Question 1

A revaluation can help reduce:
I. shortages of domestic currency.
II. surpluses of domestic currency.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) neither I nor II 
A) I only 
B) II only 
C) I and II 
D) neither I nor II

Question 2

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which of the following is a likely explanation?

Accepted Answer

A) lack of restrictions on migration 
B) the absence of political risks 
C) higher political risks and restrictions on migration 
D) greater economic integration in the present 
A) lack of restrictions on migration 
B) the absence of political risks 
C) higher political risks and restrictions on migration 
D) greater economic integration in the present

Question 3

Suppose that on January 1 the exchange rate was US$1.40 per euro. On December 31 of that year, a person needed $1.45 to buy a euro. Over the course of that year, did the dollar appreciate or depreciate against the euro? Did the change in the exchange rate make it easier or more difficult for U.S. college students to spend a semester at a European university? Explain.

Accepted Answer

At the end of the year it took more doll

Question 4

When the dollar appreciates relative to the Canadian dollar:

Accepted Answer

A) Canadian goods become more expensive in the United States. 
B) U.S. goods become more expensive in Canada. 
C) U.S. residents tend to buy more from Canada, since the United States has a weak currency. 
D) the United States sells more goods to Canada. 
A) Canadian goods become more expensive in the United States. 
B) U.S. goods become more expensive in Canada. 
C) U.S. residents tend to buy more from Canada, since the United States has a weak currency. 
D) the United States sells more goods to Canada.

Question 5

The difference between a country's exports and its imports of goods and services is known as the:

Accepted Answer

A) trade balance. 
B) balance of payments on goods and services. 
C) balance of payments on current account. 
D) balance of exchange. 
A) trade balance. 
B) balance of payments on goods and services. 
C) balance of payments on current account. 
D) balance of exchange.

Question 6

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. The exchange rate for the dollar has changed from:

Accepted Answer

A) €0.25 to €0.50. 
B) €1.25 to €1.50. 
C) €0.80 to €0.67. 
D) €0.67 to €0.80. 
A) €0.25 to €0.50. 
B) €1.25 to €1.50. 
C) €0.80 to €0.67. 
D) €0.67 to €0.80.

Question 7

A fixed rate system eliminates uncertainty about the future value of a currency.

Accepted Answer

A) True 
 B)False

Question 8

The current account responds to changes in both real and nominal exchange rates.

Accepted Answer

A) True 
 B)False

Question 9

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. The change from D1 to D2 will occur, all other things being equal, if:

Accepted Answer

A) interest rates are higher in Europe. 
B) interest rates are higher in the United States. 
C) interest rates in the United States and Europe are equal. 
D) inflation is higher in Europe. 
A) interest rates are higher in Europe. 
B) interest rates are higher in the United States. 
C) interest rates in the United States and Europe are equal. 
D) inflation is higher in Europe.

Question 10

After a revaluation, all other things equal, a country's balance of payments on the current account will likely:

Accepted Answer

A) increase. 
B) decrease. 
C) remain the same. 
D) fluctuate randomly. 
A) increase. 
B) decrease. 
C) remain the same. 
D) fluctuate randomly.

Question 11

A recession in the United States could begin with our trading partners.

Accepted Answer

A) True 
 B)False

Question 12

Governments can use foreign exchange controls to help them fix the value of their currency.

Accepted Answer

A) True 
 B)False

Question 13

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

Accepted Answer

A) True 
 B)False

Question 14

A current account deficit exists when:

Accepted Answer

A) the balance on current account is negative. 
B) spending flowing out of the country is less than spending flowing into the country. 
C) net exports are positive. 
D) an economy buys less from foreigners than it sells to them. 
A) the balance on current account is negative. 
B) spending flowing out of the country is less than spending flowing into the country. 
C) net exports are positive. 
D) an economy buys less from foreigners than it sells to them.

Question 15

Use the following to answer questions :
Scenario: Exchange Rate between the United States and India
Suppose that initially the nominal exchange rate was 40 rupees per dollar but it is now 50 rupees per dollar.
-(Scenario: Exchange Rate between the United States and India) Consider the scenario Exchange Rate between the United States and India. The real exchange rate will change by the greatest amount when the U.S. inflation rate is _____and the Indian inflation rate is _____.

Accepted Answer

A) zero; zero 
B) 5%; 2% 
C) 2%; 12% 
D) 5%; 5% 
A) zero; zero 
B) 5%; 2% 
C) 2%; 12% 
D) 5%; 5%

Question 16

Microsoft, a Seattle software company, purchases a new office building in Vancouver. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

Accepted Answer

A) from; current 
B) to; financial 
C) to; current 
D) from; financial 
A) from; current 
B) to; financial 
C) to; current 
D) from; financial

Question 17

Adopting a floating exchange rate regime:

Accepted Answer

A) makes the domestic economy less susceptible to business cycles abroad. 
B) limits the use of monetary policy to stabilize the economy. 
C) makes the domestic economy more susceptible to business cycles abroad. 
D) commits the country to maintaining low inflation rates. 
A) makes the domestic economy less susceptible to business cycles abroad. 
B) limits the use of monetary policy to stabilize the economy. 
C) makes the domestic economy more susceptible to business cycles abroad. 
D) commits the country to maintaining low inflation rates.

Question 18

A revaluation will make exports _____expensive and imports _____ expensive.

Accepted Answer

A) more; more 
B) more; less 
C) less; less 
D) less; more 
A) more; more 
B) more; less 
C) less; less 
D) less; more

Question 19

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

A) current account; from 
B) current account; to 
C) financial account; from 
D) financial account; to 
A) current account; from 
B) current account; to 
C) financial account; from 
D) financial account; to

Question 20

To fix its exchange rate, a government can use:

Accepted Answer

A) competition. 
B) exchange market intervention. 
C) speculation. 
D) arbitrage. 
A) competition. 
B) exchange market intervention. 
C) speculation. 
D) arbitrage.

A revaluation can help reduce: I. shortages of domestic currency. II. surpluses of domestic currency.

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which of the following is a likely explanation?

When the dollar appreciates relative to the Canadian dollar:

The difference between a country's exports and its imports of goods and services is known as the:

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. The exchange rate for the dollar has changed from:

A fixed rate system eliminates uncertainty about the future value of a currency.

The current account responds to changes in both real and nominal exchange rates.

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. The change from D₁ to D₂ will occur, all other things being equal, if:

After a revaluation, all other things equal, a country's balance of payments on the current account will likely:

A recession in the United States could begin with our trading partners.

Governments can use foreign exchange controls to help them fix the value of their currency.

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

A current account deficit exists when:

Microsoft, a Seattle software company, purchases a new office building in Vancouver. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

Adopting a floating exchange rate regime:

A revaluation will make exports _expensive and imports _ expensive.

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.

To fix its exchange rate, a government can use:

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

A revaluation can help reduce: I. shortages of domestic currency. II. surpluses of domestic currency.

Capital flows as a share of world savings and investment today are much smaller than they were over a century ago. Which of the following is a likely explanation?

When the dollar appreciates relative to the Canadian dollar:

The difference between a country's exports and its imports of goods and services is known as the:

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. The exchange rate for the dollar has changed from:

A fixed rate system eliminates uncertainty about the future value of a currency.

The current account responds to changes in both real and nominal exchange rates.

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. The change from D1 to D2 will occur, all other things being equal, if:

After a revaluation, all other things equal, a country's balance of payments on the current account will likely:

A recession in the United States could begin with our trading partners.

Governments can use foreign exchange controls to help them fix the value of their currency.

If a country's currency appreciates, all other things equal, its exports will decrease and its imports will increase.

A current account deficit exists when:

Microsoft, a Seattle software company, purchases a new office building in Vancouver. In the U.S. balance of payments account, this transaction is entered as a payment _____ foreigners in the _____ account.

Adopting a floating exchange rate regime:

A revaluation will make exports _____expensive and imports _____ expensive.

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

To fix its exchange rate, a government can use:

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

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. The change from D₁ to D₂ will occur, all other things being equal, if:

Microsoft, a Seattle software company, purchases a new office building in Vancouver. In the U.S. balance of payments account, this transaction is entered as a payment _ foreigners in the _ account.

A revaluation will make exports _expensive and imports _ expensive.

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.