth in economic activity, _____

Accepted Answer

A)  the price level dropped. 
B)  the price level rose. 
C)  the price level was unchanged. 
D)  money supply increased. 
E)  inflation occurred. 
A)  the price level dropped. 
B)  the price level rose. 
C)  the price level was unchanged. 
D)  money supply increased. 
E)  inflation occurred.

Question 2

In the U.S balance-of-payments accounts, debit entries in the current or financial accounts _____

Accepted Answer

A)  increase the demand for foreign exchange. 
B)  decrease the demand for foreign exchange 
C)  increase the supply for foreign exchange. 
D)  decrease the supply for foreign exchange. 
E)  result in an appreciation of the dollar. 
A)  increase the demand for foreign exchange. 
B)  decrease the demand for foreign exchange 
C)  increase the supply for foreign exchange. 
D)  decrease the supply for foreign exchange. 
E)  result in an appreciation of the dollar.

Question 3

The Bretton Woods agreement established the gold standard.

Accepted Answer

A) True 
 B)False

Question 4

As the price of foreign exchange decreases relative to the U.S. dollar, the _____

Accepted Answer

A)  products made in the United States become cheaper for foreigners. 
B)  goods made in foreign countries become cheaper for Americans. 
C)  amount of foreign currency required to purchase a unit of U.S. dollar increases. 
D)  U.S. demand curve for foreign exchange shifts to the right. 
E)  supply curve of foreign exchange to U.S. markets decreases. 
A)  products made in the United States become cheaper for foreigners. 
B)  goods made in foreign countries become cheaper for Americans. 
C)  amount of foreign currency required to purchase a unit of U.S. dollar increases. 
D)  U.S. demand curve for foreign exchange shifts to the right. 
E)  supply curve of foreign exchange to U.S. markets decreases.

Question 5

Which of the following will happen if country A's currency declines in value against other major currencies?

Accepted Answer

A)  Country A's trade deficit will increase. 
B)  Country A's trade deficit will be unaffected. 
C)  Country A's trade deficit will decrease. 
D)  Country A's products will become more expensive in foreign markets. 
E)  Foreign goods will become cheaper in country A. 
A)  Country A's trade deficit will increase. 
B)  Country A's trade deficit will be unaffected. 
C)  Country A's trade deficit will decrease. 
D)  Country A's products will become more expensive in foreign markets. 
E)  Foreign goods will become cheaper in country A.

Question 6

The main goal of the Bretton Woods meeting was to _____

Accepted Answer

A)  curb inflation that affected almost every developed country after the Second World War. 
B)  encourage gold production in third-world nations. 
C)  set world prices for gold in order to achieve stable exchange rates. 
D)  set up a new international system of payments and to stabilize exchange rates. 
E)  help less-developed countries of the world to experience growth and development. 
A)  curb inflation that affected almost every developed country after the Second World War. 
B)  encourage gold production in third-world nations. 
C)  set world prices for gold in order to achieve stable exchange rates. 
D)  set up a new international system of payments and to stabilize exchange rates. 
E)  help less-developed countries of the world to experience growth and development.

Question 7

A German national who exchanges euros for dollars at a U.S. airport is _____

Accepted Answer

A)  contributing to U.S. exports of merchandise. 
B)  lending dollars to Germany. 
C)  participating in the foreign exchange market. 
D)  engaging in speculative activities. 
E)  engaging in illegal activities. 
A)  contributing to U.S. exports of merchandise. 
B)  lending dollars to Germany. 
C)  participating in the foreign exchange market. 
D)  engaging in speculative activities. 
E)  engaging in illegal activities.

Question 8

If the same basket of goods costs $400 in the United States and £200 in Britain, then according to the purchasing power parity theory, the _____

Accepted Answer

A)  goods and services must cost half as much in Britain as in the United States. 
B)  exchange rate should approach $2 per pound. 
C)  exchange rate should approach $0.50 per pound. 
D)  goods and services must cost twice as much in Britain as in the United States. 
E)  reason for the difference in price is a difference in the cost of transportation in the two countries. 
A)  goods and services must cost half as much in Britain as in the United States. 
B)  exchange rate should approach $2 per pound. 
C)  exchange rate should approach $0.50 per pound. 
D)  goods and services must cost twice as much in Britain as in the United States. 
E)  reason for the difference in price is a difference in the cost of transportation in the two countries.

Question 9

The balance of payments can be thought of as the balance of economic transactions.

Accepted Answer

A) True 
 B)False

Question 10

The Bretton Woods system collapsed because _____

Accepted Answer

A)  countries started introducing trade barriers. 
B)  the collapse of world gold production undermined the operation of the system. 
C)  the gold value of the dollar exceeded the exchange value, causing an outflow of gold from the United States. 
D)  the dollar was undervalued. 
E)  the exchange value of the dollar exceeded its gold value, causing an inflow of gold to the United States. 
A)  countries started introducing trade barriers. 
B)  the collapse of world gold production undermined the operation of the system. 
C)  the gold value of the dollar exceeded the exchange value, causing an outflow of gold from the United States. 
D)  the dollar was undervalued. 
E)  the exchange value of the dollar exceeded its gold value, causing an inflow of gold to the United States.

Question 11

A nation's merchandise trade balance reflects _____

Accepted Answer

A)  trade in tangible products. 
B)  the value of exports of services. 
C)  the value of imports of services. 
D)  the same information as its balance of payments. 
E)  trade in tangibles and intangibles. 
A)  trade in tangible products. 
B)  the value of exports of services. 
C)  the value of imports of services. 
D)  the same information as its balance of payments. 
E)  trade in tangibles and intangibles.

Question 12

Table 18.1
 $$\begin{array}{l}
\text { Table } 18.1\
\begin{array} { | l | c | } 
\hline \text { Current Account } & ( \$ ) \
\hline \text { Merchandise exports } & + 1000 \
\hline \text { Merchandise imports } & + 3000 \
\hline \text { Merchandise trade balance } & \
\hline \text { Service exports } & + 1500 \
\hline \text { Service imports } & + 1000 \
\hline \text { Goods and services balance } & 100 \
\hline \text { Net investment income from abroad } & - 1,000 \
\hline \text { Net unilateral transfers } & \
\hline \text { Current account balance } & \
\hline
\end{array}
\end{array}$$
-Refer to Table 18.1, which shows a Balance of Payments account. What is the merchandise trade balance?

Accepted Answer

A)  ?$1,500 
B)  ?$2,000 
C)  ?$2,400 
D)  ?$2,420 
E)  $500 
A)  ?$1,500 
B)  ?$2,000 
C)  ?$2,400 
D)  ?$2,420 
E)  $500

Question 13

The purchasing power parity (PPP) theory suggests that the prices of identical items will equalize internationally. An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world.

Accepted Answer

A) True 
 B)False

Question 14

Speculators profit by taking risks, while the actions of arbitrageurs involve no risk.

Accepted Answer

A) True 
 B)False

Question 15

Which account records current flows of funds into and out of the country?

Accepted Answer

A)  the balance of payments 
B)  the merchandise trade balance 
C)  the financial account 
D)  the trade deficit 
E)  the current account 
A)  the balance of payments 
B)  the merchandise trade balance 
C)  the financial account 
D)  the trade deficit 
E)  the current account

Question 16

Exhibit 18.1
  
-Refer to Exhibit 18.1. A shift of the demand curve from D' to D will _____

Accepted Answer

A)  decrease the exchange rate from E' to E. 
B)  increase the exchange rate from E to E'. 
C)  cause the foreign currency to appreciate. 
D)  cause the domestic currency to depreciate. 
E)  cause the supply curve to shift. 
A)  decrease the exchange rate from E' to E. 
B)  increase the exchange rate from E to E'. 
C)  cause the foreign currency to appreciate. 
D)  cause the domestic currency to depreciate. 
E)  cause the supply curve to shift.

Question 17

The actions of the arbitrageurs in the foreign exchange markets _____

Accepted Answer

A)  destabilize foreign exchange markets. 
B)  are highly risky. 
C)  have no effect on exchange rates. 
D)  help ensure that exchange rates are equalized across all markets. 
E)  are the same as those undertaken by speculators. 
A)  destabilize foreign exchange markets. 
B)  are highly risky. 
C)  have no effect on exchange rates. 
D)  help ensure that exchange rates are equalized across all markets. 
E)  are the same as those undertaken by speculators.

Question 18

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen, the dollar is said to have appreciated and the yen is said to have depreciated.

Accepted Answer

A) True 
 B)False

Question 19

Flexible exchange rates do not allow for discretionary monetary policy.

Accepted Answer

A) True 
 B)False

Question 20

Under the gold standard, _____

Accepted Answer

A)  a nation's currency was traded for gold at a fixed rate. 
B)  a nation's central bank or monetary authority had absolute control over its money supply. 
C)  new discoveries of gold had no effect on money supply or prices. 
D)  prices were constant globally. 
E)  all international transactions were financed with gold. 
A)  a nation's currency was traded for gold at a fixed rate. 
B)  a nation's central bank or monetary authority had absolute control over its money supply. 
C)  new discoveries of gold had no effect on money supply or prices. 
D)  prices were constant globally. 
E)  all international transactions were financed with gold.

When gold production did not keep pace with the growth in economic activity, _____

In the U.S balance-of-payments accounts, debit entries in the current or financial accounts _____

The Bretton Woods agreement established the gold standard.

As the price of foreign exchange decreases relative to the U.S. dollar, the _____

Which of the following will happen if country A's currency declines in value against other major currencies?

The main goal of the Bretton Woods meeting was to _____

A German national who exchanges euros for dollars at a U.S. airport is _____

If the same basket of goods costs $400 in the United States and £200 in Britain, then according to the purchasing power parity theory, the _____

The balance of payments can be thought of as the balance of economic transactions.

The Bretton Woods system collapsed because _____

A nation's merchandise trade balance reflects _____

The purchasing power parity (PPP) theory suggests that the prices of identical items will equalize internationally. An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world.

Speculators profit by taking risks, while the actions of arbitrageurs involve no risk.

Which account records current flows of funds into and out of the country?

Exhibit 18.1 -Refer to Exhibit 18.1. A shift of the demand curve from D' to D will _____

The actions of the arbitrageurs in the foreign exchange markets _____

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen, the dollar is said to have appreciated and the yen is said to have depreciated.

Flexible exchange rates do not allow for discretionary monetary policy.

Under the gold standard, _____

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.

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Exam 18: International Finance.

When gold production did not keep pace with the growth in economic activity, _____

In the U.S balance-of-payments accounts, debit entries in the current or financial accounts _____

The Bretton Woods agreement established the gold standard.

As the price of foreign exchange decreases relative to the U.S. dollar, the _____

Which of the following will happen if country A's currency declines in value against other major currencies?

The main goal of the Bretton Woods meeting was to _____

A German national who exchanges euros for dollars at a U.S. airport is _____

If the same basket of goods costs $400 in the United States and £200 in Britain, then according to the purchasing power parity theory, the _____

The balance of payments can be thought of as the balance of economic transactions.

The Bretton Woods system collapsed because _____

A nation's merchandise trade balance reflects _____

The purchasing power parity (PPP) theory suggests that the prices of identical items will equalize internationally. An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world.

Speculators profit by taking risks, while the actions of arbitrageurs involve no risk.

Which account records current flows of funds into and out of the country?

Exhibit 18.1 -Refer to Exhibit 18.1. A shift of the demand curve from D' to D will _____

The actions of the arbitrageurs in the foreign exchange markets _____

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen, the dollar is said to have appreciated and the yen is said to have depreciated.

Flexible exchange rates do not allow for discretionary monetary policy.

Under the gold standard, _____

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