Question 1

The difference between a country's exports and imports of goods alone-not including services-is the:

Accepted Answer

A) merchandise trade balance. 
B) balance of payments on good and services. 
C) balance of payments on current account. 
D) current account. 
A) merchandise trade balance. 
B) balance of payments on good and services. 
C) balance of payments on current account. 
D) current account.

Question 2

When a currency depreciates, the prices of its imports from other countries will:

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly. 
A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly.

Question 3

Use the following to answer questions :
Scenario: Gizmovia
The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia) Look at the scenario Gizmovia. If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50, it should _____ interest rates, which will _____ capital outflows of gizmos.

Accepted Answer

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

Question 4

Expansionary monetary policy in the United States will cause the dollar to:

Accepted Answer

A) appreciate. 
B) be revalued. 
C) depreciate. 
D) be devalued. 
A) appreciate. 
B) be revalued. 
C) depreciate. 
D) be devalued.

Question 5

Capital tends to:

Accepted Answer

A) flow toward countries with high political risk. 
B) flow toward countries with low political risk. 
C) ignore political risk and focus on returns. 
D) ignore political risk in the current time frame. 
A) flow toward countries with high political risk. 
B) flow toward countries with low political risk. 
C) ignore political risk and focus on returns. 
D) ignore political risk in the current time frame.

Question 6

A government can target its exchange rate only if it:

Accepted Answer

A) is willing to give up use of monetary policy to stabilize its economy. 
B) continues to use monetary policy for exchange market intervention and to stabilize its economy. 
C) increases the amount of uncertainty in the foreign exchange markets. 
D) sets inflationary policies. 
A) is willing to give up use of monetary policy to stabilize its economy. 
B) continues to use monetary policy for exchange market intervention and to stabilize its economy. 
C) increases the amount of uncertainty in the foreign exchange markets. 
D) sets inflationary policies.

Question 7

Use the following to answer questions :
Figure: Exchange Market Intervention  
-(Figure: Exchange Market Intervention) Look at panel (b) in the figure Exchange Market Intervention. Which of the following approaches could the Genovian government use to decrease the value of the geno below its present equilibrium exchange rate and into the target range?

Accepted Answer

A) use its own currency to buy U.S. dollars 
B) shift the demand for genos to the right by increasing interest rates in Genovia 
C) eliminate exchange controls that limit the right of Genovian citizens to sell foreign currency 
D) tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens 
A) use its own currency to buy U.S. dollars 
B) shift the demand for genos to the right by increasing interest rates in Genovia 
C) eliminate exchange controls that limit the right of Genovian citizens to sell foreign currency 
D) tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens

Question 8

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

Accepted Answer

A) the North American Free Trade Agreement. 
B) a system of floating exchange rates. 
C) a system of fixed exchange rates. 
D) the Treaty of Ghent. 
A) the North American Free Trade Agreement. 
B) a system of floating exchange rates. 
C) a system of fixed exchange rates. 
D) the Treaty of Ghent.

Question 9

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Accepted Answer

A) depreciation. 
B) devaluation. 
C) appreciation. 
D) revaluation. 
A) depreciation. 
B) devaluation. 
C) appreciation. 
D) revaluation.

Question 10

Foreign exchange reserves are:
I. stocks of foreign currency.
II. gold and silver.
III. bonds of foreign governments.

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 11

All other things equal, an appreciation of the domestic currency will cause aggregate demand to increase.

Accepted Answer

A) True 
 B)False

Question 12

An argument in favor of Britain's adopting the euro was that using the same currency as many other European countries would expand trade and increase productivity.

Accepted Answer

A) True 
 B)False

Question 13

When a currency depreciates, the prices of its exports to other countries will:

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly. 
A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly.

Question 14

If the country's balance of payments on the current account is positive:

Accepted Answer

A) the balance of payments on the financial account is also positive. 
B) the balance of payments on the financial account is negative, so that the sum of the accounts equals zero. 
C) a country's flow of funds into the country is greater than the flow of funds out of the country. 
D) the country's imports are greater than its exports. 
A) the balance of payments on the financial account is also positive. 
B) the balance of payments on the financial account is negative, so that the sum of the accounts equals zero. 
C) a country's flow of funds into the country is greater than the flow of funds out of the country. 
D) the country's imports are greater than its exports.

Question 15

Scenario: Japan and the United States
Suppose that the interest rate in the United States is 4%, in Japan it is 7%, and financial assets in the two countries are equal in risk.

-(Scenario: Japan and the United States) Refer to the scenario Japan and the United States. The implication is that:

Accepted Answer

A) interest rates in Japan will increase. 
B) interest rates in the United States will decrease. 
C) the capital flow between Japan and the United States eventually will render the interest rates equal. 
D) the interest rates in both countries will remain unchanged. 
A) interest rates in Japan will increase. 
B) interest rates in the United States will decrease. 
C) the capital flow between Japan and the United States eventually will render the interest rates equal. 
D) the interest rates in both countries will remain unchanged.

Question 16

Toyota's factory in San Antonio is an example of direct foreign investment.

Accepted Answer

A) True 
 B)False

Question 17

Money flows into the United States from other countries as a result of:

Accepted Answer

A) U.S. purchases of foreign goods and services. 
B) payments to foreign owners of U.S. assets. 
C) domestic purchases of U.S. goods and services. 
D) transfer payments from foreign sources to U.S. residents. 
A) U.S. purchases of foreign goods and services. 
B) payments to foreign owners of U.S. assets. 
C) domestic purchases of U.S. goods and services. 
D) transfer payments from foreign sources to U.S. residents.

Question 18

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

Accepted Answer

A) allowing the price of currency to rise. 
B) allowing the price of currency to fall. 
C) buying assets from other countries. 
D) selling assets to other countries. 
A) allowing the price of currency to rise. 
B) allowing the price of currency to fall. 
C) buying assets from other countries. 
D) selling assets to other countries.

Question 19

When a currency appreciates, the prices of its imports from other countries will:

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly. 
A) increase. 
B) decrease. 
C) remain constant. 
D) fluctuate randomly.

Question 20

U.S. exports increased in 2006 because:

Accepted Answer

A) NAFTA was repealed. 
B) a global currency was established. 
C) the dollar depreciated. 
D) the dollar appreciated. 
A) NAFTA was repealed. 
B) a global currency was established. 
C) the dollar depreciated. 
D) the dollar appreciated.

The difference between a country's exports and imports of goods alone-not including services-is the:

When a currency depreciates, the prices of its imports from other countries will:

Expansionary monetary policy in the United States will cause the dollar to:

Capital tends to:

A government can target its exchange rate only if it:

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Foreign exchange reserves are: I. stocks of foreign currency. II. gold and silver. III. bonds of foreign governments.

All other things equal, an appreciation of the domestic currency will cause aggregate demand to increase.

An argument in favor of Britain's adopting the euro was that using the same currency as many other European countries would expand trade and increase productivity.

When a currency depreciates, the prices of its exports to other countries will:

If the country's balance of payments on the current account is positive:

Scenario: Japan and the United States Suppose that the interest rate in the United States is 4%, in Japan it is 7%, and financial assets in the two countries are equal in risk. -(Scenario: Japan and the United States) Refer to the scenario Japan and the United States. The implication is that:

Toyota's factory in San Antonio is an example of direct foreign investment.

Money flows into the United States from other countries as a result of:

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

When a currency appreciates, the prices of its imports from other countries will:

U.S. exports increased in 2006 because:

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

The difference between a country's exports and imports of goods alone-not including services-is the:

When a currency depreciates, the prices of its imports from other countries will:

Expansionary monetary policy in the United States will cause the dollar to:

Capital tends to:

A government can target its exchange rate only if it:

The result of the meeting of representatives of the Allied Nations at Bretton Woods, New Hampshire, in 1944 was:

An increase in the value of a currency that is determined under a floating exchange rate regime is a(n):

Foreign exchange reserves are: I. stocks of foreign currency. II. gold and silver. III. bonds of foreign governments.

All other things equal, an appreciation of the domestic currency will cause aggregate demand to increase.

An argument in favor of Britain's adopting the euro was that using the same currency as many other European countries would expand trade and increase productivity.

When a currency depreciates, the prices of its exports to other countries will:

If the country's balance of payments on the current account is positive:

Scenario: Japan and the United States Suppose that the interest rate in the United States is 4%, in Japan it is 7%, and financial assets in the two countries are equal in risk. -(Scenario: Japan and the United States) Refer to the scenario Japan and the United States. The implication is that:

Toyota's factory in San Antonio is an example of direct foreign investment.

Money flows into the United States from other countries as a result of:

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

When a currency appreciates, the prices of its imports from other countries will:

U.S. exports increased in 2006 because:

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