Question 1

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

Question 2

The value of net exports increases when the value of ________.

Accepted Answer

A)  exports of goods and services minus imports of goods and services decreases 
B)  imports of goods and services increase 
C)  imports of goods and services decrease 
D)  exports of goods and services decrease 
A)  exports of goods and services minus imports of goods and services decreases 
B)  imports of goods and services increase 
C)  imports of goods and services decrease 
D)  exports of goods and services decrease

Question 3

In the long run, the nominal exchange rate

Accepted Answer

A)  is a monetary phenomenon, determined by the quantities of money in two countries. 
B)  is not related to the real exchange rate, since the real exchange rate is the true value of currencies. 
C)  will not change if prices in one country change, since prices are nominal variables. 
D)  is fixed by world central banks, as indicated by the fixed exchange rate system. 
A)  is a monetary phenomenon, determined by the quantities of money in two countries. 
B)  is not related to the real exchange rate, since the real exchange rate is the true value of currencies. 
C)  will not change if prices in one country change, since prices are nominal variables. 
D)  is fixed by world central banks, as indicated by the fixed exchange rate system.

Question 4

Important factors that change the demand for dollars and hence shift the demand curve for dollars include which of the following?
I.interest rates around the world
II.the current exchange rate
III.the expected future exchange rate

Accepted Answer

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

Question 5

A negative balance in the capital and financial account means the economy is

Accepted Answer

A)  lending to the rest of the world. 
B)  running a capital account surplus. 
C)  borrowing from the rest of the world. 
D)  importing more than it is exporting. 
A)  lending to the rest of the world. 
B)  running a capital account surplus. 
C)  borrowing from the rest of the world. 
D)  importing more than it is exporting.

Question 6

If there are equal rates of return between assets in two currencies, then there is

Accepted Answer

A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity. 
A)  purchasing power parity. 
B)  interest rate parity. 
C)  parity of exchange. 
D)  foreign exchange parity.

Question 7

In June 2008, $1 bought 104 yen and in October, $1 bought 93 yen. This change means

Accepted Answer

A)  U.S. exports became more expensive for Japanese buyers. 
B)  there will be a movement down along the demand curve for dollars. 
C)  there was an increase in the value in the dollar, relative to the yen. 
D)  the dollar appreciated relative to the yen. 
A)  U.S. exports became more expensive for Japanese buyers. 
B)  there will be a movement down along the demand curve for dollars. 
C)  there was an increase in the value in the dollar, relative to the yen. 
D)  the dollar appreciated relative to the yen.

Question 8

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

Accepted Answer

An increase in the expected future excha

Question 9

-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 falls. 
B)  the U.S. interest rate drops. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates drop. 
A)  the expected future exchange rate falls. 
B)  the U.S. interest rate drops. 
C)  people expect that the dollar will depreciate. 
D)  foreign interest rates drop.

Question 10

According to the law of supply in the foreign exchange market, when the U.S. exchange rate rises, the quantity of U.S. dollars supplied will decrease.

Accepted Answer

A) True 
 B)False

Question 11

"If the official settlements balance is zero, a current account surplus must equal the capital account deficit." Is the previous statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is correct. The sum of the

Question 12

Suppose the U.S. interest rate is 6 percent and the world interest rate is 5 percent. The U.S. interest differential is

Accepted Answer

A)  -1 percent. 
B)  1.2 percent. 
C)  1 percent. 
D)  -0.83 percent. 
A)  -1 percent. 
B)  1.2 percent. 
C)  1 percent. 
D)  -0.83 percent.

Question 13

The nominal exchange rate is

Accepted Answer

A)  the value of the U.S. dollar expressed in units of foreign currency per U.S. dollar. 
B)  the real exchange rate multiplied by the ratio of the U.S. price level to the foreign price level. 
C)  the relative price of U.S. produced goods to foreign produced goods. 
D)  a measure of the quantity of the nominal GDP of other countries that we get per unit of U.S. nominal GDP. 
A)  the value of the U.S. dollar expressed in units of foreign currency per U.S. dollar. 
B)  the real exchange rate multiplied by the ratio of the U.S. price level to the foreign price level. 
C)  the relative price of U.S. produced goods to foreign produced goods. 
D)  a measure of the quantity of the nominal GDP of other countries that we get per unit of U.S. nominal GDP.

Question 14

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen current and markets." (www.nytimes.com, October, 29, 2008)
As a result, there was ________, holding all else the same.

Accepted Answer

A)  a movement upward along the supply curve for krona 
B)  a leftward shift in the supply curve for krona 
C)  a rightward shift in the supply curve for krona 
D)  an increase in the quantity supplied of krona 
A)  a movement upward along the supply curve for krona 
B)  a leftward shift in the supply curve for krona 
C)  a rightward shift in the supply curve for krona 
D)  an increase in the quantity supplied of krona

Question 15

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________.

Accepted Answer

A)  a decrease; $20 
B)  an increase; $20 
C)  an increase; $180 
D)  a decrease; $180 
A)  a decrease; $20 
B)  an increase; $20 
C)  an increase; $180 
D)  a decrease; $180

Question 16

________ can intervene directly in the foreign exchange market by buying or selling dollars.

Accepted Answer

A)  Congress 
B)  The Fed 
C)  The International Monetary Fund 
D)  The U.S. Treasury department 
A)  Congress 
B)  The Fed 
C)  The International Monetary Fund 
D)  The U.S. Treasury department

Question 17

All of the following statements are correct EXCEPT

Accepted Answer

A)  China's exchange rate policy boosts exports in the long run. 
B)  China's exchange rate policy is mainly an attempt to control inflation. 
C)  China's exchange rate policy results in a depreciated yuan. 
D)  China's exchange rate policy does not impact the real exchange rate in the long run. 
A)  China's exchange rate policy boosts exports in the long run. 
B)  China's exchange rate policy is mainly an attempt to control inflation. 
C)  China's exchange rate policy results in a depreciated yuan. 
D)  China's exchange rate policy does not impact the real exchange rate in the long run.

Question 18

Suppose that the yen-dollar foreign exchange rate changes from 130 yen per dollar to 140 yen per dollar. Then the yen has

Accepted Answer

A)  depreciated against the dollar, and the dollar has appreciated against the yen. 
B)  depreciated against the dollar, and the dollar has depreciated against the yen. 
C)  appreciated against the dollar, and the dollar has appreciated against the yen. 
D)  appreciated against the dollar, and the dollar has depreciated against the yen. 
A)  depreciated against the dollar, and the dollar has appreciated against the yen. 
B)  depreciated against the dollar, and the dollar has depreciated against the yen. 
C)  appreciated against the dollar, and the dollar has appreciated against the yen. 
D)  appreciated against the dollar, and the dollar has depreciated against the yen.

Question 19

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

Accepted Answer

A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650. 
A)  $100. 
B)  $900. 
C)  -$100. 
D)  $650.

Question 20

-The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?

Accepted Answer

@#IMG-DLM& The fall in the expected future exchang

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

The value of net exports increases when the value of ________.

In the long run, the nominal exchange rate

Important factors that change the demand for dollars and hence shift the demand curve for dollars include which of the following? I.interest rates around the world II.the current exchange rate III.the expected future exchange rate

A negative balance in the capital and financial account means the economy is

If there are equal rates of return between assets in two currencies, then there is

In June 2008, $1 bought 104 yen and in October, $1 bought 93 yen. This change means

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

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

According to the law of supply in the foreign exchange market, when the U.S. exchange rate rises, the quantity of U.S. dollars supplied will decrease.

"If the official settlements balance is zero, a current account surplus must equal the capital account deficit." Is the previous statement correct or incorrect? Briefly explain your answer.

Suppose the U.S. interest rate is 6 percent and the world interest rate is 5 percent. The U.S. interest differential is

The nominal exchange rate is

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen current and markets." (www.nytimes.com, October, 29, 2008) As a result, there was ________, holding all else the same.

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be in official reserves of .

________ can intervene directly in the foreign exchange market by buying or selling dollars.

All of the following statements are correct EXCEPT

Suppose that the yen-dollar foreign exchange rate changes from 130 yen per dollar to 140 yen per dollar. Then the yen has

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

-The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?

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

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

The value of net exports increases when the value of ________.

In the long run, the nominal exchange rate

Important factors that change the demand for dollars and hence shift the demand curve for dollars include which of the following? I.interest rates around the world II.the current exchange rate III.the expected future exchange rate

A negative balance in the capital and financial account means the economy is

If there are equal rates of return between assets in two currencies, then there is

In June 2008, $1 bought 104 yen and in October, $1 bought 93 yen. This change means

How will an increase in the expected future exchange rate affect the current supply and demand curves for dollars?

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

According to the law of supply in the foreign exchange market, when the U.S. exchange rate rises, the quantity of U.S. dollars supplied will decrease.

"If the official settlements balance is zero, a current account surplus must equal the capital account deficit." Is the previous statement correct or incorrect? Briefly explain your answer.

Suppose the U.S. interest rate is 6 percent and the world interest rate is 5 percent. The U.S. interest differential is

The nominal exchange rate is

In October 2008, Iceland's central bank increased its lending rate to 18% in an "effort to prop up the country's frozen current and markets." (www.nytimes.com, October, 29, 2008) As a result, there was ________, holding all else the same.

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________.

________ can intervene directly in the foreign exchange market by buying or selling dollars.

All of the following statements are correct EXCEPT

Suppose that the yen-dollar foreign exchange rate changes from 130 yen per dollar to 140 yen per dollar. Then the yen has

-The above table describes the accounts for the country of Pacifica. Using this information, net exports for Pacifica equals

-The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate changes if the expected future exchange rate falls. Does the dollar appreciate or depreciate?

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

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be in official reserves of .