Question 1

Which of the following is a credit item in the U.S. balance of payments?

Accepted Answer

A)  imports of cars from Japan 
B)  a purchase of an American car by a Japanese citizen 
C)  a purchase of Chinese assets by an American citizen 
D)  an American firm's purchase of steel from a European steel mill 
E)  an increase in American tourists abroad 
A)  imports of cars from Japan 
B)  a purchase of an American car by a Japanese citizen 
C)  a purchase of Chinese assets by an American citizen 
D)  an American firm's purchase of steel from a European steel mill 
E)  an increase in American tourists abroad

Question 2

Exchange rates _____

Accepted Answer

A)  are always fixed between the currencies of two countries. 
B)  fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied. 
C)  fluctuate to equate imports and exports. 
D)  fluctuate to equate interest rates in various countries. 
E)  fluctuate according to agreements between the governments of various countries. 
A)  are always fixed between the currencies of two countries. 
B)  fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied. 
C)  fluctuate to equate imports and exports. 
D)  fluctuate to equate interest rates in various countries. 
E)  fluctuate according to agreements between the governments of various countries.

Question 3

If the U.S. dollar depreciates, it becomes cheaper for U.S. residents to travel in foreign countries.

Accepted Answer

A) True 
 B)False

Question 4

In the United States, imports have exceeded exports every year since 1966.

Accepted Answer

A) True 
 B)False

Question 5

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.a, which shows a balance-of-payments account. What is the merchandise trade balance?

Accepted Answer

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

Question 6

In 2016, the U.S. merchandise trade deficit with China was _____

Accepted Answer

A)  $11 billion. 
B)  $347 billion. 
C)  $80 billion. 
D)  $100 billion. 
E)  $230 billion. 
A)  $11 billion. 
B)  $347 billion. 
C)  $80 billion. 
D)  $100 billion. 
E)  $230 billion.

Question 7

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____

Accepted Answer

A)  speculators. 
B)  hedgers. 
C)  entrepreneurs. 
D)  arbitrageurs. 
E)  underwriters. 
A)  speculators. 
B)  hedgers. 
C)  entrepreneurs. 
D)  arbitrageurs. 
E)  underwriters.

Question 8

According to the purchasing power parity theory, in the long run, _____

Accepted Answer

A)  the exchange rate between any two currencies should be equal all over the world. 
B)  the value of the U.S. dollar should equal the value of the pound, which should equal the value of the yen. 
C)  inflation rates should equalize around the world. 
D)  interest rates should equalize around the world. 
E)  the exchange rate between the currencies of two countries should reflect the differences in price levels in the two countries. 
A)  the exchange rate between any two currencies should be equal all over the world. 
B)  the value of the U.S. dollar should equal the value of the pound, which should equal the value of the yen. 
C)  inflation rates should equalize around the world. 
D)  interest rates should equalize around the world. 
E)  the exchange rate between the currencies of two countries should reflect the differences in price levels in the two countries.

Question 9

The statistical discrepancy in the balance of payments is _____

Accepted Answer

A)  always positive. 
B)  always negative. 
C)  always zero. 
D)  positive, negative, or zero. 
E)  indeterminate. 
A)  always positive. 
B)  always negative. 
C)  always zero. 
D)  positive, negative, or zero. 
E)  indeterminate.

Question 10

Revenue from U.S. merchandise exports is a _____ in the U.S. 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

Question 11

If a country's balance-of-payments surplus 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; not change 
A)  a loss; expand 
B)  a loss; shrink 
C)  an influx; expand 
D)  an influx; shrink 
E)  an increase; not change

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 goods and services 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

Any decrease in supply for foreign exchange, other things constant, will _____

Accepted Answer

A)  increase the number of foreign exchange units required to purchase dollars. 
B)  decrease the number of dollars required to purchase one unit of foreign exchange. 
C)  cause the dollar to appreciate. 
D)  cause the foreign currency to depreciate. 
E)  have no effect. 
A)  increase the number of foreign exchange units required to purchase dollars. 
B)  decrease the number of dollars required to purchase one unit of foreign exchange. 
C)  cause the dollar to appreciate. 
D)  cause the foreign currency to depreciate. 
E)  have no effect.

Question 14

If under the gold standard, the dollar was worth one-twentieth of an ounce of gold, and the British pound was worth one-twentieth of an ounce of gold, then one British pound was worth _____

Accepted Answer

A)  $5. 
B)  $20. 
C)  $4. 
D)  $1. 
E)  half an ounce of gold. 
A)  $5. 
B)  $20. 
C)  $4. 
D)  $1. 
E)  half an ounce of gold.

Question 15

The purchasing power parity theory is a good predictor of _____

Accepted Answer

A)  changes in exchange rates between two third world nations. 
B)  the long-run relationship between changes in the price level and the exchange rate of two countries. 
C)  interest rate differentials between two countries when there are strong barriers preventing trade between the two countries. 
D)  how intervention in exchange markets by central banks influences prices in various countries. 
E)  the day-to-day relationship between changes in the price level and the exchange rate of two countries. 
A)  changes in exchange rates between two third world nations. 
B)  the long-run relationship between changes in the price level and the exchange rate of two countries. 
C)  interest rate differentials between two countries when there are strong barriers preventing trade between the two countries. 
D)  how intervention in exchange markets by central banks influences prices in various countries. 
E)  the day-to-day relationship between changes in the price level and the exchange rate of two countries.

Question 16

Any increase in the demand for foreign exchange, other things constant, will _____

Accepted Answer

A)  increase the number of foreign exchange units required to purchase dollars. 
B)  reduce the number of dollars required to purchase one unit of foreign exchange. 
C)  cause the dollar to depreciate. 
D)  cause the foreign currency to depreciate. 
E)  have no effect. 
A)  increase the number of foreign exchange units required to purchase dollars. 
B)  reduce the number of dollars required to purchase one unit of foreign exchange. 
C)  cause the dollar to depreciate. 
D)  cause the foreign currency to depreciate. 
E)  have no effect.

Question 17

Critics of the system of flexible exchange rates allege that it _____

Accepted Answer

A)  causes inflation. 
B)  causes unemployment. 
C)  gives central banks too little discretion over their money supplies. 
D)  restricts the growth of developing countries. 
E)  gives too much financial power to industrial countries. 
A)  causes inflation. 
B)  causes unemployment. 
C)  gives central banks too little discretion over their money supplies. 
D)  restricts the growth of developing countries. 
E)  gives too much financial power to industrial countries.

Question 18

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

Accepted Answer

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

Question 19

A country's investment earnings from foreign assets minus foreigners' earnings from their assets in the country is called _____

Accepted Answer

A)  the merchandise trade balance. 
B)  net unilateral transfers abroad. 
C)  the balance on goods and services. 
D)  net investment income from abroad. 
E)  the financial account balance. 
A)  the merchandise trade balance. 
B)  net unilateral transfers abroad. 
C)  the balance on goods and services. 
D)  net investment income from abroad. 
E)  the financial account balance.

Question 20

Under the Bretton Woods agreement, _____

Accepted Answer

A)  nations could not adjust their exchange rates relative to the dollar for any reason. 
B)  exchange rates were based on a market basket of European currencies plus the dollar. 
C)  the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce. 
D)  the international monetary system operated exactly like the gold standard of the pre-World War II era. 
E)  gold played no role in the international monetary system. 
A)  nations could not adjust their exchange rates relative to the dollar for any reason. 
B)  exchange rates were based on a market basket of European currencies plus the dollar. 
C)  the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce. 
D)  the international monetary system operated exactly like the gold standard of the pre-World War II era. 
E)  gold played no role in the international monetary system.

Which of the following is a credit item in the U.S. balance of payments?

Exchange rates _____

If the U.S. dollar depreciates, it becomes cheaper for U.S. residents to travel in foreign countries.

In the United States, imports have exceeded exports every year since 1966.

In 2016, the U.S. merchandise trade deficit with China was _____

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____

According to the purchasing power parity theory, in the long run, _____

The statistical discrepancy in the balance of payments is _____

Revenue from U.S. merchandise exports is a _____ in the U.S. balance-of-payments account.

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

Any decrease in supply for foreign exchange, other things constant, will _____

If under the gold standard, the dollar was worth one-twentieth of an ounce of gold, and the British pound was worth one-twentieth of an ounce of gold, then one British pound was worth _____

The purchasing power parity theory is a good predictor of _____

Any increase in the demand for foreign exchange, other things constant, will _____

Critics of the system of flexible exchange rates allege that it _____

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

A country's investment earnings from foreign assets minus foreigners' earnings from their assets in the country is called _____

Under the Bretton Woods agreement, _____

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.

Which of the following is a credit item in the U.S. balance of payments?

Exchange rates _____

If the U.S. dollar depreciates, it becomes cheaper for U.S. residents to travel in foreign countries.

In the United States, imports have exceeded exports every year since 1966.

In 2016, the U.S. merchandise trade deficit with China was _____

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called _____

According to the purchasing power parity theory, in the long run, _____

The statistical discrepancy in the balance of payments is _____

Revenue from U.S. merchandise exports is a _____ in the U.S. balance-of-payments account.

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

Any decrease in supply for foreign exchange, other things constant, will _____

If under the gold standard, the dollar was worth one-twentieth of an ounce of gold, and the British pound was worth one-twentieth of an ounce of gold, then one British pound was worth _____

The purchasing power parity theory is a good predictor of _____

Any increase in the demand for foreign exchange, other things constant, will _____

Critics of the system of flexible exchange rates allege that it _____

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

A country's investment earnings from foreign assets minus foreigners' earnings from their assets in the country is called _____

Under the Bretton Woods agreement, _____

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 surplus resulted in _ of gold, the country's money supply would _.