Question 1

In the market for euros, a decrease in the relative safety of U.S. investments tends to

Accepted Answer

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

Question 2

Suppose an event occurs that causes people to gain faith in the ability of Europeans to pay their euro-denominated debt. 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 3

If the exchange rate of dollars for yuan is 6 yuan to $1 then the exchange rate of yuan for dollars is

Accepted Answer

A) .166 (1/6)dollars per yuan. 
B) 5 (6-1)dollars per yuan. 
C) -5 (1-6)dollars per yuan. 
D) not knowable from this data. 
A) .166 (1/6)dollars per yuan. 
B) 5 (6-1)dollars per yuan. 
C) -5 (1-6)dollars per yuan. 
D) not knowable from this data.

Question 4

If no one is holding cash, a US trade deficit with China likely means

Accepted Answer

A) the Chinese are buying more US assets than Americans are buying Chinese assets. 
B) the Chinese are selling more US assets than Americans are selling Chinese assets. 
C) the Chinese are buying fewer US assets than Americans are buying Chinese assets. 
D) that next year the US will run a trade surplus with China. 
A) the Chinese are buying more US assets than Americans are buying Chinese assets. 
B) the Chinese are selling more US assets than Americans are selling Chinese assets. 
C) the Chinese are buying fewer US assets than Americans are buying Chinese assets. 
D) that next year the US will run a trade surplus with China.

Question 5

Since roughly 1970, the U.S. has moved from being a

Accepted Answer

A) net importer of goods and services to being a net exporter of goods and services. 
B) net debtor nation to being a net creditor nation. 
C) net creditor nation to being a net debtor nation. 
D) small net creditor nation to a much larger net creditor nation. 
A) net importer of goods and services to being a net exporter of goods and services. 
B) net debtor nation to being a net creditor nation. 
C) net creditor nation to being a net debtor nation. 
D) small net creditor nation to a much larger net creditor nation.

Question 6

What "balances" in the Balance of Payments accounting system are:

Accepted Answer

A) the physical and monetary direct transfers among individuals. 
B) physical investment and ephemeral investment. 
C) aggregate consumption and government spending. 
D) the current account and the capital account. 
A) the physical and monetary direct transfers among individuals. 
B) physical investment and ephemeral investment. 
C) aggregate consumption and government spending. 
D) the current account and the capital account.

Question 7

If a country tries to maintain a fixed exchange rate it must be

Accepted Answer

A) willing to sell gold and hard currency to weaken its currency, if needed. 
B) willing to print and sell its own currency to weaken it, if needed. 
C) willing to print and sell its own currency to strengthen it, if needed. 
D) a communist nation to accomplish it. 
A) willing to sell gold and hard currency to weaken its currency, if needed. 
B) willing to print and sell its own currency to weaken it, if needed. 
C) willing to print and sell its own currency to strengthen it, if needed. 
D) a communist nation to accomplish it.

Question 8

Over the last 50 years, as a percentage of GDP, the current account deficit has been

Accepted Answer

A) trending larger. 
B) trending smaller. 
C) roughly constant. 
D) has been fixed at zero 
A) trending larger. 
B) trending smaller. 
C) roughly constant. 
D) has been fixed at zero

Question 9

In the market for euros, a decrease in U.S. imports from Europe tends to

Accepted Answer

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

Question 10

In the market for a foreign currency, a "weakening" of the dollar corresponds to a

Accepted Answer

A) higher dollar price of foreign currency. 
B) lower dollar price of foreign currency. 
C) smaller demand for the foreign currency. 
D) larger supply of the foreign currency. 
A) higher dollar price of foreign currency. 
B) lower dollar price of foreign currency. 
C) smaller demand for the foreign currency. 
D) larger supply of the foreign currency.

Question 11

In the market for euros, an increase in the relative safety of U.S. investments tends to

Accepted Answer

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

Question 12

In the market for a foreign currency, the curve that represents the "willingness of those who have foreign currency to trade them for the U.S. dollar" is the

Accepted Answer

A) price curve. 
B) equilibrium curve. 
C) supply curve. 
D) demand curve. 
A) price curve. 
B) equilibrium curve. 
C) supply curve. 
D) demand curve.

Question 13

When a good is exported from one country to another, the exporting company gets

Accepted Answer

A) the currency of the importing country and can only buy goods from the importing country with it. 
B) its own currency from buyers in importing country that those buyers have been holding for this circumstance. 
C) its own currency because the importer has arranged to get that currency through the foreign exchange market. 
D) a combination that is half its own currency and half in the currency of the importing buyers. 
A) the currency of the importing country and can only buy goods from the importing country with it. 
B) its own currency from buyers in importing country that those buyers have been holding for this circumstance. 
C) its own currency because the importer has arranged to get that currency through the foreign exchange market. 
D) a combination that is half its own currency and half in the currency of the importing buyers.

Question 14

Anything that makes it more difficult to exchange one currency for another tends to

Accepted Answer

A) decrease the price of exports. 
B) decrease the price of imports. 
C) increase the price of imports. 
D) all of the options are correct. 
A) decrease the price of exports. 
B) decrease the price of imports. 
C) increase the price of imports. 
D) all of the options are correct.

Question 15

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 weakening 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

Question 16

Between 2007 and mid-2009, 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 17

In the market for euros, a decrease in U.S. imports from Europe tends to

Accepted Answer

A) increase demand. 
B) decrease demand. 
C) cause no change in the market demand for euros. 
D) decrease supply. 
A) increase demand. 
B) decrease demand. 
C) cause no change in the market demand for euros. 
D) decrease supply.

Exam 18: International Finance and Exchange Rates

In the market for euros, a decrease in the relative safety of U.S. investments tends to

Suppose an event occurs that causes people to gain faith in the ability of Europeans to pay their euro-denominated debt. 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 exchange rate of dollars for yuan is 6 yuan to $1 then the exchange rate of yuan for dollars is

If no one is holding cash, a US trade deficit with China likely means

Since roughly 1970, the U.S. has moved from being a

What "balances" in the Balance of Payments accounting system are:

If a country tries to maintain a fixed exchange rate it must be

Over the last 50 years, as a percentage of GDP, the current account deficit has been

In the market for euros, a decrease in U.S. imports from Europe tends to

In the market for a foreign currency, a "weakening" of the dollar corresponds to a

In the market for euros, an increase in the relative safety of U.S. investments tends to

In the market for a foreign currency, the curve that represents the "willingness of those who have foreign currency to trade them for the U.S. dollar" is the

When a good is exported from one country to another, the exporting company gets

Anything that makes it more difficult to exchange one currency for another 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 weakening of Currency A would show up as

Between 2007 and mid-2009, the value of the U.S. dollar expressed in Chinese yuan

In the market for euros, a decrease in U.S. imports from Europe tends to

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