Question 1

If the expected future exchange rate decreases, then the supply of dollars ________ and the demand for dollars ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change

Question 2

Suppose you own some German government bonds that pay you interest every year.This interest is entered into which of the balance of payments accounts?

Accepted Answer

A)  current account 
B)  capital account 
C)  official settlements account 
D)  trade account 
E)  interest account 
A)  current account 
B)  capital account 
C)  official settlements account 
D)  trade account 
E)  interest account

Question 3

"Although the United States is running a large current account deficit, it is still ranked as a major international net lender." Is the previous statement correct or incorrect?
 Briefly explain your answer.

Accepted Answer

The statement is incorrect.Aside from ch

Question 4

Everything else remaining the same, in the foreign exchange market which of the following increases the supply of U.S.dollars?

Accepted Answer

A)  The European interest rate rises. 
B)  The expected future exchange rate rises. 
C)  The U.S.interest rate rises. 
D)  The U.S.interest rate differential increases. 
E)  The exchange rate falls. 
A)  The European interest rate rises. 
B)  The expected future exchange rate rises. 
C)  The U.S.interest rate rises. 
D)  The U.S.interest rate differential increases. 
E)  The exchange rate falls.

Question 5

If the current account balance has a $70 million deficit and there was no change in official reserves during that year, then we know that

Accepted Answer

A)  the balance of payments must register a $70 million surplus. 
B)  the capital account balance must have a $70 million surplus. 
C)  the official settlements account balance must have a $70 million surplus. 
D)  net transfers were -$70 million. 
E)  the capital account balance must have a $70 million deficit. 
A)  the balance of payments must register a $70 million surplus. 
B)  the capital account balance must have a $70 million surplus. 
C)  the official settlements account balance must have a $70 million surplus. 
D)  net transfers were -$70 million. 
E)  the capital account balance must have a $70 million deficit.

Question 6

If the foreign invest in the United States is ________ than the United States invests abroad, the capital account balance is ________.

Accepted Answer

A)  greater than; positive 
B)  less than; positive 
C)  greater than; negative 
D)  less than; zero 
E)  greater than; zero 
A)  greater than; positive 
B)  less than; positive 
C)  greater than; negative 
D)  less than; zero 
E)  greater than; zero

Question 7

$$\begin{array} { l c } 
\text { Balance of payments accounts } & \text { (billions of dollars) } \
\hline \text { Syldavia investment abroad } & 170 \
\text { Exports of goods and services } & 140 \
\text { Net transfers } & 0 \
\text { Change in official reserves } & 0 \
\text { Net interest } & 0 \
\text { Imports of goods and services } & 180 \
\text { Foreign investment in Syldavia } & 210 \
\hline
\end{array}$$
-The table above gives data for the nation of Syldavia.The capital account has a

Accepted Answer

A)  $40 billion deficit. 
B)  $30 billion deficit. 
C)  $40 billion surplus. 
D)  $50 billion deficit. 
E)  balance of $380 billion. 
A)  $40 billion deficit. 
B)  $30 billion deficit. 
C)  $40 billion surplus. 
D)  $50 billion deficit. 
E)  balance of $380 billion.

Question 8

When U.S.official reserves ________, the official settlements account balance becomes negative and when U.S.official reserves ________, the official settlements account balance becomes positive.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase 
E)  More information is needed about the balances on the current account and the capital account in order to answer this question. 
A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase 
E)  More information is needed about the balances on the current account and the capital account in order to answer this question.

Question 9

The ________ always equals zero.

Accepted Answer

A)  sum of current account plus capital account 
B)  sum of current account plus official settlements account 
C)  sum of capital account plus official settlements account 
D)  sum of current account plus capital account plus official settlements account 
E)  official settlements account 
A)  sum of current account plus capital account 
B)  sum of current account plus official settlements account 
C)  sum of capital account plus official settlements account 
D)  sum of current account plus capital account plus official settlements account 
E)  official settlements account

Question 10

If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has ________ and the euro has ________.

Accepted Answer

A)  appreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; appreciated 
D)  depreciated; depreciated 
E)  shrunk; grown 
A)  appreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; appreciated 
D)  depreciated; depreciated 
E)  shrunk; grown

Question 11

What would the Fed have done if it had tried to keep the exchange rate at its 2001 level?

Accepted Answer

A)  buy dollars and sell euros 
B)  buy dollars and buy euros 
C)  sell dollars and buy euros 
D)  sell dollars and sell euros 
E)  None of the above are correct because the Fed cannot affect the exchange rate. 
A)  buy dollars and sell euros 
B)  buy dollars and buy euros 
C)  sell dollars and buy euros 
D)  sell dollars and sell euros 
E)  None of the above are correct because the Fed cannot affect the exchange rate.

Question 12

The figure above shows demand curves for dollars in the foreign exchange market.
-Based on the figure above, which of the following factors could lead the demand curve to shift leftward from D₀ to D₂?

Accepted Answer

A)  a rise in the U.S.exchange rate 
B)  a fall in the U.S.exchange rate 
C)  a rise in the U.S.interest rate 
D)  a rise in expected future U.S.exchange rate 
E)  a fall in foreign interest rates 
A)  a rise in the U.S.exchange rate 
B)  a fall in the U.S.exchange rate 
C)  a rise in the U.S.interest rate 
D)  a rise in expected future U.S.exchange rate 
E)  a fall in foreign interest rates

Question 13

The official settlements account contains data on

Accepted Answer

A)  officials' expenses. 
B)  official reserves. 
C)  trade complaints that are officially settled. 
D)  official governmental complaints between countries. 
E)  capital imports and exports. 
A)  officials' expenses. 
B)  official reserves. 
C)  trade complaints that are officially settled. 
D)  official governmental complaints between countries. 
E)  capital imports and exports.

Question 14

The ________ the expected future exchange rate, the greater is the expected profit from holding dollars and so the ________.

Accepted Answer

A)  lower; supply curve of dollars shifts rightward 
B)  higher; demand curve for dollars shifts leftward 
C)  higher; supply curve of dollars shifts leftward 
D)  lower; demand curve for dollars shifts leftward 
E)  higher; supply curve of dollars shifts rightward 
A)  lower; supply curve of dollars shifts rightward 
B)  higher; demand curve for dollars shifts leftward 
C)  higher; supply curve of dollars shifts leftward 
D)  lower; demand curve for dollars shifts leftward 
E)  higher; supply curve of dollars shifts rightward

Question 15

Why do people and firms in the United States supply dollars to the foreign exchange market?

Accepted Answer

People and firms supply dollar

Question 16

The United States currently is a

Accepted Answer

A)  creditor nation and has been since the end of World War II in 1945. 
B)  debtor nation and has been since 1989. 
C)  creditor nation and has been one since 1989. 
D)  debtor nation and has been since the end of World War II in 1945. 
E)  neither a debtor nation nor a creditor nation. 
A)  creditor nation and has been since the end of World War II in 1945. 
B)  debtor nation and has been since 1989. 
C)  creditor nation and has been one since 1989. 
D)  debtor nation and has been since the end of World War II in 1945. 
E)  neither a debtor nation nor a creditor nation.

Question 17

Comparing the U.S.balance of payments in 2008 to the rest of the world, we see that the

Accepted Answer

A)  United States has the largest current account surplus. 
B)  U.S.current account is similar in size to most developed nations and has a surplus. 
C)  United States has the largest capital account deficit. 
D)  United States has the largest current account deficit. 
E)  U.S.current account is similar in size to most developed nations and has a deficit. 
A)  United States has the largest current account surplus. 
B)  U.S.current account is similar in size to most developed nations and has a surplus. 
C)  United States has the largest capital account deficit. 
D)  United States has the largest current account deficit. 
E)  U.S.current account is similar in size to most developed nations and has a deficit.

Question 18

The figure above shows supply curves of dollars in the foreign exchange market.
-Based on the figure above, which of the following factors could lead the supply curve to shift leftward from S₀ to S₁?

Accepted Answer

A)  a rise in the U.S.exchange rate 
B)  a fall in the U.S.exchange rate 
C)  a fall in the U.S.interest rate 
D)  a rise in expected future U.S.exchange rate 
E)  a rise in foreign interest rates 
A)  a rise in the U.S.exchange rate 
B)  a fall in the U.S.exchange rate 
C)  a fall in the U.S.interest rate 
D)  a rise in expected future U.S.exchange rate 
E)  a rise in foreign interest rates

Question 19

$$\begin{array} { l c } 
\text { Variables } & \text { (billions of dollars) } \
\hline \text { Imports of goods and services } & 1,400 \
\text { Exports of goods and services } & 1,600 \
\text { Net interest } & 0 \
\text { Net transfers } & 0 \
\text { Foreign investment in the United } & \
\text { States } & 480 \
\text { U.S. investment abroad } & 700 \
\hline
\end{array}$$ 
The table has some of the U.S.balance of payments account.
-If there is no statistical discrepancy, the sum of all three balance of payments accounts equals ________.

Accepted Answer

A)  zero 
B)  -$20 billion 
C)  +$200 billion 
D)  +$220 billion 
E)  +$20 billion 
A)  zero 
B)  -$20 billion 
C)  +$200 billion 
D)  +$220 billion 
E)  +$20 billion

Question 20

In the foreign exchange market, an increase in the supply of dollars could be the result of

Accepted Answer

A)  an increase in the U.S.interest rate differential. 
B)  an increase in the expected future exchange rate. 
C)  a decrease in the U.S.interest rate differential. 
D)  an increase in the exchange rate. 
E)  a decrease in the exchange rate. 
A)  an increase in the U.S.interest rate differential. 
B)  an increase in the expected future exchange rate. 
C)  a decrease in the U.S.interest rate differential. 
D)  an increase in the exchange rate. 
E)  a decrease in the exchange rate.

If the expected future exchange rate decreases, then the supply of dollars and the demand for dollars .

Suppose you own some German government bonds that pay you interest every year.This interest is entered into which of the balance of payments accounts?

"Although the United States is running a large current account deficit, it is still ranked as a major international net lender." Is the previous statement correct or incorrect? Briefly explain your answer.

Everything else remaining the same, in the foreign exchange market which of the following increases the supply of U.S.dollars?

If the current account balance has a $70 million deficit and there was no change in official reserves during that year, then we know that

If the foreign invest in the United States is than the United States invests abroad, the capital account balance is .

When U.S.official reserves , the official settlements account balance becomes negative and when U.S.official reserves , the official settlements account balance becomes positive.

The ________ always equals zero.

If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has and the euro has .

What would the Fed have done if it had tried to keep the exchange rate at its 2001 level?

The figure above shows demand curves for dollars in the foreign exchange market. -Based on the figure above, which of the following factors could lead the demand curve to shift leftward from D₀ to D₂?

The official settlements account contains data on

The the expected future exchange rate, the greater is the expected profit from holding dollars and so the .

Why do people and firms in the United States supply dollars to the foreign exchange market?

The United States currently is a

Comparing the U.S.balance of payments in 2008 to the rest of the world, we see that the

The figure above shows supply curves of dollars in the foreign exchange market. -Based on the figure above, which of the following factors could lead the supply curve to shift leftward from S₀ to S₁?

In the foreign exchange market, an increase in the supply of dollars could be the result of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 19: International Finance

If the expected future exchange rate decreases, then the supply of dollars ________ and the demand for dollars ________.

Suppose you own some German government bonds that pay you interest every year.This interest is entered into which of the balance of payments accounts?

"Although the United States is running a large current account deficit, it is still ranked as a major international net lender." Is the previous statement correct or incorrect? Briefly explain your answer.

Everything else remaining the same, in the foreign exchange market which of the following increases the supply of U.S.dollars?

If the current account balance has a $70 million deficit and there was no change in official reserves during that year, then we know that

If the foreign invest in the United States is ________ than the United States invests abroad, the capital account balance is ________.

When U.S.official reserves ________, the official settlements account balance becomes negative and when U.S.official reserves ________, the official settlements account balance becomes positive.

The ________ always equals zero.

If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has ________ and the euro has ________.

What would the Fed have done if it had tried to keep the exchange rate at its 2001 level?

The figure above shows demand curves for dollars in the foreign exchange market. -Based on the figure above, which of the following factors could lead the demand curve to shift leftward from D₀ to D₂?

The official settlements account contains data on

The ________ the expected future exchange rate, the greater is the expected profit from holding dollars and so the ________.

Why do people and firms in the United States supply dollars to the foreign exchange market?

The United States currently is a

Comparing the U.S.balance of payments in 2008 to the rest of the world, we see that the

The figure above shows supply curves of dollars in the foreign exchange market. -Based on the figure above, which of the following factors could lead the supply curve to shift leftward from S₀ to S₁?

In the foreign exchange market, an increase in the supply of dollars could be the result of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

If the expected future exchange rate decreases, then the supply of dollars and the demand for dollars .

If the foreign invest in the United States is than the United States invests abroad, the capital account balance is .

When U.S.official reserves , the official settlements account balance becomes negative and when U.S.official reserves , the official settlements account balance becomes positive.

If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has and the euro has .

The the expected future exchange rate, the greater is the expected profit from holding dollars and so the .