Question 1

The _____ measures transactions that may result in future financial flows,whereas the _____ measures current financial flows.

Accepted Answer

A)  current account;capital account 
B)  capital account;current account 
C)  foreign direct investment;portfolio investment 
D)  portfolio investment;foreign direct investment 
A)  current account;capital account 
B)  capital account;current account 
C)  foreign direct investment;portfolio investment 
D)  portfolio investment;foreign direct investment

Question 2

The boost to domestic aggregate demand resulting from new government spending will to some extent be offset by the greater difficulty of importing at the new and lower real exchange rate.

Accepted Answer

A) True 
 B)False

Question 3

Explain how an exchange rate effect enhances the effectiveness of monetary policy,but limits the effectiveness of expansionary fiscal policy.

Accepted Answer

Both monetary and fiscal policies have a

Question 4

A trade deficit always indicates that a country has a low level of savings.

Accepted Answer

A) True 
 B)False

Question 5

If the Chinese government purchases an additional $10 million worth of U.S.government bonds,this transaction is recorded as a _____ in the U.S.balance of payments.

Accepted Answer

A)  credit in the capital account 
B)  credit in the current account 
C)  debit in the capital account 
D)  debit in the current account 
A)  credit in the capital account 
B)  credit in the current account 
C)  debit in the capital account 
D)  debit in the current account

Question 6

Saying that the United States is running a large current account deficit is equivalent to saying that:

Accepted Answer

A)  exports exceed imports in the United States. 
B)  the United States is running a large capital account surplus. 
C)  the balance of payments is negative. 
D)  the value of the current capital stock in the United States exceeds the value of future capital flows. 
A)  exports exceed imports in the United States. 
B)  the United States is running a large capital account surplus. 
C)  the balance of payments is negative. 
D)  the value of the current capital stock in the United States exceeds the value of future capital flows.

Question 7

The purchasing power parity theorem implies that the real exchange rate between two currencies equals one to one.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions 
Figure: Yuan Foreign Exchange Market for U.S.Dollars  
-(Figure: Pound Foreign Exchange Market for Euros) Figure: Pound Foreign Exchange Market for Euros   Use the figure to answer the following question: If the British become wealthier and begin importing more goods from the European Union,which shift would occur in the foreign exchange market for euros?

Accepted Answer

A)  The demand for euros would shift to the right. 
B)  The demand for euros would shift to the left. 
C)  The supply of euros would shift to the right. 
D)  The supply of euros would shift to the left. 
A)  The demand for euros would shift to the right. 
B)  The demand for euros would shift to the left. 
C)  The supply of euros would shift to the right. 
D)  The supply of euros would shift to the left.

Question 9

A credit in the U.S.current account:

Accepted Answer

A)  means the United States is purchasing more foreign goods and services. 
B)  must be offset with a credit in the capital account. 
C)  is typically offset by a debit in the capital account. 
D)  decreases the U.S.official reserve account. 
A)  means the United States is purchasing more foreign goods and services. 
B)  must be offset with a credit in the capital account. 
C)  is typically offset by a debit in the capital account. 
D)  decreases the U.S.official reserve account.

Question 10

The sum of the capital account and the official reserves account must exactly equal the balance in the current account.

Accepted Answer

A) True 
 B)False

Question 11

What would the purchasing power parity theorem predict about the real purchasing power of the U.S.dollar in Mexico? Why does this theorem not appear to hold in this case?

Accepted Answer

However,in reality it is possible to pur

Question 12

Foreign direct investment includes:

Accepted Answer

A)  the purchase of U.S.stocks by foreigners. 
B)  the purchase of U.S.bonds by foreigners. 
C)  spending on construction of a new plant by foreigners in the United States. 
D)  spending on U.S.-produced goods by foreigners. 
A)  the purchase of U.S.stocks by foreigners. 
B)  the purchase of U.S.bonds by foreigners. 
C)  spending on construction of a new plant by foreigners in the United States. 
D)  spending on U.S.-produced goods by foreigners.

Question 13

Suppose an increase in the demand for dollars has caused an appreciation of the dollar.According to the purchasing power parity theorem,the value of the dollar in the future will:

Accepted Answer

A)  appreciate more. 
B)  depreciate. 
C)  not change. 
D)  cannot be predicted. 
A)  appreciate more. 
B)  depreciate. 
C)  not change. 
D)  cannot be predicted.

Question 14

An increase in the demand for a country's exports will cause the demand for its currency to:

Accepted Answer

A)  remain unchanged. 
B)  increase. 
C)  decrease. 
D)  become more unpredictable. 
A)  remain unchanged. 
B)  increase. 
C)  decrease. 
D)  become more unpredictable.

Question 15

The twin deficits refers to the case when a:

Accepted Answer

A)  trade deficit leads to a capital account deficit. 
B)  capital account deficit leads to a trade deficit. 
C)  trade deficit leads to a federal government budget deficit. 
D)  federal government budget deficit leads to a trade deficit. 
A)  trade deficit leads to a capital account deficit. 
B)  capital account deficit leads to a trade deficit. 
C)  trade deficit leads to a federal government budget deficit. 
D)  federal government budget deficit leads to a trade deficit.

Question 16

An exchange rate is:

Accepted Answer

A)  a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world. 
B)  the sum of the balance of trade,net income on capital held abroad,and net transfer payments. 
C)  the price of one currency in terms of another currency. 
D)  a currency whose value is not pegged but governments will intervene extensively in the market to keep the value within a certain range. 
A)  a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world. 
B)  the sum of the balance of trade,net income on capital held abroad,and net transfer payments. 
C)  the price of one currency in terms of another currency. 
D)  a currency whose value is not pegged but governments will intervene extensively in the market to keep the value within a certain range.

Question 17

An exchange rate system in which the government or central bank has agreed to convert its currency into another at a fixed rate is called a:

Accepted Answer

A)  floating exchange rate. 
B)  fixed exchange rate. 
C)  managed float. 
D)  forced market rate. 
A)  floating exchange rate. 
B)  fixed exchange rate. 
C)  managed float. 
D)  forced market rate.

Question 18

When a country dollarizes,its monetary policy is controlled by the:

Accepted Answer

A)  country's central bank. 
B)  country's federal government. 
C)  U.S.Federal Reserve. 
D)  country's central bank and the U.S.Federal Reserve together. 
A)  country's central bank. 
B)  country's federal government. 
C)  U.S.Federal Reserve. 
D)  country's central bank and the U.S.Federal Reserve together.

Question 19

When a German automaker opens a new plant in Alabama:

Accepted Answer

A)  both the U.S.capital account surplus and the U.S.current account surplus increase. 
B)  the U.S.capital account surplus increases and the U.S.current account surplus decreases. 
C)  the U.S.capital account surplus decreases and the U.S.current account deficit increases. 
D)  both the U.S.capital account surplus and the U.S.current account surplus decrease. 
A)  both the U.S.capital account surplus and the U.S.current account surplus increase. 
B)  the U.S.capital account surplus increases and the U.S.current account surplus decreases. 
C)  the U.S.capital account surplus decreases and the U.S.current account deficit increases. 
D)  both the U.S.capital account surplus and the U.S.current account surplus decrease.

Question 20

What occurs when the value of a country's exports exceeds the value of its imports?

Accepted Answer

A)  a trade deficit 
B)  a trade surplus 
C)  a payment imbalance 
D)  a capital surplus 
A)  a trade deficit 
B)  a trade surplus 
C)  a payment imbalance 
D)  a capital surplus

The _ measures transactions that may result in future financial flows,whereas the _ measures current financial flows.

The boost to domestic aggregate demand resulting from new government spending will to some extent be offset by the greater difficulty of importing at the new and lower real exchange rate.

Explain how an exchange rate effect enhances the effectiveness of monetary policy,but limits the effectiveness of expansionary fiscal policy.

A trade deficit always indicates that a country has a low level of savings.

If the Chinese government purchases an additional $10 million worth of U.S.government bonds,this transaction is recorded as a _____ in the U.S.balance of payments.

Saying that the United States is running a large current account deficit is equivalent to saying that:

The purchasing power parity theorem implies that the real exchange rate between two currencies equals one to one.

A credit in the U.S.current account:

The sum of the capital account and the official reserves account must exactly equal the balance in the current account.

What would the purchasing power parity theorem predict about the real purchasing power of the U.S.dollar in Mexico? Why does this theorem not appear to hold in this case?

Foreign direct investment includes:

Suppose an increase in the demand for dollars has caused an appreciation of the dollar.According to the purchasing power parity theorem,the value of the dollar in the future will:

An increase in the demand for a country's exports will cause the demand for its currency to:

The twin deficits refers to the case when a:

An exchange rate is:

An exchange rate system in which the government or central bank has agreed to convert its currency into another at a fixed rate is called a:

When a country dollarizes,its monetary policy is controlled by the:

When a German automaker opens a new plant in Alabama:

What occurs when the value of a country's exports exceeds the value of its imports?

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

The _____ measures transactions that may result in future financial flows,whereas the _____ measures current financial flows.

The boost to domestic aggregate demand resulting from new government spending will to some extent be offset by the greater difficulty of importing at the new and lower real exchange rate.

Explain how an exchange rate effect enhances the effectiveness of monetary policy,but limits the effectiveness of expansionary fiscal policy.

A trade deficit always indicates that a country has a low level of savings.

If the Chinese government purchases an additional $10 million worth of U.S.government bonds,this transaction is recorded as a _____ in the U.S.balance of payments.

Saying that the United States is running a large current account deficit is equivalent to saying that:

The purchasing power parity theorem implies that the real exchange rate between two currencies equals one to one.

A credit in the U.S.current account:

The sum of the capital account and the official reserves account must exactly equal the balance in the current account.

What would the purchasing power parity theorem predict about the real purchasing power of the U.S.dollar in Mexico? Why does this theorem not appear to hold in this case?

Foreign direct investment includes:

Suppose an increase in the demand for dollars has caused an appreciation of the dollar.According to the purchasing power parity theorem,the value of the dollar in the future will:

An increase in the demand for a country's exports will cause the demand for its currency to:

The twin deficits refers to the case when a:

An exchange rate is:

An exchange rate system in which the government or central bank has agreed to convert its currency into another at a fixed rate is called a:

When a country dollarizes,its monetary policy is controlled by the:

When a German automaker opens a new plant in Alabama:

What occurs when the value of a country's exports exceeds the value of its imports?

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

The _ measures transactions that may result in future financial flows,whereas the _ measures current financial flows.