Question 1

Economists usually use GDP rather than GNP because they are tracking:

Accepted Answer

A) only transactions on the current account. 
B) only transactions on the financial account. 
C) production rather than income. 
D) income rather than production. 
A) only transactions on the current account. 
B) only transactions on the financial account. 
C) production rather than income. 
D) income rather than production. C

Question 2

The value of accounting services purchased by clients in China is included in the merchandise trade balance.

Accepted Answer

A) True 
 B)False  False

Question 3

The global savings glut of the early 2000s was caused primarily by:

Accepted Answer

A) financial crises in the late 1990s and early 2000s that led to an increase in savings in some relatively poor countries. 
B) the high price of oil. 
C) the impact of global warming on agriculture. 
D) trade restrictions. 
A) financial crises in the late 1990s and early 2000s that led to an increase in savings in some relatively poor countries. 
B) the high price of oil. 
C) the impact of global warming on agriculture. 
D) trade restrictions. A

Question 4

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Accepted Answer

A) True 
 B)False

Question 5

Foreign exchange reserves are stocks of foreign currencies that a government maintains to buy its currency in foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 6

If a country with a floating exchange rate follows a contractionary monetary policy, with everything else remaining unchanged, it leads to a(n) _____ in interest rates and a(n) _____ in the currency.

Accepted Answer

A) increase; depreciation 
B) decrease; appreciation 
C) decrease; depreciation 
D) increase; appreciation 
A) increase; depreciation 
B) decrease; appreciation 
C) decrease; depreciation 
D) increase; appreciation

Question 7

If a government fixes the exchange rate so as to generate a surplus of the domestic currency, the exchange rate (U.S. dollars per unit of the other currency) will tend to _____. To maintain the fixed exchange rate, the government must _____ the domestic currency.

Accepted Answer

A) fall; increase the international demand for 
B) rise; increase the international demand for 
C) fall; decrease the international demand for 
D) fall; increase the domestic supply of 
A) fall; increase the international demand for 
B) rise; increase the international demand for 
C) fall; decrease the international demand for 
D) fall; increase the domestic supply of

Question 8

A change in the U.S. balance of payments on financial account generates an equal and opposite reaction in the balance of payments on current account.

Accepted Answer

A) True 
 B)False

Question 9

After the Bretton Woods agreement broke down in 1971, the U.S. and most industrialized countries adopted:

Accepted Answer

A) the euro. 
B) the bitcoin. 
C) a system of fixed exchange rates. 
D) a system of floating exchange rates. 
A) the euro. 
B) the bitcoin. 
C) a system of fixed exchange rates. 
D) a system of floating exchange rates.

Question 10

A floating exchange rate is:

Accepted Answer

A) determined by the market. 
B) set by government. 
C) set by the International Monetary Fund. 
D) determined by the United Nations. 
A) determined by the market. 
B) set by government. 
C) set by the International Monetary Fund. 
D) determined by the United Nations.

Question 11

Use the following to answer questions :
Scenario: Exchange Rates
The value of a euro goes from US$1.25 to US$1.50.
-(Scenario: Exchange Rates) Look at the scenario Exchange Rates. French exports to the United States will:

Accepted Answer

A) be cheaper. 
B) be more expensive. 
C) be unaffected. 
D) increase. 
A) be cheaper. 
B) be more expensive. 
C) be unaffected. 
D) increase.

Question 12

Which of the following statements is TRUE?

Accepted Answer

A) The financial account balance is the negative of the current account balance. 
B) A country's balance on current account will be less than its balance on financial account if exchange rates are allowed to float freely. 
C) If the market for a nation's currency is in equilibrium, a financial account surplus necessarily means a current account surplus. 
D) Exchange rates don't affect either financial accounts or current accounts. 
A) The financial account balance is the negative of the current account balance. 
B) A country's balance on current account will be less than its balance on financial account if exchange rates are allowed to float freely. 
C) If the market for a nation's currency is in equilibrium, a financial account surplus necessarily means a current account surplus. 
D) Exchange rates don't affect either financial accounts or current accounts.

Question 13

Use the following to answer questions :
Figure: Change in the Demand for U.S. Dollars  
-(Figure: Change in the Demand for U.S. Dollars) Look at the figure Change in the Demand for U.S. Dollars. A movement from E1 to E2 in this foreign exchange market would cause Americans to purchase _____ goods and services from Europe.

Accepted Answer

A) the same amount of 
B) fewer 
C) more 
D) The answer cannot be determined from the information provided. 
A) the same amount of 
B) fewer 
C) more 
D) The answer cannot be determined from the information provided.

Question 14

Use the following to answer questions:
Figure: International Capital Flows  
-(Figure: International Capital Flows) Look at the figure International Capital Flows. At an interest rate of 4%, the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

Accepted Answer

A) greater than 
B) less than 
C) equal to 
D) not related to 
A) greater than 
B) less than 
C) equal to 
D) not related to

Question 15

The Exchange Rate Mechanism established a target zone for European exchange rates during the late 1980s and 1990s.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following countries did NOT adopt the euro?
I. Britain
II. Switzerland
III. Sweden

Accepted Answer

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

Question 17

An increase in the value of a floating currency is called a revaluation.

Accepted Answer

A) True 
 B)False

Question 18

A revaluation _____ exports and _____ imports.

Accepted Answer

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

Question 19

A country's balance of payments on financial account is the difference between the country's sales of assets to foreigners and its purchases of assets from foreigners during a given period.

Accepted Answer

A) True 
 B)False

Question 20

The pound sterling floats. If the exchange rate for the pound changes from $1.68 to $1.60, the pound has:

Accepted Answer

A) depreciated. 
B) been devalued. 
C) appreciated. 
D) been revalued. 
A) depreciated. 
B) been devalued. 
C) appreciated. 
D) been revalued.

Economists usually use GDP rather than GNP because they are tracking:

The value of accounting services purchased by clients in China is included in the merchandise trade balance.

The global savings glut of the early 2000s was caused primarily by:

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Foreign exchange reserves are stocks of foreign currencies that a government maintains to buy its currency in foreign exchange markets.

If a country with a floating exchange rate follows a contractionary monetary policy, with everything else remaining unchanged, it leads to a(n) _ in interest rates and a(n) _ in the currency.

If a government fixes the exchange rate so as to generate a surplus of the domestic currency, the exchange rate (U.S. dollars per unit of the other currency) will tend to _. To maintain the fixed exchange rate, the government must _ the domestic currency.

A change in the U.S. balance of payments on financial account generates an equal and opposite reaction in the balance of payments on current account.

After the Bretton Woods agreement broke down in 1971, the U.S. and most industrialized countries adopted:

A floating exchange rate is:

Use the following to answer questions : Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. -(Scenario: Exchange Rates) Look at the scenario Exchange Rates. French exports to the United States will:

Which of the following statements is TRUE?

The Exchange Rate Mechanism established a target zone for European exchange rates during the late 1980s and 1990s.

Which of the following countries did NOT adopt the euro? I. Britain II. Switzerland III. Sweden

An increase in the value of a floating currency is called a revaluation.

A revaluation _ exports and _ imports.

A country's balance of payments on financial account is the difference between the country's sales of assets to foreigners and its purchases of assets from foreigners during a given period.

The pound sterling floats. If the exchange rate for the pound changes from $1.68 to $1.60, the pound has:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 19: Open-Economy Macroeconomics

Economists usually use GDP rather than GNP because they are tracking:

The value of accounting services purchased by clients in China is included in the merchandise trade balance.

The global savings glut of the early 2000s was caused primarily by:

Foreign exchange controls are systems of a common currency used by a group of countries, such as the Asian Tigers.

Foreign exchange reserves are stocks of foreign currencies that a government maintains to buy its currency in foreign exchange markets.

If a country with a floating exchange rate follows a contractionary monetary policy, with everything else remaining unchanged, it leads to a(n) _____ in interest rates and a(n) _____ in the currency.

If a government fixes the exchange rate so as to generate a surplus of the domestic currency, the exchange rate (U.S. dollars per unit of the other currency) will tend to _____. To maintain the fixed exchange rate, the government must _____ the domestic currency.

A change in the U.S. balance of payments on financial account generates an equal and opposite reaction in the balance of payments on current account.

After the Bretton Woods agreement broke down in 1971, the U.S. and most industrialized countries adopted:

A floating exchange rate is:

Use the following to answer questions : Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. -(Scenario: Exchange Rates) Look at the scenario Exchange Rates. French exports to the United States will:

Which of the following statements is TRUE?

The Exchange Rate Mechanism established a target zone for European exchange rates during the late 1980s and 1990s.

Which of the following countries did NOT adopt the euro? I. Britain II. Switzerland III. Sweden

An increase in the value of a floating currency is called a revaluation.

A revaluation _____ exports and _____ imports.

A country's balance of payments on financial account is the difference between the country's sales of assets to foreigners and its purchases of assets from foreigners during a given period.

The pound sterling floats. If the exchange rate for the pound changes from $1.68 to $1.60, the pound has:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

If a country with a floating exchange rate follows a contractionary monetary policy, with everything else remaining unchanged, it leads to a(n) _ in interest rates and a(n) _ in the currency.

If a government fixes the exchange rate so as to generate a surplus of the domestic currency, the exchange rate (U.S. dollars per unit of the other currency) will tend to _. To maintain the fixed exchange rate, the government must _ the domestic currency.

A revaluation _ exports and _ imports.