Question 1

Suppose the target exchange rate set by the Fed is 150 yen per dollar.If the demand for dollars permanently decreases the Fed

Accepted Answer

A)  can permanently meet the target by selling dollars. 
B)  can permanently meet the target by buying dollars. 
C)  must violate both interest rate parity and purchasing power parity to permanently meet the target. 
D)  cannot permanently maintain the target rate. 
A)  can permanently meet the target by selling dollars. 
B)  can permanently meet the target by buying dollars. 
C)  must violate both interest rate parity and purchasing power parity to permanently meet the target. 
D)  cannot permanently maintain the target rate.

Question 2

Over the last 25 years,according to the United States balance of payments,

Accepted Answer

A)  the current account and the capital and financial account balances tend to move in the same direction. 
B)  the current account and the capital and financial account balances tend to move in opposite directions. 
C)  there is no clear relationship between the current account balance and the capital and financial account balance. 
D)  the official settlements balance fluctuates greatly from year to year. 
A)  the current account and the capital and financial account balances tend to move in the same direction. 
B)  the current account and the capital and financial account balances tend to move in opposite directions. 
C)  there is no clear relationship between the current account balance and the capital and financial account balance. 
D)  the official settlements balance fluctuates greatly from year to year.

Question 3

The interest rate in Canada rises while the interest rate in the United States does not change.The

Accepted Answer

A)  demand curve for Canadian dollars will shift leftward. 
B)  demand curve for Canadian dollars will shift rightward. 
C)  demand curve for U.S. dollars will shift rightward. 
D)  demand curves Canadian and U.S. dollars will remain unchanged. 
A)  demand curve for Canadian dollars will shift leftward. 
B)  demand curve for Canadian dollars will shift rightward. 
C)  demand curve for U.S. dollars will shift rightward. 
D)  demand curves Canadian and U.S. dollars will remain unchanged.

Question 4

"Currency appreciation" means the price of the currency is decreasing.

Accepted Answer

A) True 
 B)False

Question 5

In the United States,since 1981 which two of the following have almost always moved in the same direction?

Accepted Answer

A)  net exports and the government sector balance 
B)  net exports and the private sector balance 
C)  the government sector balance and the private sector balance 
D)  none of the above 
A)  net exports and the government sector balance 
B)  net exports and the private sector balance 
C)  the government sector balance and the private sector balance 
D)  none of the above

Question 6

Which of the following contributes to a current account surplus for a country?

Accepted Answer

A)  having tourists visit the country 
B)  importing textiles 
C)  having foreigners buy government securities from the country's government 
D)  importing financial services 
A)  having tourists visit the country 
B)  importing textiles 
C)  having foreigners buy government securities from the country's government 
D)  importing financial services

Question 7

Which of the following transactions is NOT recorded in the capital and financial account?

Accepted Answer

A)  foreign investment in the United States 
B)  U.S. investment abroad 
C)  statistical discrepancy 
D)  net interest income 
A)  foreign investment in the United States 
B)  U.S. investment abroad 
C)  statistical discrepancy 
D)  net interest income

Question 8

Suppose the exchange rate between the U.S.dollar and the Jamaican dollar was $1 U.S.= $40 Jamaican dollars.A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Accepted Answer

A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct. 
A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct.

Question 9

Which of the following statements is INCORRECT?

Accepted Answer

A)  Net exports equals exports minus imports. 
B)  The government sector balance equals net taxes minus government expenditures on goods and services. 
C)  Private sector balance equal private investment minus private saving. 
D)  The sum of government sector and private sector balances equals net exports. 
A)  Net exports equals exports minus imports. 
B)  The government sector balance equals net taxes minus government expenditures on goods and services. 
C)  Private sector balance equal private investment minus private saving. 
D)  The sum of government sector and private sector balances equals net exports.

Question 10

Important factors that change the demand for dollars and shift the demand curve for dollars include which of the following?
I. Interest rates around the world.
II. The current exchange rate.
III. The expected future exchange rate.

Accepted Answer

A)  I and II 
B)  I and III 
C)  II 
D)  I, II, and III 
A)  I and II 
B)  I and III 
C)  II 
D)  I, II, and III

Question 11

A decrease in the demand for U.S.exports ________ the demand for U.S.dollars and shifts the demand curve for U.S.dollars ________.

Accepted Answer

A)  increases; rightward 
B)  decreases; rightward 
C)  decreases; leftward 
D)  increases; leftward 
A)  increases; rightward 
B)  decreases; rightward 
C)  decreases; leftward 
D)  increases; leftward

Question 12

When the U.S.interest rate rises relative to that in other counties,in the foreign exchange market the demand for U.S.dollars ________ and the supply of U.S.dollars ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 13

When you arrive at the airport in Paris and go to the bank window to exchange dollars into euros,you are

Accepted Answer

A)  selling euros to the French. 
B)  avoiding the use of foreign exchange markets. 
C)  contributing to U.S. exports. 
D)  None of the above answers is correct. 
A)  selling euros to the French. 
B)  avoiding the use of foreign exchange markets. 
C)  contributing to U.S. exports. 
D)  None of the above answers is correct.

Question 14

When people who are holding the money of some other country want to exchange it for U.S.dollars,they ________ U.S.dollars and ________ that other country's money.

Accepted Answer

A)  demand; supply 
B)  supply; supply 
C)  supply; demand 
D)  demand; demand 
A)  demand; supply 
B)  supply; supply 
C)  supply; demand 
D)  demand; demand

Question 15

Which of the following is one of the balance of payments accounts?

Accepted Answer

A)  government expenditure account 
B)  capital and financial account 
C)  reserve account 
D)  net borrowing account 
A)  government expenditure account 
B)  capital and financial account 
C)  reserve account 
D)  net borrowing account

Question 16

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus,due to increased demand for world travel. As a result,the

Accepted Answer

A)  demand curve for euros shifts rightward. 
B)  demand curve for euros shifts leftward. 
C)  quantity demanded for euros increases as the euro/rupee exchange rate increases. 
D)  quantity demand for euros decreases, on matter what the euro/rupee exchange rate is. 
A)  demand curve for euros shifts rightward. 
B)  demand curve for euros shifts leftward. 
C)  quantity demanded for euros increases as the euro/rupee exchange rate increases. 
D)  quantity demand for euros decreases, on matter what the euro/rupee exchange rate is.

Question 17

If there are equal rates of return between assets in two currencies,then there is

Accepted Answer

A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity. 
A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity.

Question 18

-In the above figure,suppose the demand for dollars permanently decreases to D₂.To maintain the target,the Fed

Accepted Answer

A)  can buy dollars. 
B)  can sell dollars. 
C)  must decrease the nation's net exports. 
D)  cannot permanently maintain the exchange rate target of 150 yen per dollar. 
A)  can buy dollars. 
B)  can sell dollars. 
C)  must decrease the nation's net exports. 
D)  cannot permanently maintain the exchange rate target of 150 yen per dollar.

Question 19

If the Federal Reserve raises the U.S.interest rate,foreigners'

Accepted Answer

A)  demand for U.S. dollars will increase and the exchange rate will rise. 
B)  demand for U.S. dollars will decrease and the exchange rate will fall. 
C)  demand for U.S. dollars will increase and the exchange rate will fall. 
D)  demand for U.S. dollars will decrease and the exchange rate will rise. 
A)  demand for U.S. dollars will increase and the exchange rate will rise. 
B)  demand for U.S. dollars will decrease and the exchange rate will fall. 
C)  demand for U.S. dollars will increase and the exchange rate will fall. 
D)  demand for U.S. dollars will decrease and the exchange rate will rise.

Question 20

Over the past decade,the United States has had a current account deficit and capital account deficit.

Accepted Answer

A) True 
 B)False

Suppose the target exchange rate set by the Fed is 150 yen per dollar.If the demand for dollars permanently decreases the Fed

Over the last 25 years,according to the United States balance of payments,

The interest rate in Canada rises while the interest rate in the United States does not change.The

"Currency appreciation" means the price of the currency is decreasing.

In the United States,since 1981 which two of the following have almost always moved in the same direction?

Which of the following contributes to a current account surplus for a country?

Which of the following transactions is NOT recorded in the capital and financial account?

Suppose the exchange rate between the U.S.dollar and the Jamaican dollar was $1 U.S.= $40 Jamaican dollars.A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Which of the following statements is INCORRECT?

Important factors that change the demand for dollars and shift the demand curve for dollars include which of the following? I. Interest rates around the world. II. The current exchange rate. III. The expected future exchange rate.

A decrease in the demand for U.S.exports the demand for U.S.dollars and shifts the demand curve for U.S.dollars .

When the U.S.interest rate rises relative to that in other counties,in the foreign exchange market the demand for U.S.dollars and the supply of U.S.dollars .

When you arrive at the airport in Paris and go to the bank window to exchange dollars into euros,you are

When people who are holding the money of some other country want to exchange it for U.S.dollars,they U.S.dollars and that other country's money.

Which of the following is one of the balance of payments accounts?

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus,due to increased demand for world travel. As a result,the

If there are equal rates of return between assets in two currencies,then there is

-In the above figure,suppose the demand for dollars permanently decreases to D₂.To maintain the target,the Fed

If the Federal Reserve raises the U.S.interest rate,foreigners'

Over the past decade,the United States has had a current account deficit and capital account deficit.

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 the target exchange rate set by the Fed is 150 yen per dollar.If the demand for dollars permanently decreases the Fed

Over the last 25 years,according to the United States balance of payments,

The interest rate in Canada rises while the interest rate in the United States does not change.The

"Currency appreciation" means the price of the currency is decreasing.

In the United States,since 1981 which two of the following have almost always moved in the same direction?

Which of the following contributes to a current account surplus for a country?

Which of the following transactions is NOT recorded in the capital and financial account?

Suppose the exchange rate between the U.S.dollar and the Jamaican dollar was $1 U.S.= $40 Jamaican dollars.A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Which of the following statements is INCORRECT?

Important factors that change the demand for dollars and shift the demand curve for dollars include which of the following? I. Interest rates around the world. II. The current exchange rate. III. The expected future exchange rate.

A decrease in the demand for U.S.exports ________ the demand for U.S.dollars and shifts the demand curve for U.S.dollars ________.

When the U.S.interest rate rises relative to that in other counties,in the foreign exchange market the demand for U.S.dollars ________ and the supply of U.S.dollars ________.

When you arrive at the airport in Paris and go to the bank window to exchange dollars into euros,you are

When people who are holding the money of some other country want to exchange it for U.S.dollars,they ________ U.S.dollars and ________ that other country's money.

Which of the following is one of the balance of payments accounts?

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus,due to increased demand for world travel. As a result,the

If there are equal rates of return between assets in two currencies,then there is

-In the above figure,suppose the demand for dollars permanently decreases to D₂.To maintain the target,the Fed

If the Federal Reserve raises the U.S.interest rate,foreigners'

Over the past decade,the United States has had a current account deficit and capital account deficit.

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 decrease in the demand for U.S.exports the demand for U.S.dollars and shifts the demand curve for U.S.dollars .

When the U.S.interest rate rises relative to that in other counties,in the foreign exchange market the demand for U.S.dollars and the supply of U.S.dollars .

When people who are holding the money of some other country want to exchange it for U.S.dollars,they U.S.dollars and that other country's money.