Question 1

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S. interest rate differential.

Accepted Answer

As the U.S. interest rate differential i

Question 2

Which of the following examples definitely illustrates an appreciation of the U.S. dollar?

Accepted Answer

A)  The dollar exchanges for 120 euros and then exchanges for 100 euros. 
B)  The dollar exchanges for 100 yen and then exchanges for 125 euros. 
C)  The dollar exchanges for 1 pound and then exchanges for 1.2 pounds. 
D)  none of the above 
A)  The dollar exchanges for 120 euros and then exchanges for 100 euros. 
B)  The dollar exchanges for 100 yen and then exchanges for 125 euros. 
C)  The dollar exchanges for 1 pound and then exchanges for 1.2 pounds. 
D)  none of the above

Question 3

Other things remaining the same, the higher the current exchange rate, the larger is the expected profit from buying dollars.

Accepted Answer

A) True 
 B)False

Question 4

When a nation's currency depreciates, the country might

Accepted Answer

A)  have an inflation rate that exceeds the inflation rate in nations with which it trades. 
B)  have an inflation rate below the inflation rate in nations with which it trades. 
C)  be responding to an increase in the demand for its currency. 
D)  be responding to a decrease in the domestic demand for foreign currencies. 
A)  have an inflation rate that exceeds the inflation rate in nations with which it trades. 
B)  have an inflation rate below the inflation rate in nations with which it trades. 
C)  be responding to an increase in the demand for its currency. 
D)  be responding to a decrease in the domestic demand for foreign currencies.

Question 5

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Accepted Answer

A)  euros. 
B)  pounds. 
C)  dollars. 
D)  foreign exchange rates. 
A)  euros. 
B)  pounds. 
C)  dollars. 
D)  foreign exchange rates.

Question 6

Currently, the United States is both a net borrower and a debtor nation.

Accepted Answer

A) True 
 B)False

Question 7

-In the above table, the private sector has a

Accepted Answer

A)  surplus of $300 billion. 
B)  deficit of $300 billion. 
C)  deficit of $200 billion. 
D)  deficit of $400 billion. 
A)  surplus of $300 billion. 
B)  deficit of $300 billion. 
C)  deficit of $200 billion. 
D)  deficit of $400 billion.

Question 8

-The above table gives data for the nation of Sueland. What is the private sector balance?

Accepted Answer

A)  $11 billion 
B)  -$11 billion 
C)  -$43 billion 
D)  $43 billion 
A)  $11 billion 
B)  -$11 billion 
C)  -$43 billion 
D)  $43 billion

Question 9

If the Federal Reserve increases interest rates

Accepted Answer

A)  the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward. 
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 demand curve for U.S dollars shifts leftward and the demand curve for European euros shifts rightward. 
A)  the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward. 
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 demand curve for U.S dollars shifts leftward and the demand curve for European euros shifts rightward.

Question 10

-The table above gives some of the accounts of the United States in 2020.
a)What is the private sector balance?
b)What is the government sector balance?
c)What is net exports?

Accepted Answer

a)The private sector balance equals savi

Question 11

-In the above figure, suppose the demand for dollars permanently decreases to D?. To maintain the target, the Fed

Accepted Answer

A)  can buy dollars. 
B)  can sell dollars. 
C)  must decrease the nation's net exports. 
D)  cannot permanently maintain the exchange rate target of 150 yen per dollar. 
A)  can buy dollars. 
B)  can sell dollars. 
C)  must decrease the nation's net exports. 
D)  cannot permanently maintain the exchange rate target of 150 yen per dollar.

Question 12

Suppose that your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S. dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S. dollars?

Accepted Answer

A)  $12 
B)  $39 
C)  $108 
D)  $109 
A)  $12 
B)  $39 
C)  $108 
D)  $109

Question 13

-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 decreases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates increase. 
A)  the expected future exchange rate decreases. 
B)  the U.S. interest rate rises. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates increase.

Question 14

Give an example of currency depreciation and appreciation.

Accepted Answer

A currency depreciates when it becomes l

Question 15

The U.S. interest rate minus the foreign interest rate is called the ________.

Accepted Answer

A)  foreign interest rate differential 
B)  U.S. bond rate differential 
C)  U.S. interest rate differential 
D)  U.S. stock yield differential 
A)  foreign interest rate differential 
B)  U.S. bond rate differential 
C)  U.S. interest rate differential 
D)  U.S. stock yield differential

Question 16

The higher the dollar's exchange rate, the ________ the expected profit from holding dollars and so ________ dollars are supplied.

Accepted Answer

A)  larger; more 
B)  larger; fewer 
C)  smaller; more 
D)  smaller; fewer 
A)  larger; more 
B)  larger; fewer 
C)  smaller; more 
D)  smaller; fewer

Question 17

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

Accepted Answer

A)  the U.S. interest rate falls. 
B)  foreign interest rates fall. 
C)  the expected future exchange rate falls. 
D)  the current exchange rate falls. 
A)  the U.S. interest rate falls. 
B)  foreign interest rates fall. 
C)  the expected future exchange rate falls. 
D)  the current exchange rate falls.

Question 18

A change in which of the following changes the supply of dollars and shifts the supply curve of dollars?
I.an increase in the exchange rate
II.a change in interest rates
III.a decrease in the expected future exchange rate

Accepted Answer

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

Question 19

-The data in the table above are the U.S. balance of payments. What is the capital and financial account balance?

Accepted Answer

A)  $0 
B)  $150 billion 
C)  -$350 billion 
D)  -$150 billion 
A)  $0 
B)  $150 billion 
C)  -$350 billion 
D)  -$150 billion

Question 20

Americans demand Japanese yen in order to

Accepted Answer

A)  buy Japanese products. 
B)  supply American goods in Japanese markets. 
C)  allow the Japanese to buy U.S. products. 
D)  balance the current account. 
A)  buy Japanese products. 
B)  supply American goods in Japanese markets. 
C)  allow the Japanese to buy U.S. products. 
D)  balance the current account.

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S. interest rate differential.

Which of the following examples definitely illustrates an appreciation of the U.S. dollar?

Other things remaining the same, the higher the current exchange rate, the larger is the expected profit from buying dollars.

When a nation's currency depreciates, the country might

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Currently, the United States is both a net borrower and a debtor nation.

-In the above table, the private sector has a

-The above table gives data for the nation of Sueland. What is the private sector balance?

If the Federal Reserve increases interest rates

-The table above gives some of the accounts of the United States in 2020. a)What is the private sector balance? b)What is the government sector balance? c)What is net exports?

-In the above figure, suppose the demand for dollars permanently decreases to D?. To maintain the target, the Fed

Suppose that your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S. dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S. dollars?

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

Give an example of currency depreciation and appreciation.

The U.S. interest rate minus the foreign interest rate is called the ________.

The higher the dollar's exchange rate, the the expected profit from holding dollars and so dollars are supplied.

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

A change in which of the following changes the supply of dollars and shifts the supply curve of dollars? I.an increase in the exchange rate II.a change in interest rates III.a decrease in the expected future exchange rate

-The data in the table above are the U.S. balance of payments. What is the capital and financial account balance?

Americans demand Japanese yen in order to

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

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S. interest rate differential.

Which of the following examples definitely illustrates an appreciation of the U.S. dollar?

Other things remaining the same, the higher the current exchange rate, the larger is the expected profit from buying dollars.

When a nation's currency depreciates, the country might

When the U.S. government buys aircraft from BAe, a British corporation, it pays for them using

Currently, the United States is both a net borrower and a debtor nation.

-In the above table, the private sector has a

-The above table gives data for the nation of Sueland. What is the private sector balance?

If the Federal Reserve increases interest rates

-The table above gives some of the accounts of the United States in 2020. a)What is the private sector balance? b)What is the government sector balance? c)What is net exports?

-In the above figure, suppose the demand for dollars permanently decreases to D?. To maintain the target, the Fed

Suppose that your firm wants to import sugarcane from Brazil. The exchange rate is 3 Brazilian reals per U.S. dollar and sugarcane costs 36 reals per ton. How much is a ton of sugarcane in U.S. dollars?

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

Give an example of currency depreciation and appreciation.

The U.S. interest rate minus the foreign interest rate is called the ________.

The higher the dollar's exchange rate, the ________ the expected profit from holding dollars and so ________ dollars are supplied.

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

A change in which of the following changes the supply of dollars and shifts the supply curve of dollars? I.an increase in the exchange rate II.a change in interest rates III.a decrease in the expected future exchange rate

-The data in the table above are the U.S. balance of payments. What is the capital and financial account balance?

Americans demand Japanese yen in order to

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

The higher the dollar's exchange rate, the the expected profit from holding dollars and so dollars are supplied.