Question 1

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen. 
A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen.

Question 2

When foreigners are making more "investments" in a country than the residents of the country are making abroad,which of the following is most likely to occur?

Accepted Answer

A) Inflation. 
B) Rapid growth of the money supply. 
C) A balance of trade deficit. 
D) A negative net investment rate. 
A) Inflation. 
B) Rapid growth of the money supply. 
C) A balance of trade deficit. 
D) A negative net investment rate.

Question 3

A depreciation in the value of the U.S.dollar would

Accepted Answer

A) encourage foreigners to travel on American owned airlines. 
B) make U.S.goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S.citizens to travel abroad. 
A) encourage foreigners to travel on American owned airlines. 
B) make U.S.goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S.citizens to travel abroad.

Question 4

Which of the following is most likely to cause the dollar to depreciate?

Accepted Answer

A) higher domestic interest rates 
B) an increase in the rate of inflation abroad 
C) a shift by the Fed to a more expansionary monetary policy 
D) a decrease in foreign interest rates 
A) higher domestic interest rates 
B) an increase in the rate of inflation abroad 
C) a shift by the Fed to a more expansionary monetary policy 
D) a decrease in foreign interest rates

Question 5

Use the figure below to answer the following question(s).
Figure 18-2
  
-Figure 18-2 illustrates supply and demand for U.S.dollars and British pounds in the foreign exchange market.Which of the following would cause the demand for foreign exchange (pounds)to shift from D₁ to D₂?

Accepted Answer

A) an increase in the real interest rate in Britain relative to the United States 
B) higher inflation in Britain than in the United States 
C) higher income growth in Britain than in the United States 
D) an increase in the number of British citizens vacationing in the United States 
A) an increase in the real interest rate in Britain relative to the United States 
B) higher inflation in Britain than in the United States 
C) higher income growth in Britain than in the United States 
D) an increase in the number of British citizens vacationing in the United States

Question 6

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

Accepted Answer

Americans who wish to buy more German go

Question 7

Under a currency board regime,if domestic citizens are buying more (imports)from foreigners than they are selling to them (exports),

Accepted Answer

A) the amount of the domestic currency exchanged for the foreign currency will decrease and,thus,increase the domestic money supply. 
B) the amount of the domestic currency exchanged for the foreign currency will decrease and,thus,decrease the domestic money supply. 
C) the amount of the domestic currency exchanged for the foreign currency will increase and,thus,increase the domestic money supply. 
D) the amount of the domestic currency exchanged for the foreign currency will increase and,thus,decrease the domestic money supply. 
A) the amount of the domestic currency exchanged for the foreign currency will decrease and,thus,increase the domestic money supply. 
B) the amount of the domestic currency exchanged for the foreign currency will decrease and,thus,decrease the domestic money supply. 
C) the amount of the domestic currency exchanged for the foreign currency will increase and,thus,increase the domestic money supply. 
D) the amount of the domestic currency exchanged for the foreign currency will increase and,thus,decrease the domestic money supply.

Question 8

If the value of a country's merchandise exports is less than the value of its merchandise imports,it is said to have a

Accepted Answer

A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) capital account deficit. 
A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) capital account deficit.

Question 9

An appreciation of a nation's currency means that

Accepted Answer

A) the country's exports will become less expensive. 
B) the country's imports will become more expensive. 
C) the country's imports will become less expensive. 
D) more of the domestic currency will be required to purchase a unit of foreign currency. 
A) the country's exports will become less expensive. 
B) the country's imports will become more expensive. 
C) the country's imports will become less expensive. 
D) more of the domestic currency will be required to purchase a unit of foreign currency.

Question 10

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

Accepted Answer

A) higher domestic interest rates 
B) a reduction in the rate of inflation abroad 
C) a shift to a more expansionary monetary policy 
D) rapid growth of income in the United States 
A) higher domestic interest rates 
B) a reduction in the rate of inflation abroad 
C) a shift to a more expansionary monetary policy 
D) rapid growth of income in the United States

Question 11

If a nation is running a trade deficit,it is

Accepted Answer

A) spending more on public services than it is raising in tax revenues. 
B) worse off as the result of its trade with foreign countries. 
C) importing more goods and services than it exports. 
D) encountering a balance of payments disequilibrium. 
A) spending more on public services than it is raising in tax revenues. 
B) worse off as the result of its trade with foreign countries. 
C) importing more goods and services than it exports. 
D) encountering a balance of payments disequilibrium.

Question 12

Suppose the dollar rises from 100 to 125 yen.As a result,

Accepted Answer

A) imports from Japan will likely increase. 
B) exports to Japan will likely increase. 
C) Japanese tourists will be more likely to visit the United States. 
D) U.S.businesses will less likely use Japanese shipping lines to transport their products. 
A) imports from Japan will likely increase. 
B) exports to Japan will likely increase. 
C) Japanese tourists will be more likely to visit the United States. 
D) U.S.businesses will less likely use Japanese shipping lines to transport their products.

Question 13

Which of the following would be recorded as a credit in the U.S.balance of payments accounts?

Accepted Answer

A) the purchase of a German business by a U.S.investor 
B) the import of Honda trucks by a U.S.automobile distributor 
C) European travel expenditures of an American college student 
D) the purchase of a U.S.Treasury bond by a French investment company 
A) the purchase of a German business by a U.S.investor 
B) the import of Honda trucks by a U.S.automobile distributor 
C) European travel expenditures of an American college student 
D) the purchase of a U.S.Treasury bond by a French investment company

Question 14

Because the United States has a flexible exchange rate system,one would expect that

Accepted Answer

A) U.S.exports and imports would be in balance. 
B) the U.S.current account would be in balance. 
C) U.S.exports to China would be in balance with U.S.imports from China. 
D) all of the above are true. 
E) none of the above are true. 
A) U.S.exports and imports would be in balance. 
B) the U.S.current account would be in balance. 
C) U.S.exports to China would be in balance with U.S.imports from China. 
D) all of the above are true. 
E) none of the above are true.

Question 15

Explain how the following will affect the relative values of the dollar and the English pound.
a.Income growth is higher in the United States than in England.
b.Inflation is higher in England than in the United States.
c.Real interest rates are higher in the United States than in England.

Accepted Answer

a.The dollar will depreciate r

Question 16

With time,an appreciation in the value of the nation's currency in the foreign exchange market would cause

Accepted Answer

A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise. 
A) the nation's imports to increase and exports to decline. 
B) the nation's exports to increase and imports to decline. 
C) both imports and exports to decline. 
D) both imports and exports to rise.

Question 17

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound,there will be

Accepted Answer

A) more U.S.imports from Great Britain because the price of pounds has fallen. 
B) more exports to Great Britain because the price of pounds has risen. 
C) fewer exports to Great Britain because the price of the pound has risen. 
D) more U.S.exports to Great Britain since the price of the dollar has fallen. 
E) no change in either exports or imports. 
A) more U.S.imports from Great Britain because the price of pounds has fallen. 
B) more exports to Great Britain because the price of pounds has risen. 
C) fewer exports to Great Britain because the price of the pound has risen. 
D) more U.S.exports to Great Britain since the price of the dollar has fallen. 
E) no change in either exports or imports.

Question 18

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the

Accepted Answer

A) capital account. 
B) current account. 
C) balance of trade. 
D) balance of payments. 
A) capital account. 
B) current account. 
C) balance of trade. 
D) balance of payments.

Question 19

If a German student pays her way to attend Harvard University,her actions will

Accepted Answer

A) create a supply of dollars and a demand for Euros in the foreign currency market. 
B) create a supply of Euros and a demand for dollars in the foreign currency market. 
C) cause the German Euro to appreciate. 
D) cause the U.S.dollar to depreciate. 
A) create a supply of dollars and a demand for Euros in the foreign currency market. 
B) create a supply of Euros and a demand for dollars in the foreign currency market. 
C) cause the German Euro to appreciate. 
D) cause the U.S.dollar to depreciate.

Question 20

An institution that issues a currency at a fixed rate in exchange for an equivalent amount of another designated currency and invests the funds in bonds and liquid assets that provide 100 percent backing for the currency units issued is called

Accepted Answer

A) a central bank. 
B) the International Monetary Fund. 
C) the World Trade Organization. 
D) a currency board. 
A) a central bank. 
B) the International Monetary Fund. 
C) the World Trade Organization. 
D) a currency board.

Exam 19: International Finance and the Foreign Exchange Market

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

When foreigners are making more "investments" in a country than the residents of the country are making abroad,which of the following is most likely to occur?

A depreciation in the value of the U.S.dollar would

Which of the following is most likely to cause the dollar to depreciate?

Use the figure below to answer the following question(s). Figure 18-2 -Figure 18-2 illustrates supply and demand for U.S.dollars and British pounds in the foreign exchange market.Which of the following would cause the demand for foreign exchange (pounds)to shift from D₁ to D₂?

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

Under a currency board regime,if domestic citizens are buying more (imports)from foreigners than they are selling to them (exports),

If the value of a country's merchandise exports is less than the value of its merchandise imports,it is said to have a

An appreciation of a nation's currency means that

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

If a nation is running a trade deficit,it is

Suppose the dollar rises from 100 to 125 yen.As a result,

Which of the following would be recorded as a credit in the U.S.balance of payments accounts?

Because the United States has a flexible exchange rate system,one would expect that

Explain how the following will affect the relative values of the dollar and the English pound. a.Income growth is higher in the United States than in England. b.Inflation is higher in England than in the United States. c.Real interest rates are higher in the United States than in England.

With time,an appreciation in the value of the nation's currency in the foreign exchange market would cause

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound,there will be

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the

If a German student pays her way to attend Harvard University,her actions will

An institution that issues a currency at a fixed rate in exchange for an equivalent amount of another designated currency and invests the funds in bonds and liquid assets that provide 100 percent backing for the currency units issued is called

The Economic Approach

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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

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Gaining From International Trade

Consumer Choice and Elasticity

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Price-Searcher Markets With Low Entry Barriers

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The Supply of and Demand for Productive Resources

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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

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