Question 1

When maintained by _____,a currency's value will see extensive intervention by the government in the foreign exchange to keep the value within a certain range.

Accepted Answer

A)  a floating exchange rate 
B)  a pegged exchange rate 
C)  a dirty float 
D)  dollarization 
A)  a floating exchange rate 
B)  a pegged exchange rate 
C)  a dirty float 
D)  dollarization

Question 2

An appreciation of the Mexican peso would most likely be a result of:

Accepted Answer

A)  a decrease in Mexican imports in the United States. 
B)  an increase in the supply of pesos. 
C)  an increase of foreign investment in Mexico. 
D)  a decrease in Mexican exports to the United States. 
A)  a decrease in Mexican imports in the United States. 
B)  an increase in the supply of pesos. 
C)  an increase of foreign investment in Mexico. 
D)  a decrease in Mexican exports to the United States.

Question 3

When a Japanese investor buys Australian stock,the Australian capital account _____;when that same Japanese investor receives a dividend from the company,the Australian current account _____.

Accepted Answer

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

Question 4

What can explain the positive relationship between a country's high government budget deficits and high trade deficits?

Accepted Answer

A popular way to finance a budget defici

Question 5

A country is running a _____ when the inflow of foreign capital is greater than the outflow of domestic capital to other nations.

Accepted Answer

A)  trade surplus 
B)  trade deficit 
C)  capital surplus 
D)  capital deficit 
A)  trade surplus 
B)  trade deficit 
C)  capital surplus 
D)  capital deficit

Question 6

The difference between foreign direct investment (FDI)and foreign aid is:

Accepted Answer

A)  not significant because both items are counted as part of the current account. 
B)  FDI refers to foreign businesses opening factories or operations,while foreign aid is monetary assistance. 
C)  FDI earns interest while foreign aid is a gift of money with no interest component. 
D)  FDI is monetary aid while foreign aid is the establishment of operations by foreign-owned businesses. 
A)  not significant because both items are counted as part of the current account. 
B)  FDI refers to foreign businesses opening factories or operations,while foreign aid is monetary assistance. 
C)  FDI earns interest while foreign aid is a gift of money with no interest component. 
D)  FDI is monetary aid while foreign aid is the establishment of operations by foreign-owned businesses.

Question 7

Explain the law of one price.

Accepted Answer

The law of one price states that if trad

Question 8

Which of the following is considered the international lender of last resort?

Accepted Answer

A)  the U.S.Federal Reserve 
B)  the International Monetary Fund 
C)  the World Bank 
D)  the U.S.government 
A)  the U.S.Federal Reserve 
B)  the International Monetary Fund 
C)  the World Bank 
D)  the U.S.government

Question 9

Which of the following results in an appreciation of the U.S.dollar?

Accepted Answer

A)  an increase in U.S.imports 
B)  an increase in U.S.capital outflow 
C)  an increase in foreign investment in the United States 
D)  an increase in Americans' demand for foreign currencies 
A)  an increase in U.S.imports 
B)  an increase in U.S.capital outflow 
C)  an increase in foreign investment in the United States 
D)  an increase in Americans' demand for foreign currencies

Question 10

With a floating exchange rate,an increase in the U.S.interest rate will cause:

Accepted Answer

A)  capital to flow into the United States. 
B)  an increase in the demand for dollars. 
C)  an appreciation of the dollar. 
D)  capital to flow into the United States,an increase in the demand for dollars,and an appreciation of the dollar. 
A)  capital to flow into the United States. 
B)  an increase in the demand for dollars. 
C)  an appreciation of the dollar. 
D)  capital to flow into the United States,an increase in the demand for dollars,and an appreciation of the dollar.

Question 11

The capital account is the sum of the balance of trade,net income on capital held abroad,and net transfer payments.

Accepted Answer

A) True 
 B)False

Question 12

When the inflow of foreign capital is greater than the outflow of domestic capital to other nations,a country runs a:

Accepted Answer

A)  dirty float. 
B)  fixed exchange rate. 
C)  capital surplus. 
D)  capital deficit. 
A)  dirty float. 
B)  fixed exchange rate. 
C)  capital surplus. 
D)  capital deficit.

Question 13

A situation in which the value of a country's exports exceeds the value of its imports is called a(n):

Accepted Answer

A)  trade surplus. 
B)  capital surplus. 
C)  balance of payments surplus. 
D)  exchange rate surplus. 
A)  trade surplus. 
B)  capital surplus. 
C)  balance of payments surplus. 
D)  exchange rate surplus.

Question 14

At the equilibrium exchange rate,the quantity demanded of a currency is:

Accepted Answer

A)  unrelated to the quantity supplied. 
B)  greater than the quantity supplied. 
C)  less than the quantity supplied. 
D)  equal to the quantity supplied. 
A)  unrelated to the quantity supplied. 
B)  greater than the quantity supplied. 
C)  less than the quantity supplied. 
D)  equal to the quantity supplied.

Question 15

Which of the following is a transaction in the capital account?

Accepted Answer

A)  export of medical services 
B)  import of foreign-made vehicles 
C)  increase in foreign reserves 
D)  purchase of a piece of land in a foreign country 
A)  export of medical services 
B)  import of foreign-made vehicles 
C)  increase in foreign reserves 
D)  purchase of a piece of land in a foreign country

Question 16

An increase in the demand for a country's exports will have what effect on its currency?

Accepted Answer

A)  Its value will not change. 
B)  Its value will increase. 
C)  Its value will decrease. 
D)  Its value will depreciate. 
A)  Its value will not change. 
B)  Its value will increase. 
C)  Its value will decrease. 
D)  Its value will depreciate.

Question 17

Which of the following will NOT prevent purchasing power parity from occurring in the real world?

Accepted Answer

A)  high transportation costs 
B)  nontradable services 
C)  trade restrictions 
D)  speculation by foreign exchange traders 
A)  high transportation costs 
B)  nontradable services 
C)  trade restrictions 
D)  speculation by foreign exchange traders

Question 18

Which theorem states that exchange rates will adjust until the prices of goods in different countries approximate one another?

Accepted Answer

A)  purchasing power parity 
B)  the law of multiple prices 
C)  the principle of comparative advantage 
D)  dollarization 
A)  purchasing power parity 
B)  the law of multiple prices 
C)  the principle of comparative advantage 
D)  dollarization

Question 19

Standard & Poor's (S&P)is a United States-based financial services company.One of the services S&P provides is to issue credit rankings for the debt of all public and private corporations.The highest credit ranking it issues is AAA,which indicates a very high level of confidence and a very low level of risk in those investments.In August 2011 S&P downgraded the credit rating on U.S.government bonds from AAA to AA.What impact would this likely have had on the value of the U.S.dollar in foreign exchange markets? Explain.

Accepted Answer

The downgrade in the U.S.credit rating e

Question 20

Use the following to answer questions 
Figure: Rupee Foreign Exchange Market for U.S.Dollars  
-(Figure: Rupee Foreign Exchange Market for U.S.Dollars)Based on the figure,what will a decrease in the money supply by the Federal Reserve cause?

Accepted Answer

A)  the demand for dollars to shift to the right 
B)  the demand for dollars to shift to the left 
C)  the supply of dollars to shift to the right 
D)  the supply of dollars to shift to the left 
A)  the demand for dollars to shift to the right 
B)  the demand for dollars to shift to the left 
C)  the supply of dollars to shift to the right 
D)  the supply of dollars to shift to the left

When maintained by _____,a currency's value will see extensive intervention by the government in the foreign exchange to keep the value within a certain range.

An appreciation of the Mexican peso would most likely be a result of:

When a Japanese investor buys Australian stock,the Australian capital account _;when that same Japanese investor receives a dividend from the company,the Australian current account _.

What can explain the positive relationship between a country's high government budget deficits and high trade deficits?

A country is running a _____ when the inflow of foreign capital is greater than the outflow of domestic capital to other nations.

The difference between foreign direct investment (FDI)and foreign aid is:

Explain the law of one price.

Which of the following is considered the international lender of last resort?

Which of the following results in an appreciation of the U.S.dollar?

With a floating exchange rate,an increase in the U.S.interest rate will cause:

The capital account is the sum of the balance of trade,net income on capital held abroad,and net transfer payments.

When the inflow of foreign capital is greater than the outflow of domestic capital to other nations,a country runs a:

A situation in which the value of a country's exports exceeds the value of its imports is called a(n):

At the equilibrium exchange rate,the quantity demanded of a currency is:

Which of the following is a transaction in the capital account?

An increase in the demand for a country's exports will have what effect on its currency?

Which of the following will NOT prevent purchasing power parity from occurring in the real world?

Which theorem states that exchange rates will adjust until the prices of goods in different countries approximate one another?

Use the following to answer questions Figure: Rupee Foreign Exchange Market for U.S.Dollars -(Figure: Rupee Foreign Exchange Market for U.S.Dollars)Based on the figure,what will a decrease in the money supply by the Federal Reserve cause?

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

Political Economy and Public Choice

Filters

Exam 20: International Finance

When maintained by _____,a currency's value will see extensive intervention by the government in the foreign exchange to keep the value within a certain range.

An appreciation of the Mexican peso would most likely be a result of:

When a Japanese investor buys Australian stock,the Australian capital account _____;when that same Japanese investor receives a dividend from the company,the Australian current account _____.

What can explain the positive relationship between a country's high government budget deficits and high trade deficits?

A country is running a _____ when the inflow of foreign capital is greater than the outflow of domestic capital to other nations.

The difference between foreign direct investment (FDI)and foreign aid is:

Explain the law of one price.

Which of the following is considered the international lender of last resort?

Which of the following results in an appreciation of the U.S.dollar?

With a floating exchange rate,an increase in the U.S.interest rate will cause:

The capital account is the sum of the balance of trade,net income on capital held abroad,and net transfer payments.

When the inflow of foreign capital is greater than the outflow of domestic capital to other nations,a country runs a:

A situation in which the value of a country's exports exceeds the value of its imports is called a(n):

At the equilibrium exchange rate,the quantity demanded of a currency is:

Which of the following is a transaction in the capital account?

An increase in the demand for a country's exports will have what effect on its currency?

Which of the following will NOT prevent purchasing power parity from occurring in the real world?

Which theorem states that exchange rates will adjust until the prices of goods in different countries approximate one another?

Use the following to answer questions Figure: Rupee Foreign Exchange Market for U.S.Dollars -(Figure: Rupee Foreign Exchange Market for U.S.Dollars)Based on the figure,what will a decrease in the money supply by the Federal Reserve cause?

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

Political Economy and Public Choice

Filters

When a Japanese investor buys Australian stock,the Australian capital account _;when that same Japanese investor receives a dividend from the company,the Australian current account _.