Question 1

The government's holdings of foreign currency is recorded in the

Accepted Answer

A)  money account. 
B)  official settlements account. 
C)  capital account. 
D)  current account. 
E)  currency account. 
A)  money account. 
B)  official settlements account. 
C)  capital account. 
D)  current account. 
E)  currency account.

Question 2

Name and briefly describe the three balance of payments accounts.

Accepted Answer

The current account is a record of inter

Question 3

$$\begin{array} { l c } 
\text { Variables } & \text { (billions of dollars) } \
\hline \text { Imports of goods and services } & 1,400 \
\text { Exports of goods and services } & 1,600 \
\text { Net interest } & 0 \
\text { Net transfers } & 0 \
\text { Foreign investment in the United } & \
\text { States } & 480 \
\text { U.S. investment abroad } & 700 \
\hline
\end{array}$$ 
The table has some of the U.S.balance of payments account.
-The table above gives some of the balance of payments accounts of the United States in 2013.
a. What is the current account balance?
b. What is the capital account balance?
c. What is the official settlements account balance?

Accepted Answer

a. The current account balance

Question 4

If official reserves increase, then we know that the

Accepted Answer

A)  official settlements account balance is negative. 
B)  capital account is negative. 
C)  official settlements account balance is positive. 
D)  capital and current accounts must sum to zero. 
E)  capital account is positive. 
A)  official settlements account balance is negative. 
B)  capital account is negative. 
C)  official settlements account balance is positive. 
D)  capital and current accounts must sum to zero. 
E)  capital account is positive.

Question 5

Figures
   
The figure above shows the demand curve for dollars in the foreign exchange market.
-If the exchange rate rises as shown by the arrow, the price of American exports to foreigners will be ________, and foreign nations will demand ________ dollars in order to buy ________ American exports.

Accepted Answer

A)  cheaper; more; more 
B)  higher; more; more 
C)  cheaper; fewer; fewer 
D)  cheaper; fewer; more 
E)  higher; fewer; fewer 
A)  cheaper; more; more 
B)  higher; more; more 
C)  cheaper; fewer; fewer 
D)  cheaper; fewer; more 
E)  higher; fewer; fewer

Question 6

When people expect that the future exchange rate will be lower, they ________ the supply of dollars and the current exchange rate ________.

Accepted Answer

A)  increase; rises 
B)  increase; falls 
C)  decrease; rises 
D)  decrease; falls 
E)  do not change; rises 
A)  increase; rises 
B)  increase; falls 
C)  decrease; rises 
D)  decrease; falls 
E)  do not change; rises

Question 7

If the U.S.capital account balance has a $30 million surplus and there was no change in official reserves during that year, we know that

Accepted Answer

A)  U.S.net foreign lending must equal $30 million. 
B)  the United States has a $30 million current account deficit. 
C)  the United States is a net lender. 
D)  U.S.official reserves have increased by $30 million. 
E)  the United States has a $30 million current account surplus. 
A)  U.S.net foreign lending must equal $30 million. 
B)  the United States has a $30 million current account deficit. 
C)  the United States is a net lender. 
D)  U.S.official reserves have increased by $30 million. 
E)  the United States has a $30 million current account surplus.

Question 8

The quantity of U.S.dollars supplied in the foreign exchange market is

Accepted Answer

A)  fixed at any given exchange rate. 
B)  positively related to the exchange rate. 
C)  negatively related to the exchange rate. 
D)  unrelated to the exchange rate. 
E)  the same as the quantity of for U.S.dollars demanded. 
A)  fixed at any given exchange rate. 
B)  positively related to the exchange rate. 
C)  negatively related to the exchange rate. 
D)  unrelated to the exchange rate. 
E)  the same as the quantity of for U.S.dollars demanded.

Question 9

A country reports exports minus imports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves.The country is a

Accepted Answer

A)  net borrower. 
B)  net lender. 
C)  debtor nation. 
D)  net liability. 
E)  net asset. 
A)  net borrower. 
B)  net lender. 
C)  debtor nation. 
D)  net liability. 
E)  net asset.

Question 10

Is the United States a debtor or a creditor nation in 2015?

Accepted Answer

A)  a debtor nation 
B)  a creditor nation 
C)  neither a creditor nor debtor nation 
D)  both a creditor nation and a debtor nation 
E)  More information is needed to determine if the United States is a debtor or creditor nation. 
A)  a debtor nation 
B)  a creditor nation 
C)  neither a creditor nor debtor nation 
D)  both a creditor nation and a debtor nation 
E)  More information is needed to determine if the United States is a debtor or creditor nation.

Question 11

In the foreign exchange market, the exchange rate is volatile because the

Accepted Answer

A)  demand for dollars changes more frequently than the supply of dollars. 
B)  supply of dollars changes more frequently than the demand for dollars. 
C)  factors that influence the supply of dollars also influence the demand for dollars. 
D)  both the demand curve for dollars and the supply curve of dollars are very flat. 
E)  None of the above is related to the volatility of the exchange rate. 
A)  demand for dollars changes more frequently than the supply of dollars. 
B)  supply of dollars changes more frequently than the demand for dollars. 
C)  factors that influence the supply of dollars also influence the demand for dollars. 
D)  both the demand curve for dollars and the supply curve of dollars are very flat. 
E)  None of the above is related to the volatility of the exchange rate.

Question 12

When the U.S.interest rate rises, the demand for U.S.dollars ________ and the exchange rate ________.

Accepted Answer

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

Question 13

Purchasing power parity determines the exchange rate in

Accepted Answer

A)  the long run. 
B)  the short run. 
C)  the long run and the short run. 
D)  theory only, but not in reality. 
E)  nations that do not allow their exchange rate to fluctuate. 
A)  the long run. 
B)  the short run. 
C)  the long run and the short run. 
D)  theory only, but not in reality. 
E)  nations that do not allow their exchange rate to fluctuate.

Question 14

Today, one U.S.dollar exchanges for 1.10 euros.The next morning the same dollar exchanges for 1.07 euros.We can conclude that the dollar has ________ and the euro has ________.

Accepted Answer

A)  appreciated; appreciated 
B)  depreciated; appreciated 
C)  depreciated; neither appreciated nor depreciated 
D)  appreciated; depreciated 
E)  depreciated; depreciated 
A)  appreciated; appreciated 
B)  depreciated; appreciated 
C)  depreciated; neither appreciated nor depreciated 
D)  appreciated; depreciated 
E)  depreciated; depreciated

Question 15

The United States currently is

Accepted Answer

A)  a net borrower and has been since the end of World War II in 1945. 
B)  a net lender and has been since the 1980s. 
C)  a net borrower and has been since the 1980s. 
D)  a net lender and has been since the end of World War II in 1945. 
E)  neither a net lender nor a net borrower. 
A)  a net borrower and has been since the end of World War II in 1945. 
B)  a net lender and has been since the 1980s. 
C)  a net borrower and has been since the 1980s. 
D)  a net lender and has been since the end of World War II in 1945. 
E)  neither a net lender nor a net borrower.

Question 16

The official settlements account records the

Accepted Answer

A)  change in official U.S.reserves. 
B)  revenue collected from taxing imports. 
C)  income used to settle international lawsuits. 
D)  change in the official U.S.exchange rate. 
E)  revenue collected from taxing exports. 
A)  change in official U.S.reserves. 
B)  revenue collected from taxing imports. 
C)  income used to settle international lawsuits. 
D)  change in the official U.S.exchange rate. 
E)  revenue collected from taxing exports.

Question 17

In the United States, the main source of fluctuations in the current account balance is

Accepted Answer

A)  net transfers. 
B)  international debt. 
C)  net exports. 
D)  net interest. 
E)  exports of capital. 
A)  net transfers. 
B)  international debt. 
C)  net exports. 
D)  net interest. 
E)  exports of capital.

Question 18

When a U.S.company makes a $200,000 donation to the International Red Cross to help the victims of an earthquake in India, the transaction is recorded in the

Accepted Answer

A)  official settlements account. 
B)  current account. 
C)  international help account. 
D)  capital account. 
E)  one-way donations account. 
A)  official settlements account. 
B)  current account. 
C)  international help account. 
D)  capital account. 
E)  one-way donations account.

Question 19

The foreign exchange market is the market in which

Accepted Answer

A)  all international transactions occur. 
B)  currencies are exchanged solely by governments. 
C)  goods and services are exchanged between governments. 
D)  the currency of one country is exchanged for the currency of another. 
E)  the world's governments collect their tariff revenue. 
A)  all international transactions occur. 
B)  currencies are exchanged solely by governments. 
C)  goods and services are exchanged between governments. 
D)  the currency of one country is exchanged for the currency of another. 
E)  the world's governments collect their tariff revenue.

Question 20

In the foreign exchange market, the demand for dollars decreases and the demand curve shifts leftward if the

Accepted Answer

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

The government's holdings of foreign currency is recorded in the

Name and briefly describe the three balance of payments accounts.

If official reserves increase, then we know that the

Figures The figure above shows the demand curve for dollars in the foreign exchange market. -If the exchange rate rises as shown by the arrow, the price of American exports to foreigners will be , and foreign nations will demand dollars in order to buy American exports.

When people expect that the future exchange rate will be lower, they the supply of dollars and the current exchange rate .

If the U.S.capital account balance has a $30 million surplus and there was no change in official reserves during that year, we know that

The quantity of U.S.dollars supplied in the foreign exchange market is

A country reports exports minus imports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves.The country is a

Is the United States a debtor or a creditor nation in 2015?

In the foreign exchange market, the exchange rate is volatile because the

When the U.S.interest rate rises, the demand for U.S.dollars and the exchange rate .

Purchasing power parity determines the exchange rate in

Today, one U.S.dollar exchanges for 1.10 euros.The next morning the same dollar exchanges for 1.07 euros.We can conclude that the dollar has and the euro has .

The United States currently is

The official settlements account records the

In the United States, the main source of fluctuations in the current account balance is

When a U.S.company makes a $200,000 donation to the International Red Cross to help the victims of an earthquake in India, the transaction is recorded in the

The foreign exchange market is the market in which

In the foreign exchange market, the demand for dollars decreases and the demand curve shifts leftward if the

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

The government's holdings of foreign currency is recorded in the

Name and briefly describe the three balance of payments accounts.

If official reserves increase, then we know that the

Figures The figure above shows the demand curve for dollars in the foreign exchange market. -If the exchange rate rises as shown by the arrow, the price of American exports to foreigners will be ________, and foreign nations will demand ________ dollars in order to buy ________ American exports.

When people expect that the future exchange rate will be lower, they ________ the supply of dollars and the current exchange rate ________.

If the U.S.capital account balance has a $30 million surplus and there was no change in official reserves during that year, we know that

The quantity of U.S.dollars supplied in the foreign exchange market is

A country reports exports minus imports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves.The country is a

Is the United States a debtor or a creditor nation in 2015?

In the foreign exchange market, the exchange rate is volatile because the

When the U.S.interest rate rises, the demand for U.S.dollars ________ and the exchange rate ________.

Purchasing power parity determines the exchange rate in

Today, one U.S.dollar exchanges for 1.10 euros.The next morning the same dollar exchanges for 1.07 euros.We can conclude that the dollar has ________ and the euro has ________.

The United States currently is

The official settlements account records the

In the United States, the main source of fluctuations in the current account balance is

When a U.S.company makes a $200,000 donation to the International Red Cross to help the victims of an earthquake in India, the transaction is recorded in the

The foreign exchange market is the market in which

In the foreign exchange market, the demand for dollars decreases and the demand curve shifts leftward if the

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

Figures The figure above shows the demand curve for dollars in the foreign exchange market. -If the exchange rate rises as shown by the arrow, the price of American exports to foreigners will be , and foreign nations will demand dollars in order to buy American exports.

When people expect that the future exchange rate will be lower, they the supply of dollars and the current exchange rate .

When the U.S.interest rate rises, the demand for U.S.dollars and the exchange rate .

Today, one U.S.dollar exchanges for 1.10 euros.The next morning the same dollar exchanges for 1.07 euros.We can conclude that the dollar has and the euro has .