Question 1

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Accepted Answer

A) True 
 B)False

Question 2

Experiences of other countries show support for the twin deficits hypothesis.

Accepted Answer

A) True 
 B)False

Question 3

Figure 19.3  
-Suppose the above graph in Figure 19.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 United States dollars,and the situation persisted,

Accepted Answer

A)  the currency would be overvalued. 
B)  there would need to be a revaluation of the currency. 
C)  the supply of pounds would be less than the demand for pounds. 
D)  the supply of pounds would be greater than the demand for pounds. 
A)  the currency would be overvalued. 
B)  there would need to be a revaluation of the currency. 
C)  the supply of pounds would be less than the demand for pounds. 
D)  the supply of pounds would be greater than the demand for pounds.

Question 4

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except

Accepted Answer

A)  not all goods and services produced in any country are traded internationally. 
B)  consumer preferences for goods and services differ across countries. 
C)  some countries impose barriers to trade. 
D)  most countries have free markets with little, if any, government regulation. 
A)  not all goods and services produced in any country are traded internationally. 
B)  consumer preferences for goods and services differ across countries. 
C)  some countries impose barriers to trade. 
D)  most countries have free markets with little, if any, government regulation.

Question 5

A decrease in capital outflows from Australia will

Accepted Answer

A)  decrease the balance on the financial account. 
B)  increase the balance on the financial account. 
C)  increase the balance on the capital account. 
D)  decrease the balance on the current account. 
A)  decrease the balance on the financial account. 
B)  increase the balance on the financial account. 
C)  increase the balance on the capital account. 
D)  decrease the balance on the current account.

Question 6

Show the impact that a relative increase in Australian interest rates will have on the exchange rate of Chinese yuan for dollars,explain what this will do to the level of goods imported from China to Australia,and discuss the effect it will have on Australia's current account.

Accepted Answer

The exchange rate is determined by suppl

Question 7

If the value of goods and services exported from Australia is smaller than the value of goods and services imported,then

Accepted Answer

A)  Australia's balance of payments will be in deficit. 
B)  Australia's balance of trade on goods and services will be in deficit. 
C)  Australia will have a current account surplus. 
D)  Australia will have a financial account deficit. 
A)  Australia's balance of payments will be in deficit. 
B)  Australia's balance of trade on goods and services will be in deficit. 
C)  Australia will have a current account surplus. 
D)  Australia will have a financial account deficit.

Question 8

The demand for yen in exchange for dollars will increase if,ceteris paribus,

Accepted Answer

A)  Japanese interest rates increase relative to interest rates in other countries. 
B)  income in Australia falls. 
C)  speculators think the value of the yen relative to the dollar will fall. 
D)  the desirability of investing in Japan falls. 
A)  Japanese interest rates increase relative to interest rates in other countries. 
B)  income in Australia falls. 
C)  speculators think the value of the yen relative to the dollar will fall. 
D)  the desirability of investing in Japan falls.

Question 9

The purchase of foreign shares and bonds by an Australian brokerage firm is an example of capital inflows to Australia.

Accepted Answer

A) True 
 B)False

Question 10

Assume that a Big Mac burger costs $3.57 in Australia and 7.80 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that the dollar will

Accepted Answer

A)  appreciate as the demand for dollars rises in the long run. 
B)  appreciate as the supply of dollars falls in the long run. 
C)  depreciate as the demand for dollars falls in the long run. 
D)  depreciate as the supply of dollars rises in the long run. 
A)  appreciate as the demand for dollars rises in the long run. 
B)  appreciate as the supply of dollars falls in the long run. 
C)  depreciate as the demand for dollars falls in the long run. 
D)  depreciate as the supply of dollars rises in the long run.

Question 11

Under the Bretton Woods System,Germany did not want to revalue its currency because the revaluation would

Accepted Answer

A)  make imports more expensive to Germans. 
B)  make exported goods less expensive. 
C)  rapidly increase the money supply, causing inflation. 
D)  cause a recession. 
A)  make imports more expensive to Germans. 
B)  make exported goods less expensive. 
C)  rapidly increase the money supply, causing inflation. 
D)  cause a recession.

Question 12

A country that allows its exchange rate to be determined by the market,without government intervention,has a

Accepted Answer

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

Question 13

The major difference between an open economy and a closed economy is that

Accepted Answer

A)  an open economy interacts with the rest of the world, a closed economy does not. 
B)  a closed economy uses rules rather than discretionary policy, an open economy uses discretionary policy. 
C)  an open economy is a market economy while a closed economy relies on central planning. 
D)  a closed economy balances budgets, an open economy does not. 
A)  an open economy interacts with the rest of the world, a closed economy does not. 
B)  a closed economy uses rules rather than discretionary policy, an open economy uses discretionary policy. 
C)  an open economy is a market economy while a closed economy relies on central planning. 
D)  a closed economy balances budgets, an open economy does not.

Question 14

The real exchange rate of British pounds to Australian dollars will increase if the British price level ________ and the nominal exchange rate of pounds to the dollar ________.

Accepted Answer

A)  increases; rises 
B)  decreases; rises 
C)  increases; falls 
D)  decreases; falls 
A)  increases; rises 
B)  decreases; rises 
C)  increases; falls 
D)  decreases; falls

Question 15

An excess supply of the dollar in exchange for yen will cause

Accepted Answer

A)  no change in the exchange rate of the yen to the dollar. 
B)  the dollar to appreciate relative to the yen. 
C)  the yen to depreciate against all major currencies. 
D)  the dollar to decline in value relative to the yen. 
A)  no change in the exchange rate of the yen to the dollar. 
B)  the dollar to appreciate relative to the yen. 
C)  the yen to depreciate against all major currencies. 
D)  the dollar to decline in value relative to the yen.

Question 16

Under the gold standard

Accepted Answer

A)  there was no inflation. 
B)  the central bank had more complete control over the money supply. 
C)  technological change in the production of gold did not affect the money supply. 
D)  the central bank lacked control over the money supply. 
A)  there was no inflation. 
B)  the central bank had more complete control over the money supply. 
C)  technological change in the production of gold did not affect the money supply. 
D)  the central bank lacked control over the money supply.

Question 17

Which of the following would increase the size of the deficit in the current account of Australia?

Accepted Answer

A)  A decrease in imports. 
B)  A decrease in the amount of money the Australian government sends in foreign aid to other countries. 
C)  A decrease in exports. 
D)  A decrease in the amount of income Australian companies pay to foreigners who own investments in Australia. 
A)  A decrease in imports. 
B)  A decrease in the amount of money the Australian government sends in foreign aid to other countries. 
C)  A decrease in exports. 
D)  A decrease in the amount of income Australian companies pay to foreigners who own investments in Australia.

Question 18

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Accepted Answer

The saving and investment equation shows

Question 19

Would we expect that purchasing power parity will hold in the long run for haircut prices between Australia and Singapore? Why or why not?

Accepted Answer

We would not expect that purchasing powe

Question 20

Consider the market for dollars against the British pound shown in Figure 19.1.From this graph,we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

Accepted Answer

A)  decreased; 0.46 
B)  increased; 2.17 
C)  decreased; 2.00 
D)  increased; 0.50 
A)  decreased; 0.46 
B)  increased; 2.17 
C)  decreased; 2.00 
D)  increased; 0.50

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Experiences of other countries show support for the twin deficits hypothesis.

Figure 19.3 -Suppose the above graph in Figure 19.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 United States dollars,and the situation persisted,

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except

A decrease in capital outflows from Australia will

Show the impact that a relative increase in Australian interest rates will have on the exchange rate of Chinese yuan for dollars,explain what this will do to the level of goods imported from China to Australia,and discuss the effect it will have on Australia's current account.

If the value of goods and services exported from Australia is smaller than the value of goods and services imported,then

The demand for yen in exchange for dollars will increase if,ceteris paribus,

The purchase of foreign shares and bonds by an Australian brokerage firm is an example of capital inflows to Australia.

Assume that a Big Mac burger costs $3.57 in Australia and 7.80 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that the dollar will

Under the Bretton Woods System,Germany did not want to revalue its currency because the revaluation would

A country that allows its exchange rate to be determined by the market,without government intervention,has a

The major difference between an open economy and a closed economy is that

The real exchange rate of British pounds to Australian dollars will increase if the British price level and the nominal exchange rate of pounds to the dollar .

An excess supply of the dollar in exchange for yen will cause

Under the gold standard

Which of the following would increase the size of the deficit in the current account of Australia?

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Would we expect that purchasing power parity will hold in the long run for haircut prices between Australia and Singapore? Why or why not?

Consider the market for dollars against the British pound shown in Figure 19.1.From this graph,we can conclude that the dollar price of a British pound has to dollars per pound.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters

Exam 19: Comparative Advantage, international Trade, and Exchange Rates

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Experiences of other countries show support for the twin deficits hypothesis.

Figure 19.3 -Suppose the above graph in Figure 19.3 represents the market for the British pound under the Bretton Woods System.If the par exchange rate was set at 2 United States dollars,and the situation persisted,

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except

A decrease in capital outflows from Australia will

Show the impact that a relative increase in Australian interest rates will have on the exchange rate of Chinese yuan for dollars,explain what this will do to the level of goods imported from China to Australia,and discuss the effect it will have on Australia's current account.

If the value of goods and services exported from Australia is smaller than the value of goods and services imported,then

The demand for yen in exchange for dollars will increase if,ceteris paribus,

The purchase of foreign shares and bonds by an Australian brokerage firm is an example of capital inflows to Australia.

Assume that a Big Mac burger costs $3.57 in Australia and 7.80 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that the dollar will

Under the Bretton Woods System,Germany did not want to revalue its currency because the revaluation would

A country that allows its exchange rate to be determined by the market,without government intervention,has a

The major difference between an open economy and a closed economy is that

The real exchange rate of British pounds to Australian dollars will increase if the British price level ________ and the nominal exchange rate of pounds to the dollar ________.

An excess supply of the dollar in exchange for yen will cause

Under the gold standard

Which of the following would increase the size of the deficit in the current account of Australia?

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Would we expect that purchasing power parity will hold in the long run for haircut prices between Australia and Singapore? Why or why not?

Consider the market for dollars against the British pound shown in Figure 19.1.From this graph,we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters

The real exchange rate of British pounds to Australian dollars will increase if the British price level and the nominal exchange rate of pounds to the dollar .

Consider the market for dollars against the British pound shown in Figure 19.1.From this graph,we can conclude that the dollar price of a British pound has to dollars per pound.