Question 1

The demand for Mexican tomatoes by an American food grocery chain creates a

Accepted Answer

A)  demand for the U.S. dollar. 
B)  demand for an interest rate differential. 
C)  supply of Mexican pesos. 
D)  supply of U.S. dollars. 
A)  demand for the U.S. dollar. 
B)  demand for an interest rate differential. 
C)  supply of Mexican pesos. 
D)  supply of U.S. dollars.

Question 2

If the equilibrium exchange rate for the dollar is 110 yen per dollar and the current exchange rate is 120 yen per dollar,then the

Accepted Answer

A)  supply curve of U.S. dollars shifts rightward. 
B)  dollar will depreciate. 
C)  dollar will appreciate. 
D)  demand curve for U.S. dollars shifts rightward. 
A)  supply curve of U.S. dollars shifts rightward. 
B)  dollar will depreciate. 
C)  dollar will appreciate. 
D)  demand curve for U.S. dollars shifts rightward.

Question 3

The exchange rate can be influenced by a nation's central bank.

Accepted Answer

A) True 
 B)False

Question 4

When the exchange rate falls,in the foreign exchange market the

Accepted Answer

A)  quantity demanded of the currency increases. 
B)  demand for the currency increases. 
C)  quantity demanded of the currency decreases. 
D)  demand for the currency decreases. 
A)  quantity demanded of the currency increases. 
B)  demand for the currency increases. 
C)  quantity demanded of the currency decreases. 
D)  demand for the currency decreases.

Question 5

Suppose $1 will buy 150 yen in January and 200 yen the following December.This change could have occurred if the

Accepted Answer

A)  demand curve for dollars shifted rightward. 
B)  demand curve for dollars shifted leftward. 
C)  supply curve of dollars shifted rightward. 
D)  demand curve for yen shifted rightward. 
A)  demand curve for dollars shifted rightward. 
B)  demand curve for dollars shifted leftward. 
C)  supply curve of dollars shifted rightward. 
D)  demand curve for yen shifted rightward.

Question 6

The U.S.dollar will depreciate in value if

Accepted Answer

A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Both answers B and C are correct. 
A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Both answers B and C are correct.

Question 7

The change in U.S.official reserves is equal to

Accepted Answer

A)  borrowing from abroad plus the current account deficit. 
B)  the current account balance plus the capital and financial account balance. 
C)  the current account balance minus the capital and financial account balance. 
D)  foreign investment in the United States minus U.S. investment abroad. 
A)  borrowing from abroad plus the current account deficit. 
B)  the current account balance plus the capital and financial account balance. 
C)  the current account balance minus the capital and financial account balance. 
D)  foreign investment in the United States minus U.S. investment abroad.

Question 8

What role can the Fed play in the foreign exchange market?

Accepted Answer

The Federal Reserve can intervene in the

Question 9

The Fed

Accepted Answer

A)  allows a flexible exchange rate, though their actions can impact the exchange rate. 
B)  has no influence on the exchange rate. 
C)  sells U.S. dollars to China in an attempt to depreciate the U.S. dollar. 
D)  alternates between a flexible, fixed, and crawling peg exchange rate policy depending on economic conditions. 
A)  allows a flexible exchange rate, though their actions can impact the exchange rate. 
B)  has no influence on the exchange rate. 
C)  sells U.S. dollars to China in an attempt to depreciate the U.S. dollar. 
D)  alternates between a flexible, fixed, and crawling peg exchange rate policy depending on economic conditions.

Question 10

If the price level rises in the United States but not in foreign nations and the current exchange rate does not change,the expected future exchange rate

Accepted Answer

A)  rises. 
B)  falls. 
C)  stays the same. 
D)  You can't tell from the given information. 
A)  rises. 
B)  falls. 
C)  stays the same. 
D)  You can't tell from the given information.

Question 11

Which of the following will lead to an appreciation of the U.S.dollar against the British pound?

Accepted Answer

A)  an increase in British demand for U.S. imports 
B)  an increase in U.S. demand for British imports 
C)  an increase in British interest rates 
D)  a decrease in British demand for U.S. assets 
A)  an increase in British demand for U.S. imports 
B)  an increase in U.S. demand for British imports 
C)  an increase in British interest rates 
D)  a decrease in British demand for U.S. assets

Question 12

Suppose the exchange rate between the dollar and the euro is 2 euros per dollar.The price of a clock in Europe is 20 euros while the price of the same clock in the United States is $5.From these prices and exchange rate,it can be concluded that

Accepted Answer

A)  purchasing power parity holds. 
B)  money buys more in the United States. 
C)  money buys more in Europe. 
D)  interest rate parity holds. 
A)  purchasing power parity holds. 
B)  money buys more in the United States. 
C)  money buys more in Europe. 
D)  interest rate parity holds.

Question 13

The quantity of dollars demanded by foreign nations increases as

Accepted Answer

A)  U.S. residents purchase more foreign goods. 
B)  foreigners purchase more U.S. goods. 
C)  more U.S. residents travel abroad. 
D)  U.S. exports fall. 
A)  U.S. residents purchase more foreign goods. 
B)  foreigners purchase more U.S. goods. 
C)  more U.S. residents travel abroad. 
D)  U.S. exports fall.

Question 14

Initially the nominal exchange rate between the South Korean won and the U.S.dollar is 950 won per dollar.If the nominal exchange rate increases to 1000 won per dollar and the U.S and Korean price levels do not change,the real exchange rate

Accepted Answer

A)  is the same as before. 
B)  is greater than before. 
C)  is less than before. 
D)  More information is needed to answer the question. 
A)  is the same as before. 
B)  is greater than before. 
C)  is less than before. 
D)  More information is needed to answer the question.

Question 15

The main item in the current account balance is

Accepted Answer

A)  net interest income. 
B)  net transfers. 
C)  net exports. 
D)  net taxes. 
A)  net interest income. 
B)  net transfers. 
C)  net exports. 
D)  net taxes.

Question 16

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

Accepted Answer

A)  $0. 
B)  -$335 billion. 
C)  $140 billion. 
D)  -$60 billion. 
A)  $0. 
B)  -$335 billion. 
C)  $140 billion. 
D)  -$60 billion.

Question 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

A)  $0. 
B)  -$80 billion. 
C)  -$200 billion. 
D)  +$200 billion. 
A)  $0. 
B)  -$80 billion. 
C)  -$200 billion. 
D)  +$200 billion.

Question 19

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S.assets,the ________ U.S.dollars will ________.

Accepted Answer

A)  demand for; increase 
B)  demand for; decrease 
C)  supply of; increase 
D)  supply of; decrease 
A)  demand for; increase 
B)  demand for; decrease 
C)  supply of; increase 
D)  supply of; decrease

Question 20

A creditor nation means a nation

Accepted Answer

A)  whose exports exceed its imports. 
B)  whose current account is larger than its capital account. 
C)  whose current lending to the rest of the world exceeds its borrowing from the rest of the world. 
D)  through its history has invested more in the rest of the world than other countries have invested in it. 
A)  whose exports exceed its imports. 
B)  whose current account is larger than its capital account. 
C)  whose current lending to the rest of the world exceeds its borrowing from the rest of the world. 
D)  through its history has invested more in the rest of the world than other countries have invested in it.

The demand for Mexican tomatoes by an American food grocery chain creates a

If the equilibrium exchange rate for the dollar is 110 yen per dollar and the current exchange rate is 120 yen per dollar,then the

The exchange rate can be influenced by a nation's central bank.

When the exchange rate falls,in the foreign exchange market the

Suppose $1 will buy 150 yen in January and 200 yen the following December.This change could have occurred if the

The U.S.dollar will depreciate in value if

The change in U.S.official reserves is equal to

What role can the Fed play in the foreign exchange market?

The Fed

If the price level rises in the United States but not in foreign nations and the current exchange rate does not change,the expected future exchange rate

Which of the following will lead to an appreciation of the U.S.dollar against the British pound?

Suppose the exchange rate between the dollar and the euro is 2 euros per dollar.The price of a clock in Europe is 20 euros while the price of the same clock in the United States is $5.From these prices and exchange rate,it can be concluded that

The quantity of dollars demanded by foreign nations increases as

Initially the nominal exchange rate between the South Korean won and the U.S.dollar is 950 won per dollar.If the nominal exchange rate increases to 1000 won per dollar and the U.S and Korean price levels do not change,the real exchange rate

The main item in the current account balance is

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

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S.assets,the U.S.dollars will .

A creditor nation means a nation

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

The demand for Mexican tomatoes by an American food grocery chain creates a

If the equilibrium exchange rate for the dollar is 110 yen per dollar and the current exchange rate is 120 yen per dollar,then the

The exchange rate can be influenced by a nation's central bank.

When the exchange rate falls,in the foreign exchange market the

Suppose $1 will buy 150 yen in January and 200 yen the following December.This change could have occurred if the

The U.S.dollar will depreciate in value if

The change in U.S.official reserves is equal to

What role can the Fed play in the foreign exchange market?

The Fed

If the price level rises in the United States but not in foreign nations and the current exchange rate does not change,the expected future exchange rate

Which of the following will lead to an appreciation of the U.S.dollar against the British pound?

Suppose the exchange rate between the dollar and the euro is 2 euros per dollar.The price of a clock in Europe is 20 euros while the price of the same clock in the United States is $5.From these prices and exchange rate,it can be concluded that

The quantity of dollars demanded by foreign nations increases as

Initially the nominal exchange rate between the South Korean won and the U.S.dollar is 950 won per dollar.If the nominal exchange rate increases to 1000 won per dollar and the U.S and Korean price levels do not change,the real exchange rate

The main item in the current account balance is

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

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S.assets,the ________ U.S.dollars will ________.

A creditor nation means a nation

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 growth in the United States speeds up so that investors believe they can make a bigger profit from U.S.assets,the U.S.dollars will .