Question 1

A country's balance of payments shows a

Accepted Answer

A)  detailed record of the import and export of services for the country. 
B)  detailed record of the country's imports. 
C)  summary record of international financial assistance received by the country. 
D)  summary record of a country's economic transactions with foreign residents and governments over a year. 
A)  detailed record of the import and export of services for the country. 
B)  detailed record of the country's imports. 
C)  summary record of international financial assistance received by the country. 
D)  summary record of a country's economic transactions with foreign residents and governments over a year.

Question 2

Why does the demand curve for Japanese yen slope down?

Accepted Answer

The demand for Japanese yen is derived f

Question 3

An accounting identity is

Accepted Answer

A)  when the balance of payments is running a surplus or deficits. 
B)  when the balance of trade is in surplus or deficit. 
C)  an expression of values that are equivalent by definition. 
D)  special drawing rights. 
A)  when the balance of payments is running a surplus or deficits. 
B)  when the balance of trade is in surplus or deficit. 
C)  an expression of values that are equivalent by definition. 
D)  special drawing rights.

Question 4

Current account transactions are all payments that are related to the purchase or sale of

Accepted Answer

A)  goods only. 
B)  services only. 
C)  goods and services only. 
D)  goods and services excluding government purchases. 
A)  goods only. 
B)  services only. 
C)  goods and services only. 
D)  goods and services excluding government purchases.

Question 5

An example of a deficit item on the U.S. balance of payments is

Accepted Answer

A)  the sale of a carburetor made in Michigan to a Honda plant in Ohio. 
B)  a deposit in a bank in New York by a British firm. 
C)  a U.S. resident flies from New York to Rome on British Airways. 
D)  the payment of a dividend from a Canadian firm to an American living in Maine. 
A)  the sale of a carburetor made in Michigan to a Honda plant in Ohio. 
B)  a deposit in a bank in New York by a British firm. 
C)  a U.S. resident flies from New York to Rome on British Airways. 
D)  the payment of a dividend from a Canadian firm to an American living in Maine.

Question 6

Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as

Accepted Answer

A)  fixed exchange rates. 
B)  gold exchange rates. 
C)  flexible exchange rates. 
D)  IMF exchange rates. 
A)  fixed exchange rates. 
B)  gold exchange rates. 
C)  flexible exchange rates. 
D)  IMF exchange rates.

Question 7

Country X-2013 Transactions (billions of dollars)
  
-In the above table, the balance on the capital account for Country X is ________ billion dollars.

Accepted Answer

A)  -85 
B)  -150 
C)  +75 
D)  -200 
A)  -85 
B)  -150 
C)  +75 
D)  -200

Question 8

Which of the following is NOT a deficit item on a country's balance of payments?

Accepted Answer

A)  gold sales to foreigners. 
B)  imports. 
C)  a personal gift to a foreign individual. 
D)  none of the above. 
A)  gold sales to foreigners. 
B)  imports. 
C)  a personal gift to a foreign individual. 
D)  none of the above.

Question 9

-Based on the transactions in the above table, what is the change in the U.S. current account balance?

Accepted Answer

A)  $31,000 
B)  $31,200 
C)  -$32,500 
D)  -$32,700 
A)  $31,000 
B)  $31,200 
C)  -$32,500 
D)  -$32,700

Question 10

One source of the supply of dollars in the foreign exchange market is

Accepted Answer

A)  U.S. companies importing foreign goods. 
B)  foreign citizens buying U.S. goods. 
C)  SDRs being converted into dollars. 
D)  the U.S. Mint buying dollars from the Bank of England. 
A)  U.S. companies importing foreign goods. 
B)  foreign citizens buying U.S. goods. 
C)  SDRs being converted into dollars. 
D)  the U.S. Mint buying dollars from the Bank of England.

Question 11

An increase in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Accepted Answer

A)  appreciation. 
B)  depreciation. 
C)  devaluation. 
D)  revaluation. 
A)  appreciation. 
B)  depreciation. 
C)  devaluation. 
D)  revaluation.

Question 12

Which of the following would NOT increase German exports to the United States?

Accepted Answer

A)  An appreciation of the U.S. dollar 
B)  A depreciation of the euro 
C)  An appreciation of the euro 
D)  An increase in German demand for U.S. exports 
A)  An appreciation of the U.S. dollar 
B)  A depreciation of the euro 
C)  An appreciation of the euro 
D)  An increase in German demand for U.S. exports

Question 13

In a nation's balance of payments, the current account includes

Accepted Answer

A)  the changes in the official reserve transaction account. 
B)  the purchases of foreign assets. 
C)  the balance of the trade account, the balance of the services account, and net unilateral transfers. 
D)  All of the above. 
A)  the changes in the official reserve transaction account. 
B)  the purchases of foreign assets. 
C)  the balance of the trade account, the balance of the services account, and net unilateral transfers. 
D)  All of the above.

Question 14

Which of the following would NOT be official reserves for Germany?

Accepted Answer

A)  U.S. dollars 
B)  The official currency of Germany 
C)  Gold 
D)  SDRs 
A)  U.S. dollars 
B)  The official currency of Germany 
C)  Gold 
D)  SDRs

Question 15

Which of the following transactions leads to an inflow of funds on the U.S. capital account?

Accepted Answer

A)  A U.S. resident purchases a share of stock on the Hong Kong exchange. 
B)  A U.S. resident sells wheat to an African nation. 
C)  A resident of China purchases U.S. government bonds. 
D)  A resident of Mexico visits the United States. 
A)  A U.S. resident purchases a share of stock on the Hong Kong exchange. 
B)  A U.S. resident sells wheat to an African nation. 
C)  A resident of China purchases U.S. government bonds. 
D)  A resident of Mexico visits the United States.

Question 16

If there are no interventions by finance ministers or control banks in the international market, then

Accepted Answer

A)  the current account and the capital account must sum to zero. 
B)  the current account will be greater than the capital market. 
C)  the capital market will be greater than the current account. 
D)  the capital market will equal the current account. 
A)  the current account and the capital account must sum to zero. 
B)  the current account will be greater than the capital market. 
C)  the capital market will be greater than the current account. 
D)  the capital market will equal the current account.

Question 17

An appreciation of a nation's currency is

Accepted Answer

A)  a situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand. 
B)  the increase in the exchange value of one nation's currency in terms of an other nation. 
C)  a nation in which households, firms, and governments buy and sell national currencies. 
D)  the decrease in the exchange value of one nation's currency in terms of another nation. 
A)  a situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand. 
B)  the increase in the exchange value of one nation's currency in terms of an other nation. 
C)  a nation in which households, firms, and governments buy and sell national currencies. 
D)  the decrease in the exchange value of one nation's currency in terms of another nation.

Question 18

A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas. This transaction is

Accepted Answer

A)  counted in the U.S. balance of payments as a current account item. 
B)  counted in the U.S. balance of payments as a surplus item. 
C)  counted in the U.S. balance of payments as an export item. 
D)  none of the above 
A)  counted in the U.S. balance of payments as a current account item. 
B)  counted in the U.S. balance of payments as a surplus item. 
C)  counted in the U.S. balance of payments as an export item. 
D)  none of the above

Question 19

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

Accepted Answer

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

Question 20

-Based on the transactions in the above table, what is the change in the U.S. capital account?

Accepted Answer

A)  $9,800 
B)  $10,000 
C)  -$20,000 
D)  -$20,200 
A)  $9,800 
B)  $10,000 
C)  -$20,000 
D)  -$20,200

Exam 33: Exchange Rates and the Balance of Payments

A country's balance of payments shows a

Why does the demand curve for Japanese yen slope down?

An accounting identity is

Current account transactions are all payments that are related to the purchase or sale of

An example of a deficit item on the U.S. balance of payments is

Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as

Country X-2013 Transactions (billions of dollars) -In the above table, the balance on the capital account for Country X is ________ billion dollars.

Which of the following is NOT a deficit item on a country's balance of payments?

-Based on the transactions in the above table, what is the change in the U.S. current account balance?

One source of the supply of dollars in the foreign exchange market is

An increase in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Which of the following would NOT increase German exports to the United States?

In a nation's balance of payments, the current account includes

Which of the following would NOT be official reserves for Germany?

Which of the following transactions leads to an inflow of funds on the U.S. capital account?

If there are no interventions by finance ministers or control banks in the international market, then

An appreciation of a nation's currency is

A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas. This transaction is

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

-Based on the transactions in the above table, what is the change in the U.S. capital account?

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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