Question 1

If the exchange rate of the English pound goes from $1.50 to $2.00,the pound has

Accepted Answer

A) appreciated,and the English will find U.S.goods cheaper. 
B) appreciated,and the English will find U.S.goods more expensive. 
C) depreciated,and the English will find U.S.goods cheaper. 
D) depreciated,and the English will find U.S.goods more expensive. 
A) appreciated,and the English will find U.S.goods cheaper. 
B) appreciated,and the English will find U.S.goods more expensive. 
C) depreciated,and the English will find U.S.goods cheaper. 
D) depreciated,and the English will find U.S.goods more expensive.

Question 2

If the exchange rate between the U.S.dollar and the Japanese yen went from $1 US = 100 yen to $1 US = 80 yen,then

Accepted Answer

A) Japanese goods have become less expensive for Americans. 
B) Japanese goods have become more expensive for Americans. 
C) American goods have become more expensive for the Japanese. 
D) American exports to Japan are likely to fall. 
A) Japanese goods have become less expensive for Americans. 
B) Japanese goods have become more expensive for Americans. 
C) American goods have become more expensive for the Japanese. 
D) American exports to Japan are likely to fall.

Question 3

A nation's trade deficit will tend to shrink when its

Accepted Answer

A) economy is expanding. 
B) economy is shrinking. 
C) investment environment is attractive to foreigners. 
D) economy is growing at a normal rate. 
A) economy is expanding. 
B) economy is shrinking. 
C) investment environment is attractive to foreigners. 
D) economy is growing at a normal rate.

Question 4

If the United States is viewed by foreigners as a great nation in which to invest,generating a large inflow of foreign investment,this will cause the United States to run a

Accepted Answer

A) deficit on the current account. 
B) surplus on the current account. 
C) deficit on the capital account. 
D) deficit on the official reserve account. 
A) deficit on the current account. 
B) surplus on the current account. 
C) deficit on the capital account. 
D) deficit on the official reserve account.

Question 5

Which one of the following would supply dollars to the foreign exchange market?

Accepted Answer

A) the sale of U.S.automobiles to a Mexican consumer 
B) the spending of British tourists in the United States 
C) the purchase of Canadian oil by a U.S.consumer 
D) the sale of a U.S.corporation to a Saudi Arabian investor 
A) the sale of U.S.automobiles to a Mexican consumer 
B) the spending of British tourists in the United States 
C) the purchase of Canadian oil by a U.S.consumer 
D) the sale of a U.S.corporation to a Saudi Arabian investor

Question 6

An appreciation in the value of the dollar would

Accepted Answer

A) make U.S.goods less expensive to foreigners. 
B) encourage U.S.consumers to buy more foreign goods. 
C) increase the number of dollars that could be purchased with a Mexican peso. 
D) discourage U.S.consumers from traveling abroad. 
A) make U.S.goods less expensive to foreigners. 
B) encourage U.S.consumers to buy more foreign goods. 
C) increase the number of dollars that could be purchased with a Mexican peso. 
D) discourage U.S.consumers from traveling abroad.

Question 7

Countries that fix the foreign exchange value of their currencies,while following a highly expansionary monetary policy,will

Accepted Answer

A) be unable to maintain both the fixed-exchange rate and the full convertibility of their currency. 
B) generally experience rapid rates of economic growth. 
C) make it easier for their citizens to engage in international trade. 
D) have relatively low rates of domestic inflation. 
A) be unable to maintain both the fixed-exchange rate and the full convertibility of their currency. 
B) generally experience rapid rates of economic growth. 
C) make it easier for their citizens to engage in international trade. 
D) have relatively low rates of domestic inflation.

Question 8

A wealthy Japanese executive decides to buy a large amount of U.S.financial assets.This would contribute to

Accepted Answer

A) a deficit in the U.S.capital account. 
B) a surplus in the U.S.current account. 
C) a surplus in the U.S.capital account. 
D) a deficit in the total balance of payments. 
A) a deficit in the U.S.capital account. 
B) a surplus in the U.S.current account. 
C) a surplus in the U.S.capital account. 
D) a deficit in the total balance of payments.

Question 9

(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 10

Which one of the following is a credit in the U.S.current account?

Accepted Answer

A) the purchase of a U.S.car by a German 
B) the purchase of insurance from Lloyd's of London by an American 
C) a trip to Mexico by an American student 
D) the purchase of Japanese bonds by an American investor 
A) the purchase of a U.S.car by a German 
B) the purchase of insurance from Lloyd's of London by an American 
C) a trip to Mexico by an American student 
D) the purchase of Japanese bonds by an American investor

Question 11

A nation's trade deficit will tend to shrink when

Accepted Answer

A) its economy is expanding. 
B) its economy is shrinking. 
C) its investment environment is less attractive to foreigners. 
D) b and c are true. 
A) its economy is expanding. 
B) its economy is shrinking. 
C) its investment environment is less attractive to foreigners. 
D) b and c are true.

Question 12

If income in the United States increases more rapidly than the income of our trading partners,other things constant,the dollar will

Accepted Answer

A) appreciate,imports will become less expensive,and domestic exports will become more expensive to foreigners. 
B) depreciate,imports will become less expensive,and domestic exports will become more expensive to foreigners. 
C) appreciate,imports will become more expensive,and domestic exports will become less expensive to foreigners. 
D) depreciate,imports will become more expensive,and domestic exports will become less expensive to foreigners. 
A) appreciate,imports will become less expensive,and domestic exports will become more expensive to foreigners. 
B) depreciate,imports will become less expensive,and domestic exports will become more expensive to foreigners. 
C) appreciate,imports will become more expensive,and domestic exports will become less expensive to foreigners. 
D) depreciate,imports will become more expensive,and domestic exports will become less expensive to foreigners.

Question 13

Explain how an increase in the Mexican demand for American goods leads to a change in the Mexican peso relative to the U.S.dollar.

Accepted Answer

Mexicans who wish to buy more American g

Question 14

As domestic income rises,net exports will tend to

Accepted Answer

A) fall,since exports remain the same but imports increase. 
B) rise,since exports remain the same but imports fall. 
C) fall,since exports are lower and imports remain the same. 
D) rise,since exports are higher and imports remain the same. 
E) may either rise or fall,since exports and imports change in opposite directions. 
A) fall,since exports remain the same but imports increase. 
B) rise,since exports remain the same but imports fall. 
C) fall,since exports are lower and imports remain the same. 
D) rise,since exports are higher and imports remain the same. 
E) may either rise or fall,since exports and imports change in opposite directions.

Question 15

If Americans decide to buy more South African diamonds,what is the effect in the foreign 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 16

If a U.S.dollar exchanges for 0.6 English pounds,the dollar price of a pound is

Accepted Answer

A) $0.60. 
B) $1.50. 
C) $1.67. 
D) $1.75. 
A) $0.60. 
B) $1.50. 
C) $1.67. 
D) $1.75.

Question 17

Under a pure flexible exchange rate system,the rate that equates demand and supply in the exchange rate market will also lead to a balance of

Accepted Answer

A) merchandise exports and merchandise imports. 
B) current account transactions. 
C) capital account transactions. 
D) current and capital account transactions. 
A) merchandise exports and merchandise imports. 
B) current account transactions. 
C) capital account transactions. 
D) current and capital account transactions.

Question 18

If the value of a nation's merchandise imports exceeds merchandise exports,the nation is running a

Accepted Answer

A) balance of payments deficit. 
B) balance of payments surplus. 
C) merchandise trade deficit. 
D) merchandise trade surplus. 
A) balance of payments deficit. 
B) balance of payments surplus. 
C) merchandise trade deficit. 
D) merchandise trade surplus.

Question 19

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 20

An increase in the U.S.demand for foreign exchange will cause

Accepted Answer

A) an increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods cheaper to U.S.residents. 
B) an increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods more expensive to U.S.residents. 
C) a decrease in the price of the U.S.dollar,which is an appreciation of the U.S.dollar. 
D) an increase in the price of foreign exchange,which is an appreciation of the U.S.dollar. 
E) a decrease in the price of foreign exchange,which is an appreciation of the U.S.dollar. 
A) an increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods cheaper to U.S.residents. 
B) an increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods more expensive to U.S.residents. 
C) a decrease in the price of the U.S.dollar,which is an appreciation of the U.S.dollar. 
D) an increase in the price of foreign exchange,which is an appreciation of the U.S.dollar. 
E) a decrease in the price of foreign exchange,which is an appreciation of the U.S.dollar.

Exam 19: International Finance and the Foreign Exchange Market

If the exchange rate of the English pound goes from $1.50 to $2.00,the pound has

If the exchange rate between the U.S.dollar and the Japanese yen went from $1 US = 100 yen to $1 US = 80 yen,then

A nation's trade deficit will tend to shrink when its

If the United States is viewed by foreigners as a great nation in which to invest,generating a large inflow of foreign investment,this will cause the United States to run a

Which one of the following would supply dollars to the foreign exchange market?

An appreciation in the value of the dollar would

Countries that fix the foreign exchange value of their currencies,while following a highly expansionary monetary policy,will

A wealthy Japanese executive decides to buy a large amount of U.S.financial assets.This would contribute to

Which one of the following is a credit in the U.S.current account?

A nation's trade deficit will tend to shrink when

If income in the United States increases more rapidly than the income of our trading partners,other things constant,the dollar will

Explain how an increase in the Mexican demand for American goods leads to a change in the Mexican peso relative to the U.S.dollar.

As domestic income rises,net exports will tend to

If Americans decide to buy more South African diamonds,what is the effect in the foreign market?

If a U.S.dollar exchanges for 0.6 English pounds,the dollar price of a pound is

Under a pure flexible exchange rate system,the rate that equates demand and supply in the exchange rate market will also lead to a balance of

If the value of a nation's merchandise imports exceeds merchandise exports,the nation is running a

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

An increase in the U.S.demand for foreign exchange will cause

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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