Question 1

If net interest and net transfers are zero,and a country's exports exceed its imports,the country definitely has ________.

Accepted Answer

A)  a current account surplus 
B)  a current account deficit 
C)  a capital and financial account surplus 
D)  an official settlements account surplus 
A)  a current account surplus 
B)  a current account deficit 
C)  a capital and financial account surplus 
D)  an official settlements account surplus

Question 2

A factor helping determine demand for the dollar in the foreign exchange market is

Accepted Answer

A)  the expected future exchange rate. 
B)  the expected future interest rate. 
C)  the amount of U.S. imports. 
D)  the supply of U.S. dollars. 
A)  the expected future exchange rate. 
B)  the expected future interest rate. 
C)  the amount of U.S. imports. 
D)  the supply of U.S. dollars.

Question 3

In June 2008,$1 bought 104 yen and in October,$1 bought 93 yen.This change means

Accepted Answer

A)  U.S. exports became more expensive for Japanese buyers. 
B)  there will be a movement down along the demand curve for dollars. 
C)  there was an increase in the value in the dollar, relative to the yen. 
D)  the dollar appreciated relative to the yen. 
A)  U.S. exports became more expensive for Japanese buyers. 
B)  there will be a movement down along the demand curve for dollars. 
C)  there was an increase in the value in the dollar, relative to the yen. 
D)  the dollar appreciated relative to the yen.

Question 4

If the U.S.exchange rate rises,the price to foreigners of U.S.-produced goods and services ________ and the quantity of U.S.dollars demanded ________.

Accepted Answer

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

Question 5

If the Federal Reserve increases interest rates,ceteris paribus,

Accepted Answer

A)  the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. 
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 supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. 
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 6

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

Question 7

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₂ could occur when

Accepted Answer

A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise. 
A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise.

Question 8

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

-The data in the table above are the U.S.balance of payments.What is the current account balance?

Accepted Answer

A)  $0 
B)  $150 billion 
C)  -$100 billion 
D)  -$150 billion 
A)  $0 
B)  $150 billion 
C)  -$100 billion 
D)  -$150 billion

Question 9

Suppose the current account of a country is in balance and the official settlements account equals 0.A new transaction occurs so that the current account is now in surplus,but the official settlements account does not change.From this we know that

Accepted Answer

A)  the balance of trade is now in surplus. 
B)  the government is running a budget deficit. 
C)  the capital and financial account is now in deficit. 
D)  the government must make official reserve transactions. 
A)  the balance of trade is now in surplus. 
B)  the government is running a budget deficit. 
C)  the capital and financial account is now in deficit. 
D)  the government must make official reserve transactions.

Question 10

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₂ could occur when

Accepted Answer

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

Question 11

What is the relationship between net exports,the government sector surplus or deficit,and the private sector surplus or deficit?

Accepted Answer

The relationship is that net e

Question 12

If U.S.official reserves increase,is the official settlements account balance positive,negative,or unaffected?

Accepted Answer

If U.S.official rese

Question 13

Suppose this year Angola borrows $100 million from foreign countries while it lends $15 million.Angola 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 14

According to purchasing power parity,the foreign exchange market will

Accepted Answer

A)  undervalue the dollar if inflation in the United States is greater than it is elsewhere. 
B)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
C)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
D)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations. 
A)  undervalue the dollar if inflation in the United States is greater than it is elsewhere. 
B)  no longer demand dollars if the inflation rate in the United States exceeds that of other nations. 
C)  adjust the value of the exchange rate to reflect differing inflation rates between nations. 
D)  result in a flow of dollars out of the United States whenever its rate of inflation is below that of other nations.

Question 15

If the European Central Bank increases interest rates,

Accepted Answer

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

Question 16

$$\begin{array} { | c | c | } 
\hline \text { Investor } & \begin{array} { c } 
\text { Expected future value of a } \
\text { dollar (francs per dollar) }
\end{array} \
\hline \text { Investor A } & 120 \
\hline \text { Investor B } & 100 \
\hline \text { Investor C } & 85 \
\hline
\end{array}$$
-Using the table above,if the current market value of the dollar is 125 francs per dollar,

Accepted Answer

A)  investor A expects dollar appreciation, but B and C expect depreciation. 
B)  investor A expects dollar depreciation, but B and C expect appreciation. 
C)  all three investors expect the dollar to appreciate. 
D)  all three investors expect the dollar to depreciate. 
A)  investor A expects dollar appreciation, but B and C expect depreciation. 
B)  investor A expects dollar depreciation, but B and C expect appreciation. 
C)  all three investors expect the dollar to appreciate. 
D)  all three investors expect the dollar to depreciate.

Question 17

If the U.S.interest rate rises while interest rates in the rest of the world do not change,the higher U.S.interest rate

Accepted Answer

A)  decreases the demand for dollars. 
B)  increases the demand for dollars. 
C)  has no effect on the demand for dollars. 
D)  will stop all trading between the currencies of the U.S. and other countries. 
A)  decreases the demand for dollars. 
B)  increases the demand for dollars. 
C)  has no effect on the demand for dollars. 
D)  will stop all trading between the currencies of the U.S. and other countries.

Question 18

What are the three balance of payments accounts?
Briefly describe them.What is the relationship among the three?

Accepted Answer

The three balance of payment accounts ar

Question 19

A country's balance of payments accounts include all of the following EXCEPT

Accepted Answer

A)  military account. 
B)  current account. 
C)  capital and financial account. 
D)  official settlements account. 
A)  military account. 
B)  current account. 
C)  capital and financial account. 
D)  official settlements account.

Question 20

Suppose that $1 U.S.costs $1.50 Canadian.If in St.Louis a CD costs $10 U.S.and in Montreal it costs $15 Canadian,then ________.

Accepted Answer

A)  purchasing power parity exists 
B)  Canadians will buy CDs in St. Louis 
C)  Americans will buy CDs in Montreal 
D)  Virgin Records will have an incentive to build more stores in North America 
A)  purchasing power parity exists 
B)  Canadians will buy CDs in St. Louis 
C)  Americans will buy CDs in Montreal 
D)  Virgin Records will have an incentive to build more stores in North America

If net interest and net transfers are zero,and a country's exports exceed its imports,the country definitely has ________.

A factor helping determine demand for the dollar in the foreign exchange market is

In June 2008,$1 bought 104 yen and in October,$1 bought 93 yen.This change means

If the U.S.exchange rate rises,the price to foreigners of U.S.-produced goods and services and the quantity of U.S.dollars demanded .

If the Federal Reserve increases interest rates,ceteris paribus,

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

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₂ could occur when

Suppose the current account of a country is in balance and the official settlements account equals 0.A new transaction occurs so that the current account is now in surplus,but the official settlements account does not change.From this we know that

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₂ could occur when

What is the relationship between net exports,the government sector surplus or deficit,and the private sector surplus or deficit?

If U.S.official reserves increase,is the official settlements account balance positive,negative,or unaffected?

Suppose this year Angola borrows $100 million from foreign countries while it lends $15 million.Angola definitely is a

According to purchasing power parity,the foreign exchange market will

If the European Central Bank increases interest rates,

Investor Expected future value of a dollar (francs per dollar) Investor A 120 Investor B 100 Investor C 85 -Using the table above,if the current market value of the dollar is 125 francs per dollar,

If the U.S.interest rate rises while interest rates in the rest of the world do not change,the higher U.S.interest rate

What are the three balance of payments accounts? Briefly describe them.What is the relationship among the three?

A country's balance of payments accounts include all of the following EXCEPT

Suppose that $1 U.S.costs $1.50 Canadian.If in St.Louis a CD costs $10 U.S.and in Montreal it costs $15 Canadian,then ________.

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

If net interest and net transfers are zero,and a country's exports exceed its imports,the country definitely has ________.

A factor helping determine demand for the dollar in the foreign exchange market is

In June 2008,$1 bought 104 yen and in October,$1 bought 93 yen.This change means

If the U.S.exchange rate rises,the price to foreigners of U.S.-produced goods and services ________ and the quantity of U.S.dollars demanded ________.

If the Federal Reserve increases interest rates,ceteris paribus,

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

-In the figure above,the shift in the demand curve for U.S.dollars from D₀ to D₂ could occur when

Suppose the current account of a country is in balance and the official settlements account equals 0.A new transaction occurs so that the current account is now in surplus,but the official settlements account does not change.From this we know that

-In the figure above,the shift in the supply curve for U.S.dollars from S₀ to S₂ could occur when

What is the relationship between net exports,the government sector surplus or deficit,and the private sector surplus or deficit?

If U.S.official reserves increase,is the official settlements account balance positive,negative,or unaffected?

Suppose this year Angola borrows $100 million from foreign countries while it lends $15 million.Angola definitely is a

According to purchasing power parity,the foreign exchange market will

If the European Central Bank increases interest rates,

Investor Expected future value of a dollar (francs per dollar) Investor A 120 Investor B 100 Investor C 85 -Using the table above,if the current market value of the dollar is 125 francs per dollar,

If the U.S.interest rate rises while interest rates in the rest of the world do not change,the higher U.S.interest rate

What are the three balance of payments accounts? Briefly describe them.What is the relationship among the three?

A country's balance of payments accounts include all of the following EXCEPT

Suppose that $1 U.S.costs $1.50 Canadian.If in St.Louis a CD costs $10 U.S.and in Montreal it costs $15 Canadian,then ________.

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

If the U.S.exchange rate rises,the price to foreigners of U.S.-produced goods and services and the quantity of U.S.dollars demanded .