Question 1

If the exchange rate falls,then the expected profit from holding the currency

Accepted Answer

A)  does not change. 
B)  increases. 
C)  decreases. 
D)  can either increase or decrease. 
A)  does not change. 
B)  increases. 
C)  decreases. 
D)  can either increase or decrease.

Question 2

If U.S.imports increase,the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

Accepted Answer

A)  becomes negative. 
B)  becomes positive. 
C)  becomes negative or positive depending on the government budget deficit or surplus. 
D)  does not change. 
A)  becomes negative. 
B)  becomes positive. 
C)  becomes negative or positive depending on the government budget deficit or surplus. 
D)  does not change.

Question 3

The People's Bank of China has

Accepted Answer

A)  allowed a flexible exchange rate to boost exports. 
B)  managed its exchange rate to help control inflation. 
C)  strictly followed a fixed exchange rate to boost exports. 
D)  purchased U.S. dollars to appreciate the yuan. 
A)  allowed a flexible exchange rate to boost exports. 
B)  managed its exchange rate to help control inflation. 
C)  strictly followed a fixed exchange rate to boost exports. 
D)  purchased U.S. dollars to appreciate the yuan.

Question 4

If the Fed sets a target exchange rate that is higher than the current exchange rate,then

Accepted Answer

A)  the Fed must sell dollars. 
B)  the Fed must buy dollars. 
C)  the Fed can do nothing in the short run. 
D)  will try to print more dollars for foreign distribution. 
A)  the Fed must sell dollars. 
B)  the Fed must buy dollars. 
C)  the Fed can do nothing in the short run. 
D)  will try to print more dollars for foreign distribution.

Question 5

If interest rates in Japan rise and those in the United States do not change,there is

Accepted Answer

A)  a decrease in the supply of dollars. 
B)  an increase in the supply of dollars. 
C)  a downward movement along the supply curve for dollars. 
D)  None of the above answers is correct. 
A)  a decrease in the supply of dollars. 
B)  an increase in the supply of dollars. 
C)  a downward movement along the supply curve for dollars. 
D)  None of the above answers is correct.

Question 6

The term "foreign currency" refers to foreign I. coins
II) notes
III) bank deposits

Accepted Answer

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

Question 7

The U.S.interest rate minus the foreign interest rate is called the ________.

Accepted Answer

A)  foreign interest rate differential 
B)  U.S. bond rate differential 
C)  U.S. interest rate differential 
D)  U.S. stock yield differential 
A)  foreign interest rate differential 
B)  U.S. bond rate differential 
C)  U.S. interest rate differential 
D)  U.S. stock yield differential

Question 8

An increase in the Japanese interest rate will ________ the supply of dollars and lead the dollar to ________.

Accepted Answer

A)  increase; appreciate 
B)  increase; depreciate 
C)  decrease; appreciate 
D)  decrease; depreciate 
A)  increase; appreciate 
B)  increase; depreciate 
C)  decrease; appreciate 
D)  decrease; depreciate

Question 9

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. If investors flocked to the dollar,

Accepted Answer

A)  the exchange rate would increase. 
B)  the exchange rate would decrease. 
C)  the exchange rate would not change. 
D)  the exchange rate could increase or decrease. 
A)  the exchange rate would increase. 
B)  the exchange rate would decrease. 
C)  the exchange rate would not change. 
D)  the exchange rate could increase or decrease.

Question 10

Suppose that the U.S.exchange rate is expected to fall in the future.As a result,in the foreign exchange market,there will be

Accepted Answer

A)  an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. 
B)  an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate. 
C)  a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. 
D)  a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate. 
A)  an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. 
B)  an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate. 
C)  a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. 
D)  a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate.

Question 11

If the interest rate on Japanese yen assets falls while interest rates in the United States remain constant,the

Accepted Answer

A)  quantity of dollars demanded will increase. 
B)  quantity of dollars demanded will decrease. 
C)  demand for dollars will increase. 
D)  demand for dollars will decrease. 
A)  quantity of dollars demanded will increase. 
B)  quantity of dollars demanded will decrease. 
C)  demand for dollars will increase. 
D)  demand for dollars will decrease.

Question 12

Adjusted for risk,interest rate parity

Accepted Answer

A)  holds only for larger countries. 
B)  holds only between the U.S. and Canada. 
C)  holds only when purchasing parity holds. 
D)  always holds. 
A)  holds only for larger countries. 
B)  holds only between the U.S. and Canada. 
C)  holds only when purchasing parity holds. 
D)  always holds.

Question 13

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Investment } & 1,900 \
\hline \text { Saving } & 1,600 \
\hline \text { Government } \
\text { expenditure } & 1,000 \
\hline \text { Net taxes } & 1,700 \
\hline
\end{array}$$
-The table above gives some of the accounts of the United States in 2020.
a) What is the private sector balance?
b) What is the government sector balance?
c) What is net exports?

Accepted Answer

a)The private sector balance equals savi

Question 14

Suppose the U.S.interest rate is 6 percent and the world interest rate is 5 percent.The U.S.interest differential is

Accepted Answer

A)  -1 percent. 
B)  1.2 percent. 
C)  1 percent. 
D)  -0.83 percent. 
A)  -1 percent. 
B)  1.2 percent. 
C)  1 percent. 
D)  -0.83 percent.

Question 15

What are the main components of the current account?
What has been the recent U.S.experience with these items?

Accepted Answer

The current account records payments for

Question 16

Which of the following is correct?

Accepted Answer

A)  Net exports equals the government sector balance plus the private sector balance. 
B)  The government sector balance equals net exports plus the private sector balance. 
C)  The private sector balance equals net exports plus the government sector balance. 
D)  Net exports equals the current account plus the capital account plus the official settlements account. 
A)  Net exports equals the government sector balance plus the private sector balance. 
B)  The government sector balance equals net exports plus the private sector balance. 
C)  The private sector balance equals net exports plus the government sector balance. 
D)  Net exports equals the current account plus the capital account plus the official settlements account.

Question 17

X is exports,M is imports,T is net taxes,G is government expenditure,C is consumption expenditure,S is saving,and I is investment.The government sector balance is equal to

Accepted Answer

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

Question 18

$$\begin{array} { | l | c | } 
\hline { \text { Item } } & \begin{array} { c } 
\text { Billions of } \
\text { dollars }
\end{array} \
\hline \text { Exports of goods and services, } X & \
\hline \text { Imports of goods and services, } M & 1,000 \
\hline \text { Net taxes, } T & \
\hline \text { Government expenditure, } G & 1,300 \
\hline \text { Saving, } S & \
\hline \text { Investment, } I & 650 \
\hline
\end{array}$$
-Using the data in the above table,if net exports = -$500 billion and the government balances its budget,

Accepted Answer

A)  the private sector must balance its budget. 
B)  savings must equal $150 billion. 
C)  the private sector runs a surplus of $850 billion. 
D)  saving must equal $650 billion. 
A)  the private sector must balance its budget. 
B)  savings must equal $150 billion. 
C)  the private sector runs a surplus of $850 billion. 
D)  saving must equal $650 billion.

Question 19

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

Accepted Answer

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

Question 20

The official settlements account records the change in official U.S.reserves.

Accepted Answer

A) True 
 B)False

If the exchange rate falls,then the expected profit from holding the currency

If U.S.imports increase,the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

The People's Bank of China has

If the Fed sets a target exchange rate that is higher than the current exchange rate,then

If interest rates in Japan rise and those in the United States do not change,there is

The term "foreign currency" refers to foreign I. coins II) notes III) bank deposits

The U.S.interest rate minus the foreign interest rate is called the ________.

An increase in the Japanese interest rate will the supply of dollars and lead the dollar to .

Suppose that the U.S.exchange rate is expected to fall in the future.As a result,in the foreign exchange market,there will be

If the interest rate on Japanese yen assets falls while interest rates in the United States remain constant,the

Adjusted for risk,interest rate parity

Item Amount (billions of dollars) Investment 1,900 Saving 1,600 Government expenditure 1,000 Net taxes 1,700 -The table above gives some of the accounts of the United States in 2020. a) What is the private sector balance? b) What is the government sector balance? c) What is net exports?

Suppose the U.S.interest rate is 6 percent and the world interest rate is 5 percent.The U.S.interest differential is

What are the main components of the current account? What has been the recent U.S.experience with these items?

Which of the following is correct?

X is exports,M is imports,T is net taxes,G is government expenditure,C is consumption expenditure,S is saving,and I is investment.The government sector balance is equal to

Item Billions of dollars Exports of goods and services, X Imports of goods and services, M 1,000 Net taxes, T Government expenditure, G 1,300 Saving, S Investment, I 650 -Using the data in the above table,if net exports = -$500 billion and the government balances its budget,

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

The official settlements account records the change in official U.S.reserves.

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 the exchange rate falls,then the expected profit from holding the currency

If U.S.imports increase,the sum of the balance of payments accounts (the sum of the current account plus capital and financial account plus official settlements account)

The People's Bank of China has

If the Fed sets a target exchange rate that is higher than the current exchange rate,then

If interest rates in Japan rise and those in the United States do not change,there is

The term "foreign currency" refers to foreign I. coins II) notes III) bank deposits

The U.S.interest rate minus the foreign interest rate is called the ________.

An increase in the Japanese interest rate will ________ the supply of dollars and lead the dollar to ________.

Suppose that the U.S.exchange rate is expected to fall in the future.As a result,in the foreign exchange market,there will be

If the interest rate on Japanese yen assets falls while interest rates in the United States remain constant,the

Adjusted for risk,interest rate parity

Item Amount (billions of dollars) Investment 1,900 Saving 1,600 Government expenditure 1,000 Net taxes 1,700 -The table above gives some of the accounts of the United States in 2020. a) What is the private sector balance? b) What is the government sector balance? c) What is net exports?

Suppose the U.S.interest rate is 6 percent and the world interest rate is 5 percent.The U.S.interest differential is

What are the main components of the current account? What has been the recent U.S.experience with these items?

Which of the following is correct?

X is exports,M is imports,T is net taxes,G is government expenditure,C is consumption expenditure,S is saving,and I is investment.The government sector balance is equal to

Item Billions of dollars Exports of goods and services, X Imports of goods and services, M 1,000 Net taxes, T Government expenditure, G 1,300 Saving, S Investment, I 650 -Using the data in the above table,if net exports = -$500 billion and the government balances its budget,

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

The official settlements account records the change in official U.S.reserves.

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

An increase in the Japanese interest rate will the supply of dollars and lead the dollar to .