Question 1

-The data in the table above are the U.S. balance of payments. The data show that

Accepted Answer

A)  the United States has a current account surplus. 
B)  the United States has a capital and financial account surplus. 
C)  The United States loaned $400 billion to the rest of the world. 
D)  Both answers A and B are correct. 
A)  the United States has a current account surplus. 
B)  the United States has a capital and financial account surplus. 
C)  The United States loaned $400 billion to the rest of the world. 
D)  Both answers A and B are correct.

Question 2

An official settlements account balance of -$5,000 means

Accepted Answer

A)  official reserves of foreign currency increased by $5,000. 
B)  official reserves of foreign currency decreased by $5,000. 
C)  the country is exporting more than it is importing. 
D)  the country is importing more than it is exporting. 
A)  official reserves of foreign currency increased by $5,000. 
B)  official reserves of foreign currency decreased by $5,000. 
C)  the country is exporting more than it is importing. 
D)  the country is importing more than it is exporting.

Question 3

If a country has a capital and financial account deficit, that country's stock of international indebtedness is

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero. 
A)  increasing. 
B)  decreasing. 
C)  constant. 
D)  zero.

Question 4

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

Accepted Answer

A)  -$146 billion 
B)  -$183 billion 
C)  -$99 billion 
D)  $142 billion 
A)  -$146 billion 
B)  -$183 billion 
C)  -$99 billion 
D)  $142 billion

Question 5

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

Accepted Answer

The relationship is that (X -

Question 6

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D?. To maintain the target exchange rate, the Fed

Accepted Answer

A)  can sell dollars. 
B)  can buy dollars. 
C)  must violate both interest rate parity and purchasing power parity. 
D)  cannot maintain the target exchange rate. 
A)  can sell dollars. 
B)  can buy dollars. 
C)  must violate both interest rate parity and purchasing power parity. 
D)  cannot maintain the target exchange rate.

Question 7

What factors can change expectations about the exchange rate?

Accepted Answer

A)  interest rate parity 
B)  purchasing power parity 
C)  real GDP parity 
D)  Both answers A and B are correct. 
A)  interest rate parity 
B)  purchasing power parity 
C)  real GDP parity 
D)  Both answers A and B are correct.

Question 8

Other things remaining the same, the U.S. interest rate differential increases if the U.S. interest rate

Accepted Answer

A)  rises and foreign interest rates remain constant. 
B)  falls and foreign interest rates remain constant. 
C)  falls and foreign interest rates rise. 
D)  remains constant and foreign interest rates rise. 
A)  rises and foreign interest rates remain constant. 
B)  falls and foreign interest rates remain constant. 
C)  falls and foreign interest rates rise. 
D)  remains constant and foreign interest rates rise.

Question 9

If people expect the foreign exchange rate for dollars to rise in the future

Accepted Answer

A)  the demand for dollars today decreases. 
B)  the demand for dollars today increases. 
C)  the demand for dollars today is unaffected. 
D)  there is a movement along the demand curve for dollars. 
A)  the demand for dollars today decreases. 
B)  the demand for dollars today increases. 
C)  the demand for dollars today is unaffected. 
D)  there is a movement along the demand curve for dollars.

Question 10

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

Accepted Answer

A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise. 
A)  the expected future exchange rate increases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will appreciate. 
D)  foreign interest rates rise.

Question 11

Which of the following are included in the U.S. current account balance?
I.exports to Japan
II.interest payments made to Canada
III.transfer payments made to Israel

Accepted Answer

A)  I only 
B)  I and II 
C)  I and III 
D)  I, II and III 
A)  I only 
B)  I and II 
C)  I and III 
D)  I, II and III

Question 12

Arbitrage in the foreign exchange market, international loans markets, and goods markets results in

Accepted Answer

A)  purchasing power parity, interest rate parity and law of one price. 
B)  purchasing power parity, interest rate parity and price parity. 
C)  purchasing power parity, interest rate parity and round-trip profit. 
D)  purchasing power parity, price parity and no round-trip profit. 
A)  purchasing power parity, interest rate parity and law of one price. 
B)  purchasing power parity, interest rate parity and price parity. 
C)  purchasing power parity, interest rate parity and round-trip profit. 
D)  purchasing power parity, price parity and no round-trip profit.

Question 13

The capital and financial account measures ________.

Accepted Answer

A)  foreign investment in the United States minus U.S. investment abroad 
B)  capital produced outside of the United States minus capital produced inside the United States 
C)  capital used inside the United States but manufactured outside the United States 
D)  capital used outside the United States but manufactured inside the United States 
A)  foreign investment in the United States minus U.S. investment abroad 
B)  capital produced outside of the United States minus capital produced inside the United States 
C)  capital used inside the United States but manufactured outside the United States 
D)  capital used outside the United States but manufactured inside the United States

Question 14

Of the following, when would the U.S. exchange rate rise the most?

Accepted Answer

A)  when the supply of and demand for U.S. dollars increase 
B)  when the supply of U.S. dollars increases and the demand for them decreases 
C)  when the supply of U.S. dollars decreases and the demand for them increases 
D)  when the supply of and demand for U.S. dollars decrease 
A)  when the supply of and demand for U.S. dollars increase 
B)  when the supply of U.S. dollars increases and the demand for them decreases 
C)  when the supply of U.S. dollars decreases and the demand for them increases 
D)  when the supply of and demand for U.S. dollars decrease

Question 15

If the Federal Reserve increases interest rates, ceteris paribus

Accepted Answer

A)  the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
D)  the supply curve of U.S. dollars shifts rightward and the supply curve of European euros shifts leftward 
A)  the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. 
C)  the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. 
D)  the supply curve of U.S. dollars shifts rightward and the supply curve of European euros shifts leftward

Question 16

To pay for a current account deficit, a country can

Accepted Answer

A)  borrow money from abroad. 
B)  lend money abroad. 
C)  increase official reserves to cover the shortfall. 
D)  transfer money from the capital account to the official settlements account. 
A)  borrow money from abroad. 
B)  lend money abroad. 
C)  increase official reserves to cover the shortfall. 
D)  transfer money from the capital account to the official settlements account.

Question 17

If the U.S. interest rate differential increases, then in the foreign exchange market the

Accepted Answer

A)  quantity of U.S. dollars supplied increases. 
B)  supply of U.S. dollars decreases. 
C)  demand for U.S. dollars does not change. 
D)  supply of U.S. dollars increases. 
A)  quantity of U.S. dollars supplied increases. 
B)  supply of U.S. dollars decreases. 
C)  demand for U.S. dollars does not change. 
D)  supply of U.S. dollars increases.

Question 18

In the market for international loans, most countries, including the United States, are net borrowers.

Accepted Answer

A) True 
 B)False

Question 19

The private sector balance is equal to ________.

Accepted Answer

A)  income minus consumption minus net taxes 
B)  income minus consumption minus investment 
C)  saving minus investment 
D)  income minus consumption 
A)  income minus consumption minus net taxes 
B)  income minus consumption minus investment 
C)  saving minus investment 
D)  income minus consumption

Question 20

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result

Accepted Answer

A)  the demand curve for European euros and the supply curve for Indian rupees both shift rightward. 
B)  the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward. 
C)  only the demand curve for Indian rupees shifts rightward. 
D)  only the demand curve for European euros shifts rightward. 
A)  the demand curve for European euros and the supply curve for Indian rupees both shift rightward. 
B)  the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward. 
C)  only the demand curve for Indian rupees shifts rightward. 
D)  only the demand curve for European euros shifts rightward.

-The data in the table above are the U.S. balance of payments. The data show that

An official settlements account balance of -$5,000 means

If a country has a capital and financial account deficit, that country's stock of international indebtedness is

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D?. To maintain the target exchange rate, the Fed

What factors can change expectations about the exchange rate?

Other things remaining the same, the U.S. interest rate differential increases if the U.S. interest rate

If people expect the foreign exchange rate for dollars to rise in the future

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

Which of the following are included in the U.S. current account balance? I.exports to Japan II.interest payments made to Canada III.transfer payments made to Israel

Arbitrage in the foreign exchange market, international loans markets, and goods markets results in

The capital and financial account measures ________.

Of the following, when would the U.S. exchange rate rise the most?

If the Federal Reserve increases interest rates, ceteris paribus

To pay for a current account deficit, a country can

If the U.S. interest rate differential increases, then in the foreign exchange market the

In the market for international loans, most countries, including the United States, are net borrowers.

The private sector balance is equal to ________.

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

-The data in the table above are the U.S. balance of payments. The data show that

An official settlements account balance of -$5,000 means

If a country has a capital and financial account deficit, that country's stock of international indebtedness is

-The above table shows some of the balance of payments accounts for Urland. What is Urland's balance on the capital and financial account?

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

-In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D?. To maintain the target exchange rate, the Fed

What factors can change expectations about the exchange rate?

Other things remaining the same, the U.S. interest rate differential increases if the U.S. interest rate

If people expect the foreign exchange rate for dollars to rise in the future

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

Which of the following are included in the U.S. current account balance? I.exports to Japan II.interest payments made to Canada III.transfer payments made to Israel

Arbitrage in the foreign exchange market, international loans markets, and goods markets results in

The capital and financial account measures ________.

Of the following, when would the U.S. exchange rate rise the most?

If the Federal Reserve increases interest rates, ceteris paribus

To pay for a current account deficit, a country can

If the U.S. interest rate differential increases, then in the foreign exchange market the

In the market for international loans, most countries, including the United States, are net borrowers.

The private sector balance is equal to ________.

Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters