Question 1

The balance of payments consists of the

Accepted Answer

A)  current account, capital account, and gold flows. 
B)  current account, official reserve transactions account, and monetary account. 
C)  current account, capital account, and official reserve transactions account. 
D)  capital account, official reserve transactions account, and recent account. 
A)  current account, capital account, and gold flows. 
B)  current account, official reserve transactions account, and monetary account. 
C)  current account, capital account, and official reserve transactions account. 
D)  capital account, official reserve transactions account, and recent account.

Question 2

Ahmed is working and is spending more than he is earning by using his savings to make up the difference. Which of the following statements is true?

Accepted Answer

A)  Ahmed is in equilibrium since he pays all of his bills. 
B)  Ahmed is in disequilibrium. 
C)  By using savings Ahmed is using special drawing rights. 
D)  By using savings Ahmed has caused the balance of payments to go into a deficit situation. 
A)  Ahmed is in equilibrium since he pays all of his bills. 
B)  Ahmed is in disequilibrium. 
C)  By using savings Ahmed is using special drawing rights. 
D)  By using savings Ahmed has caused the balance of payments to go into a deficit situation.

Question 3

Under a pure gold standard,

Accepted Answer

A)  the dollar is tied to gold and all other currencies are fixed relative to the dollar. 
B)  all foreign exchanges involve gold for goods and services. 
C)  all currencies are defined in terms of gold and these rates are fixed. 
D)  all trade involves government agencies. 
A)  the dollar is tied to gold and all other currencies are fixed relative to the dollar. 
B)  all foreign exchanges involve gold for goods and services. 
C)  all currencies are defined in terms of gold and these rates are fixed. 
D)  all trade involves government agencies.

Question 4

When there is a negative entry for unilateral transfers in the balance of payments, it means that

Accepted Answer

A)  there must be an offsetting positive sign in the capital account. 
B)  U.S. residents gave more to foreign residents than foreign residents gave to U.S. residents. 
C)  U.S. residents purchased less services from foreign countries than foreign countries purchased from U.S. residents. 
D)  U.S. residents purchased more services from foreign countries than foreign countries purchased from U.S. residents. 
A)  there must be an offsetting positive sign in the capital account. 
B)  U.S. residents gave more to foreign residents than foreign residents gave to U.S. residents. 
C)  U.S. residents purchased less services from foreign countries than foreign countries purchased from U.S. residents. 
D)  U.S. residents purchased more services from foreign countries than foreign countries purchased from U.S. residents.

Question 5

The major factor affecting a nation's balance of payments is

Accepted Answer

A)  an increase in its rate of unemployment. 
B)  its rate of inflation relative to the rate of inflation of its trading partners. 
C)  a change in the productivity of its labor. 
D)  its stock market movements. 
A)  an increase in its rate of unemployment. 
B)  its rate of inflation relative to the rate of inflation of its trading partners. 
C)  a change in the productivity of its labor. 
D)  its stock market movements.

Question 6

The use of foreign exchange reserves to keep exchange rates constant over time is called

Accepted Answer

A)  a fixed exchange rate system. 
B)  the Bretton Woods system. 
C)  a fiscal fix. 
D)  a floating exchange rate system. 
A)  a fixed exchange rate system. 
B)  the Bretton Woods system. 
C)  a fiscal fix. 
D)  a floating exchange rate system.

Question 7

Which of the following is NOT a category in the U.S. balance of payments account?

Accepted Answer

A)  Current account 
B)  Past-due account 
C)  Capital account 
D)  Official reserve transactions account 
A)  Current account 
B)  Past-due account 
C)  Capital account 
D)  Official reserve transactions account

Question 8

The balance of payments is

Accepted Answer

A)  a summary record of the financial transactions of a country's government with foreign governments. 
B)  a summary record of a country's imports and exports of goods with foreign residents and governments. 
C)  a summary record of a country's economic transactions with foreign residents and governments. 
D)  a summary record of a country's purchases and sales of goods and services in the world market. 
A)  a summary record of the financial transactions of a country's government with foreign governments. 
B)  a summary record of a country's imports and exports of goods with foreign residents and governments. 
C)  a summary record of a country's economic transactions with foreign residents and governments. 
D)  a summary record of a country's purchases and sales of goods and services in the world market.

Question 9

A nation's balance of payments can be affected by

Accepted Answer

A)  the country's inflation rate relative to other nations' inflation rates. 
B)  the country's population increases relative to other nations' populations. 
C)  per capita GDP relative to other nations' per capita GDP. 
D)  none of the above. 
A)  the country's inflation rate relative to other nations' inflation rates. 
B)  the country's population increases relative to other nations' populations. 
C)  per capita GDP relative to other nations' per capita GDP. 
D)  none of the above.

Question 10

In July 2011, $1 was worth 45 Indian rupees and in July 2012, $1 was worth 55 Indian rupees. We can therefore conclude that

Accepted Answer

A)  the Indian rupee depreciated. 
B)  the Indican rupee appreciated. 
C)  the U.S. dollar has depreciated. 
D)  the value of the U.S. dollar has fluctuated. 
A)  the Indian rupee depreciated. 
B)  the Indican rupee appreciated. 
C)  the U.S. dollar has depreciated. 
D)  the value of the U.S. dollar has fluctuated.

Question 11

A summary of a country's economic transactions with foreign residents and governments is called the

Accepted Answer

A)  current account balance. 
B)  capital account balance. 
C)  balance of trade. 
D)  balance of payments. 
A)  current account balance. 
B)  capital account balance. 
C)  balance of trade. 
D)  balance of payments.

Question 12

Suppose the exchange rate was $0.30 for one Argentine peso. If the exchange rate falls to $0.20 for one peso, we would expect to see

Accepted Answer

A)  more exports to Argentina since the price of the peso has risen. 
B)  fewer exports to Argentina since the price of the peso has risen. 
C)  more U.S. imports from Argentina since the price of the peso has fallen. 
D)  more U.S. exports since the price of the dollar has fallen. 
A)  more exports to Argentina since the price of the peso has risen. 
B)  fewer exports to Argentina since the price of the peso has risen. 
C)  more U.S. imports from Argentina since the price of the peso has fallen. 
D)  more U.S. exports since the price of the dollar has fallen.

Question 13

Which of the following is NOT a deficit item on the international accounts balance sheet for a country?

Accepted Answer

A)  imports of merchandise 
B)  military spending abroad 
C)  purchases of foreign currency 
D)  exports of merchandise 
A)  imports of merchandise 
B)  military spending abroad 
C)  purchases of foreign currency 
D)  exports of merchandise

Question 14

An increase in a country's rate of inflation is apt to

Accepted Answer

A)  reduce its imports and improve its trade balance. 
B)  lower its nominal rate of interest and encourage an inflow of capital. 
C)  worsen its balance of trade and balance of payments. 
D)  decrease demand for the country's currency. 
A)  reduce its imports and improve its trade balance. 
B)  lower its nominal rate of interest and encourage an inflow of capital. 
C)  worsen its balance of trade and balance of payments. 
D)  decrease demand for the country's currency.

Question 15

The Japanese yen will appreciate against the dollar if

Accepted Answer

A)  U.S. residents demand more Japanese goods. 
B)  U.S. residents demand fewer Japanese goods. 
C)  Japanese residents demand more U.S. goods. 
D)  None of the above. 
A)  U.S. residents demand more Japanese goods. 
B)  U.S. residents demand fewer Japanese goods. 
C)  Japanese residents demand more U.S. goods. 
D)  None of the above.

Question 16

Which of the following is a deficit item in the U.S. current account?

Accepted Answer

A)  Toyota builds a new plant in California. 
B)  Many U.S. residents who previously had not traveled abroad decide to make Mexico a tourist destination. 
C)  A Saudi Arabian prince builds six new homes in California. 
D)  Sony buys a new film studio in Florida. 
A)  Toyota builds a new plant in California. 
B)  Many U.S. residents who previously had not traveled abroad decide to make Mexico a tourist destination. 
C)  A Saudi Arabian prince builds six new homes in California. 
D)  Sony buys a new film studio in Florida.

Question 17

The exchange rate for a foreign currency that is determined by supply and demand is

Accepted Answer

A)  a fixed exchange rate. 
B)  a controlled exchange rate. 
C)  a constrained exchange rate. 
D)  a flexible exchange rate. 
A)  a fixed exchange rate. 
B)  a controlled exchange rate. 
C)  a constrained exchange rate. 
D)  a flexible exchange rate.

Question 18

The supply of U.S. dollars on foreign exchange markets is

Accepted Answer

A)  determined directly by open market operations at the Federal Reserve Bank. 
B)  derived from the demand for U.S. products by foreigners. 
C)  derived from the supply of U.S. goods. 
D)  derived from the demand by United States for imported goods and services. 
A)  determined directly by open market operations at the Federal Reserve Bank. 
B)  derived from the demand for U.S. products by foreigners. 
C)  derived from the supply of U.S. goods. 
D)  derived from the demand by United States for imported goods and services.

Question 19

A resident of the U.S. just purchased a share of stock on the London stock market. As far as the U.S. balance of payments this purchase will

Accepted Answer

A)  have no influence on the balance of payments since stock is not a good or service. 
B)  be entered as a unilateral transfer in the current account. 
C)  be entered in the capital account. 
D)  require special drawing rights. 
A)  have no influence on the balance of payments since stock is not a good or service. 
B)  be entered as a unilateral transfer in the current account. 
C)  be entered in the capital account. 
D)  require special drawing rights.

Question 20

As the dollar price of the euro increases,

Accepted Answer

A)  the demand for euros will increase. 
B)  the price of French goods will fall for U.S. residents. 
C)  French residents will purchase more U.S. goods. 
D)  U. S. residents will increase their travel to France. 
A)  the demand for euros will increase. 
B)  the price of French goods will fall for U.S. residents. 
C)  French residents will purchase more U.S. goods. 
D)  U. S. residents will increase their travel to France.

Exam 33: Exchange Rates and the Balance of Payments

The balance of payments consists of the

Ahmed is working and is spending more than he is earning by using his savings to make up the difference. Which of the following statements is true?

Under a pure gold standard,

When there is a negative entry for unilateral transfers in the balance of payments, it means that

The major factor affecting a nation's balance of payments is

The use of foreign exchange reserves to keep exchange rates constant over time is called

Which of the following is NOT a category in the U.S. balance of payments account?

The balance of payments is

A nation's balance of payments can be affected by

In July 2011, $1 was worth 45 Indian rupees and in July 2012, $1 was worth 55 Indian rupees. We can therefore conclude that

A summary of a country's economic transactions with foreign residents and governments is called the

Suppose the exchange rate was $0.30 for one Argentine peso. If the exchange rate falls to $0.20 for one peso, we would expect to see

Which of the following is NOT a deficit item on the international accounts balance sheet for a country?

An increase in a country's rate of inflation is apt to

The Japanese yen will appreciate against the dollar if

Which of the following is a deficit item in the U.S. current account?

The exchange rate for a foreign currency that is determined by supply and demand is

The supply of U.S. dollars on foreign exchange markets is

A resident of the U.S. just purchased a share of stock on the London stock market. As far as the U.S. balance of payments this purchase will

As the dollar price of the euro increases,

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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