Question 1

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

Question 2

-In the above figure,suppose the economy is initially at point A.The interest rate in Japan rises relative to the interest rate in the United States.As a result,there will be a change from point A to a point such as ________.

Accepted Answer

A)  point B 
B)  point C 
C)  point D 
D)  point E 
A)  point B 
B)  point C 
C)  point D 
D)  point E

Question 3

Suppose that the U.S.interest rate is 5 percent and the Turkish interest rate is 50 percent.The effect of this difference in the foreign exchange market is that

Accepted Answer

A)  financial capital stops moving. 
B)  an American investor is guaranteed to make an additional 45 percent in dollar terms by investing in Turkey. 
C)  investors expect the Turkish currency to rise in value (appreciate) against the dollar. 
D)  investors expect the Turkish currency to fall in value (depreciate) against the dollar. 
A)  financial capital stops moving. 
B)  an American investor is guaranteed to make an additional 45 percent in dollar terms by investing in Turkey. 
C)  investors expect the Turkish currency to rise in value (appreciate) against the dollar. 
D)  investors expect the Turkish currency to fall in value (depreciate) against the dollar.

Question 4

Balance of payments accounts include

Accepted Answer

A)  the net interest income account. 
B)  the current account. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct. 
A)  the net interest income account. 
B)  the current account. 
C)  Both answers A and B are correct. 
D)  Neither answer A nor B is correct.

Question 5

In June 2008,the dollar bought 1.6 Brazilian reals and in October,the dollar bought 2.4 reals. This resulted in a

Accepted Answer

A)  a decrease in the quantity of dollars supplied. 
B)  an increase in the quantity of dollars supplied. 
C)  a rightward shift in the supply curve of dollars. 
D)  a depreciation of the dollar. 
A)  a decrease in the quantity of dollars supplied. 
B)  an increase in the quantity of dollars supplied. 
C)  a rightward shift in the supply curve of dollars. 
D)  a depreciation of the dollar.

Question 6

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

Accepted Answer

An increase in the expected future excha

Question 7

Which of the following is included in a nation's current account?
I. the import of services
II. a change of foreign currency holdings
III. net transfers,such as foreign aid payments

Accepted Answer

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

Question 8

Hyundai is a large South Korean company that produces finished steel products.Hyundai plans to buy raw steel from U.S.Steel.As a result,the demand curve for U.S.dollars ________ and the demand curve for South Korean won ________.

Accepted Answer

A)  shifts rightward; does not shift 
B)  shifts rightward; shifts leftward 
C)  does not shift; shifts leftward 
D)  shifts leftward; shifts rightward. 
A)  shifts rightward; does not shift 
B)  shifts rightward; shifts leftward 
C)  does not shift; shifts leftward 
D)  shifts leftward; shifts rightward.

Question 9

$$\begin{array} { | c | c | } 
\hline{ \text { Item } } & \text { Billions of dollars } \
\hline \text { Exports of goods } & 1000 \
\hline \text { Imports of goods } & - 665 \
\hline \text { Exports of services } & 410 \
\hline \text { Imports of services } & - 590 \
\hline \text { Net interest income } & 0 \
\hline \text { Net transfers } & - 15 \
\hline \text { U.S. investment abroad } & - 600 \
\hline \text { Foreign investment in } \
\text { the United States } & 400 \
\hline \begin{array} { l } 
\text { Official settlements } \
\text { account }
\end{array} & 60 \
\hline
\end{array}$$
-The data in the table above are the U.S.balance of payments.The current account balance is

Accepted Answer

A)  $140 billion. 
B)  $155 billion. 
C)  $170 billion. 
D)  -$45 billion. 
A)  $140 billion. 
B)  $155 billion. 
C)  $170 billion. 
D)  -$45 billion.

Question 10

In the foreign exchange market,an increase in the world demand for U.S.exports shifts

Accepted Answer

A)  demand curve for U.S. dollars rightward 
B)  demand curve for U.S. dollars leftward 
C)  supply curve for U.S. dollars leftward 
D)  supply curve for U.S. dollars rightward 
A)  demand curve for U.S. dollars rightward 
B)  demand curve for U.S. dollars leftward 
C)  supply curve for U.S. dollars leftward 
D)  supply curve for U.S. dollars rightward

Question 11

The sum of the current,capital and official settlements accounts is always zero.

Accepted Answer

A) True 
 B)False

Question 12

The account that records foreign investment in the United States minus U.S.investment abroad is the

Accepted Answer

A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account. 
A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account.

Question 13

Which of the following statements is INCORRECT?

Accepted Answer

A)  Payments for imports and receipts from exports are recorded in the current account. 
B)  Foreign investment in the United States and U.S. investment abroad are recorded in the capital and financial account. 
C)  A change in U.S. official reserves is recorded in the official settlements account. 
D)  Net interest income is recorded in the official settlements account. 
A)  Payments for imports and receipts from exports are recorded in the current account. 
B)  Foreign investment in the United States and U.S. investment abroad are recorded in the capital and financial account. 
C)  A change in U.S. official reserves is recorded in the official settlements account. 
D)  Net interest income is recorded in the official settlements account.

Question 14

"In the foreign exchange market,if the demand for the U.S.dollar increases,the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is correct.The increase in

Question 15

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

Accepted Answer

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

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 110 francs,

Accepted Answer

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

Question 17

If a country's central bank does not intervene in the foreign exchange market,the country has

Accepted Answer

A)  a crawling peg exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a flexible exchange rate policy. 
D)  no exchange rate policy. 
A)  a crawling peg exchange rate policy. 
B)  a fixed exchange rate policy. 
C)  a flexible exchange rate policy. 
D)  no exchange rate policy.

Question 18

Give an example of currency depreciation and appreciation.

Accepted Answer

A currency depreciates when it becomes l

Question 19

The lower the exchange rate today,ceteris paribus,the

Accepted Answer

A)  greater is the expected profit from buying U.S. dollars today and holding them. 
B)  smaller is the expected profit from buying U.S. dollars today and holding them. 
C)  greater is the expected profit from buying foreign currency today and holding it. 
D)  smaller the quantity of U.S. dollars demanded in the foreign exchange market today. 
A)  greater is the expected profit from buying U.S. dollars today and holding them. 
B)  smaller is the expected profit from buying U.S. dollars today and holding them. 
C)  greater is the expected profit from buying foreign currency today and holding it. 
D)  smaller the quantity of U.S. dollars demanded in the foreign exchange market today.

Question 20

Suppose a Japanese bank offers a 4 percent interest rate and U.S.banks offer a 2 percent interest rate.People must expect the yen to

Accepted Answer

A)  depreciate by 2 percent. 
B)  appreciate by 2 percent. 
C)  depreciate by 6 percent. 
D)  appreciate by 6 percent. 
A)  depreciate by 2 percent. 
B)  appreciate by 2 percent. 
C)  depreciate by 6 percent. 
D)  appreciate by 6 percent.

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

-In the above figure,suppose the economy is initially at point A.The interest rate in Japan rises relative to the interest rate in the United States.As a result,there will be a change from point A to a point such as ________.

Suppose that the U.S.interest rate is 5 percent and the Turkish interest rate is 50 percent.The effect of this difference in the foreign exchange market is that

Balance of payments accounts include

In June 2008,the dollar bought 1.6 Brazilian reals and in October,the dollar bought 2.4 reals. This resulted in a

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

Which of the following is included in a nation's current account? I. the import of services II. a change of foreign currency holdings III. net transfers,such as foreign aid payments

Hyundai is a large South Korean company that produces finished steel products.Hyundai plans to buy raw steel from U.S.Steel.As a result,the demand curve for U.S.dollars and the demand curve for South Korean won .

In the foreign exchange market,an increase in the world demand for U.S.exports shifts

The sum of the current,capital and official settlements accounts is always zero.

The account that records foreign investment in the United States minus U.S.investment abroad is the

Which of the following statements is INCORRECT?

"In the foreign exchange market,if the demand for the U.S.dollar increases,the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

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 and net exports is a .

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 110 francs,

If a country's central bank does not intervene in the foreign exchange market,the country has

Give an example of currency depreciation and appreciation.

The lower the exchange rate today,ceteris paribus,the

Suppose a Japanese bank offers a 4 percent interest rate and U.S.banks offer a 2 percent interest rate.People must expect the yen to

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

-In the above figure,suppose the economy is initially at point A.The interest rate in Japan rises relative to the interest rate in the United States.As a result,there will be a change from point A to a point such as ________.

Suppose that the U.S.interest rate is 5 percent and the Turkish interest rate is 50 percent.The effect of this difference in the foreign exchange market is that

Balance of payments accounts include

In June 2008,the dollar bought 1.6 Brazilian reals and in October,the dollar bought 2.4 reals. This resulted in a

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

Which of the following is included in a nation's current account? I. the import of services II. a change of foreign currency holdings III. net transfers,such as foreign aid payments

Hyundai is a large South Korean company that produces finished steel products.Hyundai plans to buy raw steel from U.S.Steel.As a result,the demand curve for U.S.dollars ________ and the demand curve for South Korean won ________.

In the foreign exchange market,an increase in the world demand for U.S.exports shifts

The sum of the current,capital and official settlements accounts is always zero.

The account that records foreign investment in the United States minus U.S.investment abroad is the

Which of the following statements is INCORRECT?

"In the foreign exchange market,if the demand for the U.S.dollar increases,the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

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 ________ and net exports is a ________.

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 110 francs,

If a country's central bank does not intervene in the foreign exchange market,the country has

Give an example of currency depreciation and appreciation.

The lower the exchange rate today,ceteris paribus,the

Suppose a Japanese bank offers a 4 percent interest rate and U.S.banks offer a 2 percent interest rate.People must expect the yen to

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

Hyundai is a large South Korean company that produces finished steel products.Hyundai plans to buy raw steel from U.S.Steel.As a result,the demand curve for U.S.dollars and the demand curve for South Korean won .

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 and net exports is a .