Question 1

An exchange rate is the price of one currency in terms of a second currency.

Accepted Answer

A) True 
 B)False

Question 2

Deflation in the United States would tend to make the exchange value of the dollar depreciate.

Accepted Answer

A) True 
 B)False

Question 3

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate,a ____ exists at the current exchange rate that will put ____ pressure on the exchange value of a dollar.

Accepted Answer

A)  surplus of dollars; downward 
B)  surplus of dollars; upward 
C)  shortage of dollars; downward 
D)  shortage of dollars; upward 
A)  surplus of dollars; downward 
B)  surplus of dollars; upward 
C)  shortage of dollars; downward 
D)  shortage of dollars; upward

Question 4

In foreign exchange markets,the demand for dollars is determined:

Accepted Answer

A)  solely by the level of U.S. merchandise exports. 
B)  solely by the level of U.S. merchandise imports. 
C)  by the level of U.S. imports and the demand for foreign assets by U.S. citizens and the U.S. government. 
D)  by the level of U.S. exports and the demand for U.S. assets by foreigners. 
A)  solely by the level of U.S. merchandise exports. 
B)  solely by the level of U.S. merchandise imports. 
C)  by the level of U.S. imports and the demand for foreign assets by U.S. citizens and the U.S. government. 
D)  by the level of U.S. exports and the demand for U.S. assets by foreigners.

Question 5

The Bretton Woods Conference:

Accepted Answer

A)  established a system of fixed exchange rates. 
B)  established a system of flexible exchange rates. 
C)  established a dirty float exchange rate system. 
D)  did none of the above. 
A)  established a system of fixed exchange rates. 
B)  established a system of flexible exchange rates. 
C)  established a dirty float exchange rate system. 
D)  did none of the above.

Question 6

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance:

Accepted Answer

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

Question 7

If the rate of inflation overseas falls relative to the rate of inflation in the United States,U.S.net exports will tend to ____,causing the exchange value of the U.S.dollar to ____.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 8

If your aunt in Italy lends you $5,000 to complete your American education,this will be entered on the U.S.balance of payments account as a:

Accepted Answer

A)  debit (-). 
B)  credit (+). 
C)  non-entry, since it will affect Italy's payments but not those of the United States. 
D)  devaluation, since the net value of the American capital stock will be reduced by the amount of your debt. 
A)  debit (-). 
B)  credit (+). 
C)  non-entry, since it will affect Italy's payments but not those of the United States. 
D)  devaluation, since the net value of the American capital stock will be reduced by the amount of your debt.

Question 9

If the interest rate in two countries were the same,you would prefer to invest in assets of the country:

Accepted Answer

A)  whose currency was likely to appreciate. 
B)  whose currency was likely to depreciate. 
C)  whose currency had the greatest exchange value. 
D)  none of the above; it would not matter what was likely to happen to a country's currency exchange rate. 
A)  whose currency was likely to appreciate. 
B)  whose currency was likely to depreciate. 
C)  whose currency had the greatest exchange value. 
D)  none of the above; it would not matter what was likely to happen to a country's currency exchange rate.

Question 10

The exchange rate:

Accepted Answer

A)  states the price of one currency in terms of another currency. 
B)  is the rate at which one country's money is flowing to a second country. 
C)  is closely related to the concept of comparative advantage. 
D)  is closely related to the concept of absolute advantage. 
A)  states the price of one currency in terms of another currency. 
B)  is the rate at which one country's money is flowing to a second country. 
C)  is closely related to the concept of comparative advantage. 
D)  is closely related to the concept of absolute advantage.

Question 11

A country would tend to experience currency depreciation relative to other countries if:

Accepted Answer

A)  the profitability of investments within the country increases relative to the rest of the world. 
B)  people in the foreign currency markets expect the value of the currency to rise in the near future. 
C)  the foreign demand for its exports decreases. 
D)  none of the above. 
A)  the profitability of investments within the country increases relative to the rest of the world. 
B)  people in the foreign currency markets expect the value of the currency to rise in the near future. 
C)  the foreign demand for its exports decreases. 
D)  none of the above.

Question 12

Is it possible for a currency to appreciate relative to another currency,and depreciate relative to a third?

Accepted Answer

A)  No, this is not theoretically possible; a currency rises or falls against all others. 
B)  No, although this could occur under a strict gold standard. 
C)  Yes, this is possible in a world of floating exchange rates. 
D)  Yes, in theory, but it does not happen in reality. 
A)  No, this is not theoretically possible; a currency rises or falls against all others. 
B)  No, although this could occur under a strict gold standard. 
C)  Yes, this is possible in a world of floating exchange rates. 
D)  Yes, in theory, but it does not happen in reality.

Question 13

Whenever there is a surplus in the current account,the capital account:

Accepted Answer

A)  will be negative. 
B)  will be positive. 
C)  will be zero. 
D)  could be negative, positive, or zero. 
A)  will be negative. 
B)  will be positive. 
C)  will be zero. 
D)  could be negative, positive, or zero.

Question 14

Suppose that the exchange rate between Japanese yen and U.S.dollars is originally 130 yen to the dollar.If it then changes to 150 yen to the dollar,exports of U.S.goods to Japan will tend to:

Accepted Answer

A)  rise. 
B)  fall. 
C)  stay the same. 
D)  change in an indeterminate direction. 
A)  rise. 
B)  fall. 
C)  stay the same. 
D)  change in an indeterminate direction.

Question 15

In 2011 the U.S.current account balance was zero.

Accepted Answer

A) True 
 B)False

Question 16

Classify each of the following as debits or credits in the U.S.balance of payments.
A.Russian tourists travel to United States.
B.U.S.gives foreign aid to Bosnia.
C.British investors purchase U.S.government bonds.
D.American tourists travel to Australia.
E.Volkswagen earns profits in the United States from its new cars.
F.Toyota builds a new plant in Ohio.
G.Capital Records sells rock and roll music in Sweden.
H.German consumer buy Ronco Vegematics made in United States.
I.Procter & Gamble earns profits in their Mexican facility.

Accepted Answer

A,C,F,G,and H are cr

Question 17

Since the advent of flexible exchange rates,world trade has not only continued but also expanded.

Accepted Answer

A) True 
 B)False

Question 18

The current exchange rate system is effectively a dirty float system.

Accepted Answer

A) True 
 B)False

Question 19

A country would tend to experience currency depreciation relative to other countries if:

Accepted Answer

A)  the profitability of investments within the country increases relative to the rest of the world. 
B)  people in the foreign currency markets expect the value of the currency to rise in the near future. 
C)  the foreign demand for its exports decreases. 
D)  none of the above 
A)  the profitability of investments within the country increases relative to the rest of the world. 
B)  people in the foreign currency markets expect the value of the currency to rise in the near future. 
C)  the foreign demand for its exports decreases. 
D)  none of the above

Question 20

With flexible exchange rates,the imbalance between debits and credits arising from shifts in currency demand and/or supply is accommodated through special financial borrowings or reserve movements.

Accepted Answer

A) True 
 B)False

Exam 29: International Finance

An exchange rate is the price of one currency in terms of a second currency.

Deflation in the United States would tend to make the exchange value of the dollar depreciate.

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate,a ____ exists at the current exchange rate that will put ____ pressure on the exchange value of a dollar.

In foreign exchange markets,the demand for dollars is determined:

The Bretton Woods Conference:

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance:

If the rate of inflation overseas falls relative to the rate of inflation in the United States,U.S.net exports will tend to ____,causing the exchange value of the U.S.dollar to ____.

If your aunt in Italy lends you $5,000 to complete your American education,this will be entered on the U.S.balance of payments account as a:

If the interest rate in two countries were the same,you would prefer to invest in assets of the country:

The exchange rate:

A country would tend to experience currency depreciation relative to other countries if:

Is it possible for a currency to appreciate relative to another currency,and depreciate relative to a third?

Whenever there is a surplus in the current account,the capital account:

Suppose that the exchange rate between Japanese yen and U.S.dollars is originally 130 yen to the dollar.If it then changes to 150 yen to the dollar,exports of U.S.goods to Japan will tend to:

In 2011 the U.S.current account balance was zero.

Since the advent of flexible exchange rates,world trade has not only continued but also expanded.

The current exchange rate system is effectively a dirty float system.

A country would tend to experience currency depreciation relative to other countries if:

With flexible exchange rates,the imbalance between debits and credits arising from shifts in currency demand and/or supply is accommodated through special financial borrowings or reserve movements.

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

Filters

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate,a exists at the current exchange rate that will put pressure on the exchange value of a dollar.

If the rate of inflation overseas falls relative to the rate of inflation in the United States,U.S.net exports will tend to ,causing the exchange value of the U.S.dollar to .