Question 1

In the foreign exchange market,the supply curve for dollars slopes upwards because

Accepted Answer

A)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. 
B)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
C)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
D)  supply curves always slope upwards. 
A)  as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. 
B)  as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports. 
C)  as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. 
D)  supply curves always slope upwards.

Question 2

When a nation has no funds to finance economic development,how can it acquire the needed funds?
Is the country a net lender or a net borrower?

Accepted Answer

Funds for development can be b

Question 3

Interest rates in the United States rise relative to interest rates in other countries.As a result,in the foreign exchange market

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 an upward 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 an upward movement along the supply curve of dollars.

Question 4

The current account balance is equal to

Accepted Answer

A)  net exports + net interest income + net transfers. 
B)  net exports - net interest income - net transfers. 
C)  net exports + net interest income - net transfers. 
D)  net interest income + net transfers - net exports. 
A)  net exports + net interest income + net transfers. 
B)  net exports - net interest income - net transfers. 
C)  net exports + net interest income - net transfers. 
D)  net interest income + net transfers - net exports.

Question 5

Suppose Italy currently lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations.Italy definitely is a

Accepted Answer

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

Question 6

If the prices in the United States rise faster than those in other countries,

Accepted Answer

A)  the exchange rate rises. 
B)  the exchange rate falls. 
C)  then interest rate parity must not hold. 
D)  the interest rate in the United States falls. 
A)  the exchange rate rises. 
B)  the exchange rate falls. 
C)  then interest rate parity must not hold. 
D)  the interest rate in the United States falls.

Question 7

$$\begin{array} { | l | c | c | } 
\hline \text { Currency } & \begin{array} { c } 
\text { 2007 exchange rate } \
\text { (per U.S. dollar) }
\end{array} & \begin{array} { c } 
\text { 2008 exchange rate } \
\text { (per U.S. dollar) }
\end{array} \
\hline \text { Euro } & 0.9954 & 1.0747 \
\hline \begin{array} { l } 
\text { Tapanese } \
\text { yen }
\end{array} & 102.20 & 114.90 \
\hline \begin{array} { l } 
\text { Canadian } \
\text { dollar }
\end{array} & 1.44 & 1.50 \
\hline
\end{array}$$
-The table above shows the exchange rates between various currencies and the U.S.dollar.Between 2007 and 2008,the U.S.dollar ________ against the euro and ________ against the Japanese yen.

Accepted Answer

A)  depreciated; depreciated 
B)  appreciated; appreciated 
C)  appreciated; depreciated 
D)  depreciated; appreciated 
A)  depreciated; depreciated 
B)  appreciated; appreciated 
C)  appreciated; depreciated 
D)  depreciated; appreciated

Question 8

Suppose the target exchange rate set by the Fed is 100 guilders per dollar.If the demand for dollars temporarily decreases,to maintain the target exchange rate,the Fed can

Accepted Answer

A)  sell dollars. 
B)  buy dollars. 
C)  increase U.S. exports. 
D)  increase U.S. imports. 
A)  sell dollars. 
B)  buy dollars. 
C)  increase U.S. exports. 
D)  increase U.S. imports.

Question 9

$$\begin{array} { | c | c | } 
\hline \text { Item } & \text { Billions of buns } \
\hline \text { Imports of goods and services } & 600 \
\hline \text { Exports of goods and services } & 700 \
\hline \text { Foreign investment in Exland } & 350 \
\hline \text { Exland's investment abroad } & 430 \
\hline \text { Increase in the official holdings } & 20 \
\text { of foreign currency }\
\hline 
\end{array}$$
-The citizens of Exland,whose currency is the bun,conduct the transactions outlined in the table above.
a) What is Exland's current account balance?
b) What is Exland's capital account balance?
c) What is Exland's official settlement balance?
d) What is Exland's net foreign borrowing?

Accepted Answer

a)The current account balance equals exp

Question 10

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Item}\
\hline \text {Imports of goods and}\
\text {services}\
\hline \text {Exports of goods and}\
\text {services}\
\hline \text {Net interest income}\
\hline \text {Net transfers}\
\hline \text {U.S. investment abroad}\
\hline \text {Foreign investment in}\
\text {the United States}\
\hline
\end{array}
\begin{array}{c|}
\hline\text { Billions of dollars }\
\hline-750 \
\
\hline 1,000 \
\
\hline-50 \
\hline-50 \
\hline-350 \
\hline 200 \
\
\hline 
\end{array}
\end{array}$

-The data in the table above are the U.S.balance of payments.If there is no statistical discrepancy,what is the balance in the official settlements account?

Accepted Answer

A)  $150 billion 
B)  -$150 billion 
C)  $50 billion 
D)  $0 
A)  $150 billion 
B)  -$150 billion 
C)  $50 billion 
D)  $0

Question 11

Which of the following accounts records the change in U.S.official reserves?

Accepted Answer

A)  current account 
B)  capital and financial account 
C)  official settlements account 
D)  none of the above 
A)  current account 
B)  capital and financial account 
C)  official settlements account 
D)  none of the above

Question 12

Suppose U.S.net exports are -$400 billion and the U.S.government sector surplus is $200 billion.Then in the private sector,saving minus investment equals

Accepted Answer

A)  -$600 billion. 
B)  -$200 billion. 
C)  +$600 billion. 
D)  +$200 billion. 
A)  -$600 billion. 
B)  -$200 billion. 
C)  +$600 billion. 
D)  +$200 billion.

Question 13

With everything else the same,in the foreign exchange market the

Accepted Answer

A)  larger the value of U.S. exports, the greater is the quantity of dollars demanded. 
B)  lower the exchange rate, the smaller the amount of U.S. exports. 
C)  the lower the exchange rate, the smaller is the expected profit from buying dollars. 
D)  the higher the exchange rate, the cheaper are U.S.-produced goods and services. 
A)  larger the value of U.S. exports, the greater is the quantity of dollars demanded. 
B)  lower the exchange rate, the smaller the amount of U.S. exports. 
C)  the lower the exchange rate, the smaller is the expected profit from buying dollars. 
D)  the higher the exchange rate, the cheaper are U.S.-produced goods and services.

Question 14

When we have a negative current account,we are

Accepted Answer

A)  borrowing from the rest of the world. 
B)  lending to the rest of the world. 
C)  running a government budget surplus. 
D)  None of the above is correct. 
A)  borrowing from the rest of the world. 
B)  lending to the rest of the world. 
C)  running a government budget surplus. 
D)  None of the above is correct.

Question 15

If the Fed sells U.S.dollars,the exchange rate

Accepted Answer

A)  rises. 
B)  does not change. 
C)  falls. 
D)  changes, but the direction depends on whether the Fed affected the demand for dollars or the supply of dollars. 
A)  rises. 
B)  does not change. 
C)  falls. 
D)  changes, but the direction depends on whether the Fed affected the demand for dollars or the supply of dollars.

Question 16

If U.S.interest rates are rise relative to foreign interest rates,in the foreign exchange market the demand for U.S.dollars will decrease.

Accepted Answer

A) True 
 B)False

Question 17

Over its history,Spain has loaned more money abroad than foreigners have lent to it.Spain is a

Accepted Answer

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

Question 18

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Item}\
\hline \text {Imports of goods and}\
\text {services}\
\hline \text {Exports of goods and}\
\text {services}\
\hline \text {Net interest}\
\hline \text {Net transfers}\
\hline \text {Foreign investment in}\
\text {the United States}\ 
\hline \text {U.S. investment }\
\text { abroad}\
\hline
\end{array}
\begin{array}{c|}
\hline\text { Billions of dollars }\
\hline1,400\
\
\hline 1,600 \
\
\hline0 \
\hline0 \
\hline480 \
\
\hline 700 \
\
\hline 
\end{array}
\end{array}$

-The above gives some of the balance of payments accounts of the United States in 2020.
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 19

$$\begin{array} { | l | c | } 
\hline  { \text { Item } } & \text { Billions of dollars } \
\hline \text { Imports of goods and services, } M & 275 \
\hline \text { Net taxes, } T & 300 \
\hline \text { Government expenditure, } G & 250 \
\hline \text { Savings, } S & 125 \
\hline \text { Investment, } I & 100 \
\hline
\end{array}$$
-The table above gives some of the entries in the national income and product accounts.The government sector has a ________,and the private sector has a ________.

Accepted Answer

A)  surplus of $50 billion; surplus of $25 billion 
B)  deficit of $50 billion; surplus of $25 billion 
C)  surplus of $50 billion; deficit of $25 billion 
D)  deficit of $50 billion; deficit of $25 billion 
A)  surplus of $50 billion; surplus of $25 billion 
B)  deficit of $50 billion; surplus of $25 billion 
C)  surplus of $50 billion; deficit of $25 billion 
D)  deficit of $50 billion; deficit of $25 billion

Question 20

When the demand for a currency permanently increases,that nation's central bank can maintain its fixed exchange rate indefinitely.

Accepted Answer

A) True 
 B)False

In the foreign exchange market,the supply curve for dollars slopes upwards because

When a nation has no funds to finance economic development,how can it acquire the needed funds? Is the country a net lender or a net borrower?

Interest rates in the United States rise relative to interest rates in other countries.As a result,in the foreign exchange market

The current account balance is equal to

Suppose Italy currently lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations.Italy definitely is a

If the prices in the United States rise faster than those in other countries,

Suppose the target exchange rate set by the Fed is 100 guilders per dollar.If the demand for dollars temporarily decreases,to maintain the target exchange rate,the Fed can

Which of the following accounts records the change in U.S.official reserves?

Suppose U.S.net exports are -$400 billion and the U.S.government sector surplus is $200 billion.Then in the private sector,saving minus investment equals

With everything else the same,in the foreign exchange market the

When we have a negative current account,we are

If the Fed sells U.S.dollars,the exchange rate

If U.S.interest rates are rise relative to foreign interest rates,in the foreign exchange market the demand for U.S.dollars will decrease.

Over its history,Spain has loaned more money abroad than foreigners have lent to it.Spain is a

Item Billions of dollars Imports of goods and services, M 275 Net taxes, T 300 Government expenditure, G 250 Savings, S 125 Investment, I 100 -The table above gives some of the entries in the national income and product accounts.The government sector has a ,and the private sector has a .

When the demand for a currency permanently increases,that nation's central bank can maintain its fixed exchange rate indefinitely.

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

In the foreign exchange market,the supply curve for dollars slopes upwards because

When a nation has no funds to finance economic development,how can it acquire the needed funds? Is the country a net lender or a net borrower?

Interest rates in the United States rise relative to interest rates in other countries.As a result,in the foreign exchange market

The current account balance is equal to

Suppose Italy currently lends 1.5 billion euros to other nations and borrows 1 billion euros from other nations.Italy definitely is a

If the prices in the United States rise faster than those in other countries,

Suppose the target exchange rate set by the Fed is 100 guilders per dollar.If the demand for dollars temporarily decreases,to maintain the target exchange rate,the Fed can

Which of the following accounts records the change in U.S.official reserves?

Suppose U.S.net exports are -$400 billion and the U.S.government sector surplus is $200 billion.Then in the private sector,saving minus investment equals

With everything else the same,in the foreign exchange market the

When we have a negative current account,we are

If the Fed sells U.S.dollars,the exchange rate

If U.S.interest rates are rise relative to foreign interest rates,in the foreign exchange market the demand for U.S.dollars will decrease.

Over its history,Spain has loaned more money abroad than foreigners have lent to it.Spain is a

When the demand for a currency permanently increases,that nation's central bank can maintain its fixed exchange rate indefinitely.

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