Question 1

If there is a trade deficit that creates a current account deficit

Accepted Answer

A) there must be a capital account deficit too. 
B) there must be a capital account surplus. 
C) there must be greater exports than imports. 
D) a currency must ultimately decrease in value. 
A) there must be a capital account deficit too. 
B) there must be a capital account surplus. 
C) there must be greater exports than imports. 
D) a currency must ultimately decrease in value. B

Question 2

Since 1970, U.S. investment in other countries has

Accepted Answer

A) increased by more than foreign investment in the U.S. 
B) increased by less than foreign investment in the U.S. 
C) necessarily increased by exactly the same as foreign investment in the U.S. 
D) increased more than twenty-fold. 
A) increased by more than foreign investment in the U.S. 
B) increased by less than foreign investment in the U.S. 
C) necessarily increased by exactly the same as foreign investment in the U.S. 
D) increased more than twenty-fold. B

Question 3

Borrowing from other nations is necessary to finance

Accepted Answer

A) more imports than exports. 
B) more exports than imports. 
C) a foreign trade surplus. 
D) a surplus in the current account. 
A) more imports than exports. 
B) more exports than imports. 
C) a foreign trade surplus. 
D) a surplus in the current account. A

Question 4

"Net transfers of private money" most often represent

Accepted Answer

A) money sent home by foreign workers in the U.S. 
B) purchases by foreigners of physical capital in the U.S. 
C) purchases by foreigners of U.S. export goods. 
D) purchases of foreign-produced goods and services by U.S. citizens. 
A) money sent home by foreign workers in the U.S. 
B) purchases by foreigners of physical capital in the U.S. 
C) purchases by foreigners of U.S. export goods. 
D) purchases of foreign-produced goods and services by U.S. citizens.

Question 5

Between 2000 and mid-2005, the value of the U.S. dollar expressed in Chinese yuan

Accepted Answer

A) increased sharply. 
B) decreased precipitously. 
C) remained essentially constant. 
D) was zero because it was illegal to sell yuan. 
A) increased sharply. 
B) decreased precipitously. 
C) remained essentially constant. 
D) was zero because it was illegal to sell yuan.

Question 6

Occasional government intervention in markets for foreign currency is typical of a

Accepted Answer

A) fixed exchange rate system. 
B) floating exchange rate system. 
C) managed float exchange rate system. 
D) gold standard. 
A) fixed exchange rate system. 
B) floating exchange rate system. 
C) managed float exchange rate system. 
D) gold standard.

Question 7

Changes in U.S. citizens' holdings of long-term financial and physical assets in another country are reported in

Accepted Answer

A) the trade balance. 
B) the current account. 
C) total exports of goods and services. 
D) the capital account. 
A) the trade balance. 
B) the current account. 
C) total exports of goods and services. 
D) the capital account.

Question 8

Any restriction on the ease of exchanging on currency for another tends to harm

Accepted Answer

A) only the prospective purchaser of imported goods. 
B) only the prospective manufacturer of goods for export. 
C) both the prospective import purchaser and the prospective export manufacturer. 
D) no one. 
A) only the prospective purchaser of imported goods. 
B) only the prospective manufacturer of goods for export. 
C) both the prospective import purchaser and the prospective export manufacturer. 
D) no one.

Question 9

In the market for yen, an increase in U.S. real interest rates tends to

Accepted Answer

A) cause no change in equilibrium price. 
B) increase excess demand. 
C) increase equilibrium price. 
D) decrease demand. 
A) cause no change in equilibrium price. 
B) increase excess demand. 
C) increase equilibrium price. 
D) decrease demand.

Question 10

In 2014, the U. S. current account balance as a percentage of GDP was approximately

Accepted Answer

A) 20%. 
B) 2%. 
C) 0%. 
D) -3%. 
A) 20%. 
B) 2%. 
C) 0%. 
D) -3%.

Question 11

If the exchange rate of US dollars for Canadian dollars is 1.1 Canadian dollars to $1 (U.S.)then the exchange rate of Canadian dollars for U.S. dollars is

Accepted Answer

A) .909 (1/1.1)US dollars per Canadian dollars. 
B) .1 (1.1-1)US dollars per Canadian dollars. 
C) -.1 (1-1.1)US dollars per Canadian dollars. 
D) not knowable from this data. 
A) .909 (1/1.1)US dollars per Canadian dollars. 
B) .1 (1.1-1)US dollars per Canadian dollars. 
C) -.1 (1-1.1)US dollars per Canadian dollars. 
D) not knowable from this data.

Question 12

The massive deficit in the U.S. current account primarily reflects the

Accepted Answer

A) excess of foreign investment in the U.S. over domestic private investment. 
B) excess of U.S. exports over U.S. imports. 
C) excess of U.S. imports over U.S. exports. 
D) transfers of money home by U.S. citizens working in other countries. 
A) excess of foreign investment in the U.S. over domestic private investment. 
B) excess of U.S. exports over U.S. imports. 
C) excess of U.S. imports over U.S. exports. 
D) transfers of money home by U.S. citizens working in other countries.

Question 13

If the exchange rate of U.S. dollars for yen is 100.yen to $1 (U.S.)then the exchange rate of yen for U.S. dollars is

Accepted Answer

A) .01 (1/100)dollars per yen. 
B) 99 (100-1)dollars per yen. 
C) -.1 (1-1.1)dollars per yen. 
D) not knowable from this data. 
A) .01 (1/100)dollars per yen. 
B) 99 (100-1)dollars per yen. 
C) -.1 (1-1.1)dollars per yen. 
D) not knowable from this data.

Question 14

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to fall and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Accepted Answer

A) rise to (perhaps).9 euros/dollar. 
B) fall to (perhaps).6 euros/dollar. 
C) cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense). 
D) remain unchanged. 
A) rise to (perhaps).9 euros/dollar. 
B) fall to (perhaps).6 euros/dollar. 
C) cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense). 
D) remain unchanged.

Question 15

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to grow and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Accepted Answer

A) rise to (perhaps).9 euros/dollar. 
B) fall to (perhaps).6 euros/dollar. 
C) cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense). 
D) remain unchanged. 
A) rise to (perhaps).9 euros/dollar. 
B) fall to (perhaps).6 euros/dollar. 
C) cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense). 
D) remain unchanged.

Question 16

If the exports are $1.5 trillion, imports are $2 trillion, short-term investment to and from the US exactly balances, and taxes and private payments to and from the US also exactly balance, the current account balance is a

Accepted Answer

A) surplus of $3.5 trillion. 
B) deficit of $.5 trillion. 
C) surplus of $.5 trillion. 
D) deficit of $3.5 trillion. 
A) surplus of $3.5 trillion. 
B) deficit of $.5 trillion. 
C) surplus of $.5 trillion. 
D) deficit of $3.5 trillion.

Question 17

Which exchange rate system requires an immediate response by a government to counter all market forces on exchange rates?

Accepted Answer

A) The fixed exchange rate system 
B) The managed float exchange rate system 
C) The floating exchange rate system 
D) The Bretton-Woods exchange rate system 
A) The fixed exchange rate system 
B) The managed float exchange rate system 
C) The floating exchange rate system 
D) The Bretton-Woods exchange rate system

Question 18

Which exchange rate system requires an immediate response by a government to counter market forces on exchange rates but it need not completely negate all of those forces?

Accepted Answer

A) The fixed exchange rate system 
B) The managed float exchange rate system 
C) The floating exchange rate system 
D) The free market exchange rate system 
A) The fixed exchange rate system 
B) The managed float exchange rate system 
C) The floating exchange rate system 
D) The free market exchange rate system

Question 19

In the market for yen, a decrease in U.S. real interest rates tends to

Accepted Answer

A) cause no change in equilibrium price. 
B) increase excess supply. 
C) increase demand. 
D) decrease equilibrium price. 
A) cause no change in equilibrium price. 
B) increase excess supply. 
C) increase demand. 
D) decrease equilibrium price.

Question 20

Suppose there are two countries (country A and country B)each with its own currency (Currency A and Currency B). Suppose the exchange rate is expressed in terms of amount of Currency B needed to get Currency A. A strengthening of Currency A would show up as

Accepted Answer

A) an increase in the exchange rate. 
B) a decrease in the exchange rate. 
C) an increase in the interest rate 
D) a decrease in the interest rate 
A) an increase in the exchange rate. 
B) a decrease in the exchange rate. 
C) an increase in the interest rate 
D) a decrease in the interest rate

Exam 18: International Finance and Exchange Rates

If there is a trade deficit that creates a current account deficit

Since 1970, U.S. investment in other countries has

Borrowing from other nations is necessary to finance

"Net transfers of private money" most often represent

Between 2000 and mid-2005, the value of the U.S. dollar expressed in Chinese yuan

Occasional government intervention in markets for foreign currency is typical of a

Changes in U.S. citizens' holdings of long-term financial and physical assets in another country are reported in

Any restriction on the ease of exchanging on currency for another tends to harm

In the market for yen, an increase in U.S. real interest rates tends to

In 2014, the U. S. current account balance as a percentage of GDP was approximately

If the exchange rate of US dollars for Canadian dollars is 1.1 Canadian dollars to $1 (U.S.)then the exchange rate of Canadian dollars for U.S. dollars is

The massive deficit in the U.S. current account primarily reflects the

If the exchange rate of U.S. dollars for yen is 100.yen to $1 (U.S.)then the exchange rate of yen for U.S. dollars is

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to fall and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to grow and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

If the exports are $1.5 trillion, imports are $2 trillion, short-term investment to and from the US exactly balances, and taxes and private payments to and from the US also exactly balance, the current account balance is a

Which exchange rate system requires an immediate response by a government to counter all market forces on exchange rates?

Which exchange rate system requires an immediate response by a government to counter market forces on exchange rates but it need not completely negate all of those forces?

In the market for yen, a decrease in U.S. real interest rates tends to

Suppose there are two countries (country A and country B)each with its own currency (Currency A and Currency B). Suppose the exchange rate is expressed in terms of amount of Currency B needed to get Currency A. A strengthening of Currency A would show up as

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