Question 1

The official settlements account records the change in ________.

Accepted Answer

A)  international trade 
B)  U.S. official reserves 
C)  foreign investment and domestic investment 
D)  the reserves held by banks and the Fed 
A)  international trade 
B)  U.S. official reserves 
C)  foreign investment and domestic investment 
D)  the reserves held by banks and the Fed

Question 2

According to interest rate parity,if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent,the comparable interest rate in the United States will be

Accepted Answer

A)  4 percent. 
B)  3 percent. 
C)  2 percent. 
D)  1 percent. 
A)  4 percent. 
B)  3 percent. 
C)  2 percent. 
D)  1 percent.

Question 3

$$\begin{array} { | l | c |} 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Investment, } I & 700 \
\hline \text { Net taxes, } T & 1,300 \
\hline \text { Government expenditure, } & \
G & 1,200 \
\hline \text { Exports, } X & 1,500 \
\hline \text { Imports, } M & 1,700 \
\hline
\end{array}$$
-In the above table,the government sector balance is a

Accepted Answer

A)  surplus of $200 billion. 
B)  deficit of $200 billion. 
C)  surplus of $100 billion. 
D)  deficit of $100 billion. 
A)  surplus of $200 billion. 
B)  deficit of $200 billion. 
C)  surplus of $100 billion. 
D)  deficit of $100 billion.

Question 4

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

Accepted Answer

A)  the U.S. interest rate rises. 
B)  foreign interest rates rise. 
C)  the expected future exchange rate falls. 
D)  the current exchange rate rises. 
A)  the U.S. interest rate rises. 
B)  foreign interest rates rise. 
C)  the expected future exchange rate falls. 
D)  the current exchange rate rises.

Question 5

An increase in the U.S.demand for imports will ________ the supply of dollars and lead the dollar to ________.

Accepted Answer

A)  increase; appreciate 
B)  decrease; appreciate 
C)  increase; depreciate 
D)  decrease; depreciate 
A)  increase; appreciate 
B)  decrease; appreciate 
C)  increase; depreciate 
D)  decrease; depreciate

Question 6

Suppose your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S.dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S.dollars?

Accepted Answer

A)  $12 
B)  $39 
C)  $108 
D)  $109 
A)  $12 
B)  $39 
C)  $108 
D)  $109

Question 7

Which of the following statements is true?

Accepted Answer

A)  If private saving is greater than private investment, then the private sector has a surplus. 
B)  If private investment is greater than private saving, then the private sector has a deficit. 
C)  If private investment is greater than private saving, then either the government or net export sector must have a surplus. 
D)  All of the above answers are correct. 
A)  If private saving is greater than private investment, then the private sector has a surplus. 
B)  If private investment is greater than private saving, then the private sector has a deficit. 
C)  If private investment is greater than private saving, then either the government or net export sector must have a surplus. 
D)  All of the above answers are correct.

Question 8

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

Accepted Answer

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

Question 9

Consider the market for dollars.If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

Accepted Answer

A)  the supply curve of dollars shifts leftward. 
B)  the supply curve of dollars shifts rightward. 
C)  there is an upward movement along the supply curve for dollars. 
D)  there is a downward movement along the supply curve for dollars. 
A)  the supply curve of dollars shifts leftward. 
B)  the supply curve of dollars shifts rightward. 
C)  there is an upward movement along the supply curve for dollars. 
D)  there is a downward movement along the supply curve for dollars.

Question 10

Epsilon is a country whose unit of currency is the omega.New information leads people to expect that the omega will appreciate next year.To keep the foreign exchange value of the omega fairly steady,the Bank of Epsilon will ________ enough omegas on the foreign exchange market so that the ________ omegas will ________.

Accepted Answer

A)  buy; demand for; increase 
B)  sell; supply of; increase 
C)  buy; demand for; decrease 
D)  buy; supply of; decrease 
A)  buy; demand for; increase 
B)  sell; supply of; increase 
C)  buy; demand for; decrease 
D)  buy; supply of; decrease

Question 11

What is the relationship between net borrower,net lender,debtor nation,and creditor nation?

Accepted Answer

If a nation is currently borrowing from

Question 12

A country has a government sector deficit and a private sector surplus.If the government sector deficit increases,and the private sector surplus decreases,________.

Accepted Answer

A)  net exports decrease or remain constant 
B)  net exports increase 
C)  net exports increase, decrease, or remain constant 
D)  net exports decrease 
A)  net exports decrease or remain constant 
B)  net exports increase 
C)  net exports increase, decrease, or remain constant 
D)  net exports decrease

Question 13

Suppose a British bank offers a 3 percent interest rate while a U.S.bank offers a 7 percent interest rate.People must expect the U.S.dollar will

Accepted Answer

A)  depreciate 4 percent. 
B)  appreciate 4 percent. 
C)  appreciate 10 percent. 
D)  depreciate 10 percent. 
A)  depreciate 4 percent. 
B)  appreciate 4 percent. 
C)  appreciate 10 percent. 
D)  depreciate 10 percent.

Question 14

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \text { Billions of dollars } \
\hline \text { Exports } & 234 \
\hline \text { Imports } & 277 \
\hline \text { Government } & \
\text { expenditure } & 887 \
\hline \text { Net taxes } & 855 \
\hline \text { Investment } & 760 \
\hline \text { Saving } & 749 \
\hline
\end{array}$$
-The above table gives data for the nation of Sueland.What is the government sector balance?

Accepted Answer

A)  $1,772 billion 
B)  $32 billion 
C)  -$43 billion 
D)  -$32 billion 
A)  $1,772 billion 
B)  $32 billion 
C)  -$43 billion 
D)  -$32 billion

Question 15

Which of the following is NOT included in the U.S.current account?

Accepted Answer

A)  U.S. investment abroad 
B)  net interest income 
C)  net transfers 
D)  imports of goods and services 
A)  U.S. investment abroad 
B)  net interest income 
C)  net transfers 
D)  imports of goods and services

Question 16

Suppose the exchange rate of the U.S.dollar was 1.00 euro = $0.50 on Thursday,and on Friday the exchange rate was $1.00 = 2.10 euros.Which of the following best explains what has happened between Thursday and Friday?

Accepted Answer

A)  The U.S. dollar appreciated against the euro. 
B)  The euro appreciated against the U.S. dollar. 
C)  The U.S. dollar depreciated against the euro. 
D)  Both answers B and C are correct. 
A)  The U.S. dollar appreciated against the euro. 
B)  The euro appreciated against the U.S. dollar. 
C)  The U.S. dollar depreciated against the euro. 
D)  Both answers B and C are correct.

Question 17

The official settlements account of a country measures

Accepted Answer

A)  the receipts from goods and services bought and sold and transfers to and from foreigners. 
B)  borrowing and lending between the country's residents and foreigners. 
C)  the net increase or decrease in the country's official reserves. 
D)  net transfer payments between the country's citizens and foreigners. 
A)  the receipts from goods and services bought and sold and transfers to and from foreigners. 
B)  borrowing and lending between the country's residents and foreigners. 
C)  the net increase or decrease in the country's official reserves. 
D)  net transfer payments between the country's citizens and foreigners.

Question 18

According to the law of supply in the foreign exchange market,when the U.S.exchange rate rises,the quantity of U.S.dollars supplied will decrease.

Accepted Answer

A) True 
 B)False

Question 19

The demand for one money is the supply of another money.

Accepted Answer

A) True 
 B)False

Question 20

This year a country loaned more to the rest of the world than it borrowed from the rest of the world.In addition,the country has invested more in the rest of the world than other countries have invested in it.The country is currently a ________ and also a ________.

Accepted Answer

A)  net lender; creditor nation 
B)  net borrower; creditor nation 
C)  net borrower; debtor nation 
D)  debtor nation; net lender 
A)  net lender; creditor nation 
B)  net borrower; creditor nation 
C)  net borrower; debtor nation 
D)  debtor nation; net lender

The official settlements account records the change in ________.

According to interest rate parity,if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent,the comparable interest rate in the United States will be

Component Amount (billions of dollars) Investment, I 700 Net taxes, T 1,300 Government expenditure, G 1,200 Exports, X 1,500 Imports, M 1,700 -In the above table,the government sector balance is a

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

An increase in the U.S.demand for imports will the supply of dollars and lead the dollar to .

Suppose your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S.dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S.dollars?

Which of the following statements is true?

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

Consider the market for dollars.If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

Epsilon is a country whose unit of currency is the omega.New information leads people to expect that the omega will appreciate next year.To keep the foreign exchange value of the omega fairly steady,the Bank of Epsilon will enough omegas on the foreign exchange market so that the omegas will .

What is the relationship between net borrower,net lender,debtor nation,and creditor nation?

A country has a government sector deficit and a private sector surplus.If the government sector deficit increases,and the private sector surplus decreases,________.

Suppose a British bank offers a 3 percent interest rate while a U.S.bank offers a 7 percent interest rate.People must expect the U.S.dollar will

Item Billions of dollars Exports 234 Imports 277 Government expenditure 887 Net taxes 855 Investment 760 Saving 749 -The above table gives data for the nation of Sueland.What is the government sector balance?

Which of the following is NOT included in the U.S.current account?

Suppose the exchange rate of the U.S.dollar was 1.00 euro = $0.50 on Thursday,and on Friday the exchange rate was $1.00 = 2.10 euros.Which of the following best explains what has happened between Thursday and Friday?

The official settlements account of a country measures

According to the law of supply in the foreign exchange market,when the U.S.exchange rate rises,the quantity of U.S.dollars supplied will decrease.

The demand for one money is the supply of another money.

This year a country loaned more to the rest of the world than it borrowed from the rest of the world.In addition,the country has invested more in the rest of the world than other countries have invested in it.The country is currently a and also a .

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

The official settlements account records the change in ________.

According to interest rate parity,if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent,the comparable interest rate in the United States will be

Component Amount (billions of dollars) Investment, I 700 Net taxes, T 1,300 Government expenditure, G 1,200 Exports, X 1,500 Imports, M 1,700 -In the above table,the government sector balance is a

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

An increase in the U.S.demand for imports will ________ the supply of dollars and lead the dollar to ________.

Suppose your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S.dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S.dollars?

Which of the following statements is true?

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₁ could occur when

Consider the market for dollars.If the exchange rate rises from 2 pesos per dollar to 4 pesos per dollar,

What is the relationship between net borrower,net lender,debtor nation,and creditor nation?

A country has a government sector deficit and a private sector surplus.If the government sector deficit increases,and the private sector surplus decreases,________.

Suppose a British bank offers a 3 percent interest rate while a U.S.bank offers a 7 percent interest rate.People must expect the U.S.dollar will

Item Billions of dollars Exports 234 Imports 277 Government expenditure 887 Net taxes 855 Investment 760 Saving 749 -The above table gives data for the nation of Sueland.What is the government sector balance?

Which of the following is NOT included in the U.S.current account?

Suppose the exchange rate of the U.S.dollar was 1.00 euro = $0.50 on Thursday,and on Friday the exchange rate was $1.00 = 2.10 euros.Which of the following best explains what has happened between Thursday and Friday?

The official settlements account of a country measures

According to the law of supply in the foreign exchange market,when the U.S.exchange rate rises,the quantity of U.S.dollars supplied will decrease.

The demand for one money is the supply of another money.

This year a country loaned more to the rest of the world than it borrowed from the rest of the world.In addition,the country has invested more in the rest of the world than other countries have invested in it.The country is currently a ________ and also a ________.

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

An increase in the U.S.demand for imports will the supply of dollars and lead the dollar to .

This year a country loaned more to the rest of the world than it borrowed from the rest of the world.In addition,the country has invested more in the rest of the world than other countries have invested in it.The country is currently a and also a .