Question 1

All of the following are surplus items on the balance of payments accounts EXCEPT

Accepted Answer

A)  U.S. residents purchases of gold from foreign residents. 
B)  foreign tourists spending funds in the United States. 
C)  exports of merchandise. 
D)  sales of U.S. dollars to foreign residents. 
A)  U.S. residents purchases of gold from foreign residents. 
B)  foreign tourists spending funds in the United States. 
C)  exports of merchandise. 
D)  sales of U.S. dollars to foreign residents.

Question 2

The U.S. balance of payments status may improve when

Accepted Answer

A)  the inflation rate increases in the United States relative to other countries. 
B)  political instability in other countries increases. 
C)  the world demand for U.S. products falls. 
D)  the American government increases its spending on foreign aid. 
A)  the inflation rate increases in the United States relative to other countries. 
B)  political instability in other countries increases. 
C)  the world demand for U.S. products falls. 
D)  the American government increases its spending on foreign aid.

Question 3

Caitlin has just decided to order a computer that is made in Japan. She needs to convert U.S. dollars for Japanese yen. This conversion takes place in the

Accepted Answer

A)  International Monetary Fund. 
B)  target zone. 
C)  foreign exchange markets. 
D)  SDRs. 
A)  International Monetary Fund. 
B)  target zone. 
C)  foreign exchange markets. 
D)  SDRs.

Question 4

Suppose the U.S. dollar price of the Japanese yen decreases. Given this information, which of the following is correct?

Accepted Answer

A)  The dollar has appreciated. 
B)  The dollar has depreciated. 
C)  The yen has appreciated. 
D)  The yen price of the dollar decreased. 
A)  The dollar has appreciated. 
B)  The dollar has depreciated. 
C)  The yen has appreciated. 
D)  The yen price of the dollar decreased.

Question 5

Under flexible exchange rates, the exchange rate is set by

Accepted Answer

A)  the International Monetary Fund. 
B)  the U.S. Federal Reserve's Board of Governors. 
C)  the intersection of demand and supply curves in the currency markets. 
D)  negotiations among central banks of the major industrial powers. 
A)  the International Monetary Fund. 
B)  the U.S. Federal Reserve's Board of Governors. 
C)  the intersection of demand and supply curves in the currency markets. 
D)  negotiations among central banks of the major industrial powers.

Question 6

The market in which households, firms and governments buy and sell national currencies is known as

Accepted Answer

A)  the foreign exchange market. 
B)  standard drawing rights. 
C)  the exchange rate. 
D)  flexible exchange rates. 
A)  the foreign exchange market. 
B)  standard drawing rights. 
C)  the exchange rate. 
D)  flexible exchange rates.

Question 7

If the foreign exchange rate for 1 Hungarian forint is 0.5 cent, then

Accepted Answer

A)  a dinner priced at 400 forints will cost $20. 
B)  a wine that sells for 600 forints will cost $3,000. 
C)  a Big Mac hamburger priced at 50 forints will cost $1. 
D)  a hotel room renting for 40,000 forints will cost $200. 
A)  a dinner priced at 400 forints will cost $20. 
B)  a wine that sells for 600 forints will cost $3,000. 
C)  a Big Mac hamburger priced at 50 forints will cost $1. 
D)  a hotel room renting for 40,000 forints will cost $200.

Question 8

A system of accounts that measures the transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is the

Accepted Answer

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

Question 9

Jane has just sent a gift that was made in the U.S. to her relatives in Italy. As far as the balance of payments is concerned this gift will

Accepted Answer

A)  have no influence on the balance of payments since it was made in the U.S. 
B)  be part of the capital account since the gift is a physical item. 
C)  be considered an export since it has left the U.S. 
D)  be part of the current account as a unilateral transfer. 
A)  have no influence on the balance of payments since it was made in the U.S. 
B)  be part of the capital account since the gift is a physical item. 
C)  be considered an export since it has left the U.S. 
D)  be part of the current account as a unilateral transfer.

Question 10

When a Mexican resident buys a ukulele from a U.S. producer, there is a(n)

Accepted Answer

A)  increase in the supply of dollars in the foreign exchange market. 
B)  decrease in the supply of dollars in the foreign exchange market. 
C)  increase in the demand for dollars in the foreign exchange market. 
D)  decrease in the demand for dollars in the foreign exchange market. 
A)  increase in the supply of dollars in the foreign exchange market. 
B)  decrease in the supply of dollars in the foreign exchange market. 
C)  increase in the demand for dollars in the foreign exchange market. 
D)  decrease in the demand for dollars in the foreign exchange market.

Question 11

If you go to Europe to work and send funds home to your family living in the United States, this is known as a

Accepted Answer

A)  service import. 
B)  merchandise import. 
C)  service export. 
D)  unilateral transfer. 
A)  service import. 
B)  merchandise import. 
C)  service export. 
D)  unilateral transfer.

Question 12

If the exchange rate measured in euros per dollar increases, then

Accepted Answer

A)  the dollar depreciates relative to the euro. 
B)  the euro appreciates relative to the dollar. 
C)  the euro depreciates relative to the dollar. 
D)  neither currency appreciates or depreciates. 
A)  the dollar depreciates relative to the euro. 
B)  the euro appreciates relative to the dollar. 
C)  the euro depreciates relative to the dollar. 
D)  neither currency appreciates or depreciates.

Question 13

-Use the above figure. A rightward shift of the demand curve, ceteris paribus, would result in

Accepted Answer

A)  dollar depreciation. 
B)  dollar appreciation. 
C)  euro depreciation. 
D)  reducing the equilibrium quantity of euros. 
A)  dollar depreciation. 
B)  dollar appreciation. 
C)  euro depreciation. 
D)  reducing the equilibrium quantity of euros.

Question 14

Suppose the foreign exchange market is in equilibrium. Then, the U.S. government increases borrowing, causing American interest rates to increase. What will happen to the price of the Japanese yen? Why?

Accepted Answer

The higher U.S. interest rates induce fo

Question 15

The balance of trade is defined as

Accepted Answer

A)  the difference between the value of goods and services exported and the value of goods and services imported. 
B)  the difference between the value of goods exported and the value of goods imported. 
C)  the difference between the value of services exported and the value of services imported. 
D)  none of the above. 
A)  the difference between the value of goods and services exported and the value of goods and services imported. 
B)  the difference between the value of goods exported and the value of goods imported. 
C)  the difference between the value of services exported and the value of services imported. 
D)  none of the above.

Question 16

-In the diagram above, which of the following could cause a movement from point E to point   ?

Accepted Answer

A)  Japanese residents' incomes rise, so they increase their purchases of U.S. goods. 
B)  the dollar depreciates, including Japanese residents to buy more U.S. goods. 
C)  U.S. residents' incomes rise, so they increase their purchases of Japanese goods. 
D)  the dollar depreciates, inducing U.S. residents to buy more Japanese goods. 
A)  Japanese residents' incomes rise, so they increase their purchases of U.S. goods. 
B)  the dollar depreciates, including Japanese residents to buy more U.S. goods. 
C)  U.S. residents' incomes rise, so they increase their purchases of Japanese goods. 
D)  the dollar depreciates, inducing U.S. residents to buy more Japanese goods.

Question 17

Assets that the IMF created to be used by countries to settle international payment obligations are called

Accepted Answer

A)  capital intervention accounts. 
B)  foreign currency reserves. 
C)  gold reserves. 
D)  special drawing rights. 
A)  capital intervention accounts. 
B)  foreign currency reserves. 
C)  gold reserves. 
D)  special drawing rights.

Question 18

When a dinner in Bulgaria costs 150 Bulgarian levas, it will cost a U.S. resident ________ dollars, if the exchange rate is 1.5 Bulgarian levas to the dollar.

Accepted Answer

A)  $10 
B)  $75 
C)  $120 
D)  $150 
A)  $10 
B)  $75 
C)  $120 
D)  $150

Question 19

Which of the following is an example of a surplus item on the balance of payments?

Accepted Answer

A)  Private gifts to foreign residents 
B)  Public gifts to foreign residents 
C)  Interest receipts from foreign residents 
D)  Purchases of gold from foreign residents 
A)  Private gifts to foreign residents 
B)  Public gifts to foreign residents 
C)  Interest receipts from foreign residents 
D)  Purchases of gold from foreign residents

Question 20

-Refer to the above table. The balance of trade is

Accepted Answer

A)  $1000. 
B)  -$665. 
C)  +$335. 
D)  -$155. 
A)  $1000. 
B)  -$665. 
C)  +$335. 
D)  -$155.

Exam 33: Exchange Rates and the Balance of Payments

All of the following are surplus items on the balance of payments accounts EXCEPT

The U.S. balance of payments status may improve when

Caitlin has just decided to order a computer that is made in Japan. She needs to convert U.S. dollars for Japanese yen. This conversion takes place in the

Suppose the U.S. dollar price of the Japanese yen decreases. Given this information, which of the following is correct?

Under flexible exchange rates, the exchange rate is set by

The market in which households, firms and governments buy and sell national currencies is known as

If the foreign exchange rate for 1 Hungarian forint is 0.5 cent, then

A system of accounts that measures the transactions of goods, services, income, and financial assets between domestic households, businesses, and governments and residents of the rest of the world during a specific time period is the

Jane has just sent a gift that was made in the U.S. to her relatives in Italy. As far as the balance of payments is concerned this gift will

When a Mexican resident buys a ukulele from a U.S. producer, there is a(n)

If you go to Europe to work and send funds home to your family living in the United States, this is known as a

If the exchange rate measured in euros per dollar increases, then

-Use the above figure. A rightward shift of the demand curve, ceteris paribus, would result in

Suppose the foreign exchange market is in equilibrium. Then, the U.S. government increases borrowing, causing American interest rates to increase. What will happen to the price of the Japanese yen? Why?

The balance of trade is defined as

-In the diagram above, which of the following could cause a movement from point E to point ?

Assets that the IMF created to be used by countries to settle international payment obligations are called

When a dinner in Bulgaria costs 150 Bulgarian levas, it will cost a U.S. resident ________ dollars, if the exchange rate is 1.5 Bulgarian levas to the dollar.

Which of the following is an example of a surplus item on the balance of payments?

-Refer to the above table. The balance of trade is

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

Filters