Question 1

If the U.S. dollar depreciates, it means that _____

Accepted Answer

A)  the value of the U.S. dollar has increased. 
B)  the value of foreign exchange has decreased. 
C)  fewer U.S. dollars are required to purchase foreign exchange. 
D)  more U.S. dollars are required to purchase foreign exchange. 
E)  exports will fall. 
A)  the value of the U.S. dollar has increased. 
B)  the value of foreign exchange has decreased. 
C)  fewer U.S. dollars are required to purchase foreign exchange. 
D)  more U.S. dollars are required to purchase foreign exchange. 
E)  exports will fall.

Question 2

The reason the current exchange rate system is called a "managed float" is that _____

Accepted Answer

A)  it is managed by the IMF. 
B)  it is basically a misnomer. 
C)  it recognizes that there will be some intervention by central banks. 
D)  only the forces of supply and demand determine the exchange rates. 
E)  Congress passed a law declaring that the exchange rate system be legally termed "managed float." 
A)  it is managed by the IMF. 
B)  it is basically a misnomer. 
C)  it recognizes that there will be some intervention by central banks. 
D)  only the forces of supply and demand determine the exchange rates. 
E)  Congress passed a law declaring that the exchange rate system be legally termed "managed float."

Question 3

Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for €8,000 in the euro zone. According to the purchasing power parity theory, the equilibrium exchange rate should be equal to _____

Accepted Answer

A)  $2.50 per euro. 
B)  $1.50 per euro. 
C)  $1.25 per euro. 
D)  $1.00 per euro. 
E)  $.80 per euro. 
A)  $2.50 per euro. 
B)  $1.50 per euro. 
C)  $1.25 per euro. 
D)  $1.00 per euro. 
E)  $.80 per euro.

Question 4

If a country's balance-of-payments deficit resulted in _____ of gold, the country's money supply would _____.

Accepted Answer

A)  a loss; expand 
B)  a loss; shrink 
C)  an influx; expand 
D)  an influx; shrink 
E)  an increase; be unchanged 
A)  a loss; expand 
B)  a loss; shrink 
C)  an influx; expand 
D)  an influx; shrink 
E)  an increase; be unchanged

Question 5

Suppose U.S. consumers start buying more English shoes and fewer American shoes. Which of the following will be a likely impact on the foreign exchange market?

Accepted Answer

A)  U.S. demand for British pounds will increase. 
B)  U.S. demand for British pounds will decrease. 
C)  U.S. demand for British pounds will increase, but the demand for foreign exchange will decrease. 
D)  U.S. demand for British pounds will decrease, but the demand for foreign exchange will increase. 
E)  There would be no effect on the demand for foreign exchange in the United States. 
A)  U.S. demand for British pounds will increase. 
B)  U.S. demand for British pounds will decrease. 
C)  U.S. demand for British pounds will increase, but the demand for foreign exchange will decrease. 
D)  U.S. demand for British pounds will decrease, but the demand for foreign exchange will increase. 
E)  There would be no effect on the demand for foreign exchange in the United States.

Question 6

A country's balance of payments summarizes all economic transactions during a given period between the residents of that country and the residents of other countries.

Accepted Answer

A) True 
 B)False

Question 7

Under the gold standard, gold discoveries in Alaska and South America led to severe deflation in the U.S. economy.

Accepted Answer

A) True 
 B)False

Question 8

Table 18.a
 $$\begin{array}{l}
\text { Table 18.a }\
\begin{array} { | l | c | } 
\hline \text { Current Account } & ( \$ ) \
\hline \text { Merchandise exports } & 500 \
\hline \text { Merchandise imports } & 200 \
\hline \text { Merchandise trade balance } & \
\hline \text { Service exports } & 400 \
\hline \text { Service imports } & 600 \
\hline \text { Goods and services balance } & \
\hline \text { Net investment income from abroad } & 50 \
\hline \text { Net unilateral transfers } & - 90 \
\hline \text { Current account balance } & \
\hline
\end{array}
\end{array}$$
-Refer to Table 18.1, which shows a balance-of-payments account. What is the goods and services balance?

Accepted Answer

A)  $300 
B)  $100 
C)  ?-$300 
D)  ?$100 
E)  $60 
A)  $300 
B)  $100 
C)  ?-$300 
D)  ?$100 
E)  $60

Question 9

Under the gold standard, _____

Accepted Answer

A)  the U.S. dollar could be redeemed at the U.S. Treasury for one-fourth of an ounce of gold. 
B)  the U.S. dollar could be redeemed at the U.S. Treasury for one-half of an ounce of gold. 
C)  the British pound could be redeemed at the British Exchequer for one-fourth of an ounce of gold. 
D)  the British pound could be redeemed at the British Exchequer for one-tenth of an ounce of gold. 
E)  all international transactions were financed with gold. 
A)  the U.S. dollar could be redeemed at the U.S. Treasury for one-fourth of an ounce of gold. 
B)  the U.S. dollar could be redeemed at the U.S. Treasury for one-half of an ounce of gold. 
C)  the British pound could be redeemed at the British Exchequer for one-fourth of an ounce of gold. 
D)  the British pound could be redeemed at the British Exchequer for one-tenth of an ounce of gold. 
E)  all international transactions were financed with gold.

Question 10

Which of the following events would not be recorded in the U.S. balance of payments?

Accepted Answer

A)  the increase in the money supply of a foreign nation 
B)  Oxfam America, a U.S. relief agency, sending rice to drought victims in sub-Saharan Africa 
C)  Bangladesh receiving a loan from the United States to complete an infrastructural project 
D)  the Pentagon stationing troops in Saudi Arabia 
E)  the United States exporting computer software and importing oil from Iraq 
A)  the increase in the money supply of a foreign nation 
B)  Oxfam America, a U.S. relief agency, sending rice to drought victims in sub-Saharan Africa 
C)  Bangladesh receiving a loan from the United States to complete an infrastructural project 
D)  the Pentagon stationing troops in Saudi Arabia 
E)  the United States exporting computer software and importing oil from Iraq

Question 11

Under the gold standard, a country with a surplus in its balance of payments experienced a decline in its money supply and a drop in its price level.

Accepted Answer

A) True 
 B)False

Question 12

If the U.S. dollar depreciates relative to the Swiss franc, then _____

Accepted Answer

A)  Swiss goods become more expensive in the United States. 
B)  U.S. goods become more expensive in Switzerland. 
C)  Swiss investors will pay more Swiss francs to buy one unit of U.S. dollar. 
D)  the U.S. import of Swiss goods will increase. 
E)  the U.S. dollar per Swiss franc exchange rate will decrease. 
A)  Swiss goods become more expensive in the United States. 
B)  U.S. goods become more expensive in Switzerland. 
C)  Swiss investors will pay more Swiss francs to buy one unit of U.S. dollar. 
D)  the U.S. import of Swiss goods will increase. 
E)  the U.S. dollar per Swiss franc exchange rate will decrease.

Question 13

If the U.S. dollar depreciates in the foreign exchange market, American exports will _____ and American imports will _____.

Accepted Answer

A)  be more expensive; be more expensive 
B)  be more expensive; be less expensive 
C)  be less expensive; be less expensive 
D)  be less expensive; be more expensive 
E)  decrease; increase 
A)  be more expensive; be more expensive 
B)  be more expensive; be less expensive 
C)  be less expensive; be less expensive 
D)  be less expensive; be more expensive 
E)  decrease; increase

Question 14

Managed float means _____

Accepted Answer

A)  a fixed exchange rate system with regularly scheduled periodic devaluations. 
B)  a freely floating exchange rate system. 
C)  a combination of freely floating exchange rates with occasional intervention by central banks. 
D)  a fixed exchange rate system managed by the European Community. 
E)  a flexible exchange rate system managed entirely by the IMF. 
A)  a fixed exchange rate system with regularly scheduled periodic devaluations. 
B)  a freely floating exchange rate system. 
C)  a combination of freely floating exchange rates with occasional intervention by central banks. 
D)  a fixed exchange rate system managed by the European Community. 
E)  a flexible exchange rate system managed entirely by the IMF.

Question 15

In a fixed exchange-rate system, rates are maintained by the central bank's ongoing purchases and sales of currencies.

Accepted Answer

A) True 
 B)False

Question 16

The balance of payments summarizes the transactions that occur during a given time period between _____

Accepted Answer

A)  the local governments of a country and the federal government of the country. 
B)  the producers and consumers of all goods and services within a country. 
C)  individuals, firms, and government of one country and individuals, firms, and governments of the other countries. 
D)  two firms that operate in two different states in a country. 
E)  the firms in a country and the government of the country. 
A)  the local governments of a country and the federal government of the country. 
B)  the producers and consumers of all goods and services within a country. 
C)  individuals, firms, and government of one country and individuals, firms, and governments of the other countries. 
D)  two firms that operate in two different states in a country. 
E)  the firms in a country and the government of the country.

Question 17

If the U.S. demand for British pounds increases, then _____

Accepted Answer

A)  the dollar price of British pounds will increase. 
B)  the dollar price of British pounds will decrease. 
C)  the exchange rate between dollars and pounds will be less than the equilibrium exchange rate. 
D)  the pound will fall in value vis-à-vis the dollar. 
E)  there will be no change in either the value of the dollar or the pound. 
A)  the dollar price of British pounds will increase. 
B)  the dollar price of British pounds will decrease. 
C)  the exchange rate between dollars and pounds will be less than the equilibrium exchange rate. 
D)  the pound will fall in value vis-à-vis the dollar. 
E)  there will be no change in either the value of the dollar or the pound.

Question 18

Foreign exchange rates tend toward equality around the world because of the actions of _____

Accepted Answer

A)  central banks. 
B)  stock markets. 
C)  commodity markets. 
D)  the World Bank. 
E)  arbitrageurs. 
A)  central banks. 
B)  stock markets. 
C)  commodity markets. 
D)  the World Bank. 
E)  arbitrageurs.

Question 19

The demand curve for foreign exchange _____

Accepted Answer

A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal, because no individual country can influence the price of foreign exchange. 
D)  is vertical, because no individual country can influence the price of foreign exchange. 
E)  may slope downward or upward depending on the volume of imports and exports of the trading countries. 
A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal, because no individual country can influence the price of foreign exchange. 
D)  is vertical, because no individual country can influence the price of foreign exchange. 
E)  may slope downward or upward depending on the volume of imports and exports of the trading countries.

Question 20

A speculator 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)  takes no risks in foreign currency exchanges. 
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)  takes no risks in foreign currency exchanges.

If the U.S. dollar depreciates, it means that _____

The reason the current exchange rate system is called a "managed float" is that _____

Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for €8,000 in the euro zone. According to the purchasing power parity theory, the equilibrium exchange rate should be equal to _____

If a country's balance-of-payments deficit resulted in _ of gold, the country's money supply would _.

Suppose U.S. consumers start buying more English shoes and fewer American shoes. Which of the following will be a likely impact on the foreign exchange market?

A country's balance of payments summarizes all economic transactions during a given period between the residents of that country and the residents of other countries.

Under the gold standard, gold discoveries in Alaska and South America led to severe deflation in the U.S. economy.

Under the gold standard, _____

Which of the following events would not be recorded in the U.S. balance of payments?

Under the gold standard, a country with a surplus in its balance of payments experienced a decline in its money supply and a drop in its price level.

If the U.S. dollar depreciates relative to the Swiss franc, then _____

If the U.S. dollar depreciates in the foreign exchange market, American exports will _ and American imports will _.

Managed float means _____

In a fixed exchange-rate system, rates are maintained by the central bank's ongoing purchases and sales of currencies.

The balance of payments summarizes the transactions that occur during a given time period between _____

If the U.S. demand for British pounds increases, then _____

Foreign exchange rates tend toward equality around the world because of the actions of _____

The demand curve for foreign exchange _____

A speculator in foreign exchange is a person who _____

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.

If the U.S. dollar depreciates, it means that _____

The reason the current exchange rate system is called a "managed float" is that _____

Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for €8,000 in the euro zone. According to the purchasing power parity theory, the equilibrium exchange rate should be equal to _____

If a country's balance-of-payments deficit resulted in _____ of gold, the country's money supply would _____.

Suppose U.S. consumers start buying more English shoes and fewer American shoes. Which of the following will be a likely impact on the foreign exchange market?

A country's balance of payments summarizes all economic transactions during a given period between the residents of that country and the residents of other countries.

Under the gold standard, gold discoveries in Alaska and South America led to severe deflation in the U.S. economy.

Under the gold standard, _____

Which of the following events would not be recorded in the U.S. balance of payments?

Under the gold standard, a country with a surplus in its balance of payments experienced a decline in its money supply and a drop in its price level.

If the U.S. dollar depreciates relative to the Swiss franc, then _____

If the U.S. dollar depreciates in the foreign exchange market, American exports will _____ and American imports will _____.

Managed float means _____

In a fixed exchange-rate system, rates are maintained by the central bank's ongoing purchases and sales of currencies.

The balance of payments summarizes the transactions that occur during a given time period between _____

If the U.S. demand for British pounds increases, then _____

Foreign exchange rates tend toward equality around the world because of the actions of _____

The demand curve for foreign exchange _____

A speculator in foreign exchange is a person who _____

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

If a country's balance-of-payments deficit resulted in _ of gold, the country's money supply would _.

If the U.S. dollar depreciates in the foreign exchange market, American exports will _ and American imports will _.