Question 1

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance.What relationship exists among these variables?

Accepted Answer

A)  (X - M ) + (T - G ) + (S - I ) = 0 
B)  (X - M ) = (T - G ) + (S - I ) 
C)  (T - G ) + (X - M ) = (S - I ) 
D)  (T - G ) = (X - M ) + (S - I ) 
A)  (X - M ) + (T - G ) + (S - I ) = 0 
B)  (X - M ) = (T - G ) + (S - I ) 
C)  (T - G ) + (X - M ) = (S - I ) 
D)  (T - G ) = (X - M ) + (S - I )

Question 2

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

Accepted Answer

The official settlements account is the

Question 3

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ________,and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a ________.

Accepted Answer

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

Question 4

$\begin{array}{|c|c|}
\hline {\text { Item }} & \text { Dollars } \
\hline \text { Exports } & 500 \
\hline \text { Imports } & 400 \
\hline \text { Government sector } & 250 \
\text { surplus } & \
\hline \text { Private sector deficit } & -150 \
\hline
\end{array}$ 
-The above table describes accounts for the country of Pacifica.Using this information,net exports for Pacifica equals

Accepted Answer

A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650. 
A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650.

Question 5

If the exchange rate rises from 100 yen per dollar to 120 yen per dollar,the dollar has appreciated.

Accepted Answer

A) True 
 B)False

Question 6

Currently,the United States is both a net borrower and a debtor nation.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

People and firms supply dollar

Question 8

The Fed ________ intervene in the foreign exchange market by supplying dollars and the Fed ________ intervene in the foreign exchange market by demanding dollars.

Accepted Answer

A)  can; can 
B)  cannot; can 
C)  can; cannot 
D)  cannot; cannot 
A)  can; can 
B)  cannot; can 
C)  can; cannot 
D)  cannot; cannot

Question 9

If the Federal Reserve increases interest rates,

Accepted Answer

A)  the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward. 
B)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
D)  only the demand curve for U.S. dollars shifts rightward. 
A)  the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward. 
B)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
D)  only the demand curve for U.S. dollars shifts rightward.

Question 10

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month.As a result,

Accepted Answer

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

Question 11

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

Accepted Answer

A) True 
 B)False

Question 12

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₁ could occur when

Accepted Answer

A)  the expected future exchange rate decreases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates increase. 
A)  the expected future exchange rate decreases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates increase.

Question 13

The price of a computer in the United States is $1,000.The price of a car in Germany is 10,000 euros.The current exchange rate is 0.9 euros per dollar.
a) If a computer is exported from the United States to Germany with no barriers to trade,what will be the price of the computer in Germany?
b) If a car is imported to the United States from Germany with no barriers to trade,what will be the price of the car in the United States?
c) Suppose the dollar appreciates by 10 percent against the euro.How will the price of a computer exported from the United States change in Germany?
d) Suppose the dollar appreciates by 10 percent against the euro.How will the price of a car imported to the United States from Germany change in the United States?

Accepted Answer

a)The price of an American computer in G

Question 14

Suppose the Fed wants to fix the U.S.dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar,the Fed can

Accepted Answer

A)  buy dollars. 
B)  sell dollars. 
C)  attempt to freeze all sales of dollars. 
D)  any of the above actions could take place. 
A)  buy dollars. 
B)  sell dollars. 
C)  attempt to freeze all sales of dollars. 
D)  any of the above actions could take place.

Question 15

Suppose China Airlines wants to purchase a French Airbus.The price of the Airbus is 95 million Euro.If the exchange rate is 1 euro per 10 yuan,the price of this airplane to China Airlines is

Accepted Answer

A)  950 million yuan. 
B)  85.5 million yuan. 
C)  10 million yuan. 
D)  9.5 million yuan. 
A)  950 million yuan. 
B)  85.5 million yuan. 
C)  10 million yuan. 
D)  9.5 million yuan.

Question 16

On the island country of Sunshine where the unit of currency is fish,net exports are 50 fish,saving is 250 fish,net taxes are 100 fish,and the government budget deficit is 175 fish.The private sector has a ________.

Accepted Answer

A)  deficit of 125 fish 
B)  surplus of 125 fish 
C)  deficit of 225 fish 
D)  surplus of 225 fish 
A)  deficit of 125 fish 
B)  surplus of 125 fish 
C)  deficit of 225 fish 
D)  surplus of 225 fish

Question 17

The dollar is regarded as the "safe haven" currency; investors flock to it when they are worried about the outlook for the global economy.Fears were at their greatest in late 2008 and early 2009 after the collapse of Lehman Brothers,an investment bank,in September 2008. As investors flocked to the dollar,

Accepted Answer

A)  the demand for dollars increased and the exchange rate increased. 
B)  the demand for dollars decreased and the exchange rate decreased. 
C)  the supply of dollars increased and the exchange rate decreased. 
D)  the supply of dollars decreased and the exchange rate increased. 
A)  the demand for dollars increased and the exchange rate increased. 
B)  the demand for dollars decreased and the exchange rate decreased. 
C)  the supply of dollars increased and the exchange rate decreased. 
D)  the supply of dollars decreased and the exchange rate increased.

Question 18

Purchasing power parity means equal rates of return.

Accepted Answer

A) True 
 B)False

Question 19

An American consumer buys a French luxury product in New York.In the U.S.balance of payments accounts,this transaction directly appears in

Accepted Answer

A)  the official settlements account. 
B)  the imports part of the current account. 
C)  the net transfers part of the current account. 
D)  the capital and financial account. 
A)  the official settlements account. 
B)  the imports part of the current account. 
C)  the net transfers part of the current account. 
D)  the capital and financial account.

Question 20

In the foreign exchange market,how does the quantity of U.S.dollars demanded respond to a change in the U.S.exchange rate?
Why is there this response?

Accepted Answer

If the U.S.exchange rate falls,the quant

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance.What relationship exists among these variables?

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ,and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a .

Item Dollars Exports 500 Imports 400 Government sector 250 surplus Private sector deficit -150 -The above table describes accounts for the country of Pacifica.Using this information,net exports for Pacifica equals

If the exchange rate rises from 100 yen per dollar to 120 yen per dollar,the dollar has appreciated.

Currently,the United States is both a net borrower and a debtor nation.

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

The Fed intervene in the foreign exchange market by supplying dollars and the Fed intervene in the foreign exchange market by demanding dollars.

If the Federal Reserve increases interest rates,

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month.As a result,

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₁ could occur when

Suppose the Fed wants to fix the U.S.dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar,the Fed can

Suppose China Airlines wants to purchase a French Airbus.The price of the Airbus is 95 million Euro.If the exchange rate is 1 euro per 10 yuan,the price of this airplane to China Airlines is

On the island country of Sunshine where the unit of currency is fish,net exports are 50 fish,saving is 250 fish,net taxes are 100 fish,and the government budget deficit is 175 fish.The private sector has a ________.

Purchasing power parity means equal rates of return.

An American consumer buys a French luxury product in New York.In the U.S.balance of payments accounts,this transaction directly appears in

In the foreign exchange market,how does the quantity of U.S.dollars demanded respond to a change in the U.S.exchange rate? Why is there this response?

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

Suppose X - M = net exports; T - G = government sector balance; and S - I = private sector balance.What relationship exists among these variables?

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ________,and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a ________.

Item Dollars Exports 500 Imports 400 Government sector 250 surplus Private sector deficit -150 -The above table describes accounts for the country of Pacifica.Using this information,net exports for Pacifica equals

If the exchange rate rises from 100 yen per dollar to 120 yen per dollar,the dollar has appreciated.

Currently,the United States is both a net borrower and a debtor nation.

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

The Fed ________ intervene in the foreign exchange market by supplying dollars and the Fed ________ intervene in the foreign exchange market by demanding dollars.

If the Federal Reserve increases interest rates,

People come to expect the exchange rate for the dollar to rise from 90 yen per dollar to 111 yen per dollar in a month.As a result,

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₁ could occur when

Suppose the Fed wants to fix the U.S.dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar,the Fed can

Suppose China Airlines wants to purchase a French Airbus.The price of the Airbus is 95 million Euro.If the exchange rate is 1 euro per 10 yuan,the price of this airplane to China Airlines is

On the island country of Sunshine where the unit of currency is fish,net exports are 50 fish,saving is 250 fish,net taxes are 100 fish,and the government budget deficit is 175 fish.The private sector has a ________.

Purchasing power parity means equal rates of return.

An American consumer buys a French luxury product in New York.In the U.S.balance of payments accounts,this transaction directly appears in

In the foreign exchange market,how does the quantity of U.S.dollars demanded respond to a change in the U.S.exchange rate? Why is there this response?

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

A country that during its entire history has borrowed more from the rest of the world than it has lent to it is a ,and a country that during its entire history has invested more in the rest of the world than other countries have invested in it is a .

The Fed intervene in the foreign exchange market by supplying dollars and the Fed intervene in the foreign exchange market by demanding dollars.