Question 1

A system in which the exchange rate is determined primarily by market forces is called:

Accepted Answer

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

Question 2

Most economists think that the U.S.trade deficit is a problem.

Accepted Answer

A) True 
 B)False

Question 3

In the long run,with a floating exchange rate,changes in _____ will have an impact on the real exchange rate.

Accepted Answer

A)  the U.S.money supply only 
B)  the foreign country's money supply only 
C)  both the U.S.money supply and the foreign country's money supply 
D)  neither the U.S.money supply nor the foreign country's money supply 
A)  the U.S.money supply only 
B)  the foreign country's money supply only 
C)  both the U.S.money supply and the foreign country's money supply 
D)  neither the U.S.money supply nor the foreign country's money supply

Question 4

If every country in the world adopted an open borders immigration policy,which of the following would happen?

Accepted Answer

A)  Purchasing power parity would cease to hold. 
B)  Purchasing power parity would hold more closely. 
C)  There would be no change in the degree of purchasing power parity. 
D)  Currencies would depreciate. 
A)  Purchasing power parity would cease to hold. 
B)  Purchasing power parity would hold more closely. 
C)  There would be no change in the degree of purchasing power parity. 
D)  Currencies would depreciate.

Question 5

Which of the following explains why a budget deficit can cause a trade deficit?

Accepted Answer

A)  An increase in the budget deficit raises domestic interest rates,resulting in a current account surplus and an appreciation of its currency. 
B)  An increase in the budget deficit lowers domestic interest rates,resulting in a current account deficit and a depreciation of the currency. 
C)  An increase in the budget deficit raises domestic interest rates,resulting in a capital account surplus and an appreciation of the currency. 
D)  An increase in the budget deficit lowers domestic interest rates,resulting in a capital account deficit and a depreciation of the currency. 
A)  An increase in the budget deficit raises domestic interest rates,resulting in a current account surplus and an appreciation of its currency. 
B)  An increase in the budget deficit lowers domestic interest rates,resulting in a current account deficit and a depreciation of the currency. 
C)  An increase in the budget deficit raises domestic interest rates,resulting in a capital account surplus and an appreciation of the currency. 
D)  An increase in the budget deficit lowers domestic interest rates,resulting in a capital account deficit and a depreciation of the currency.

Question 6

When you shop at Old Navy,you run a private _____ with Old Navy.

Accepted Answer

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

Question 7

The United States currently has a net _____ with the rest of the world.

Accepted Answer

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

Question 8

Foreign direct investment is part of the:

Accepted Answer

A)  current account. 
B)  capital account. 
C)  official reserves account. 
D)  Treasury direct account. 
A)  current account. 
B)  capital account. 
C)  official reserves account. 
D)  Treasury direct account.

Question 9

Which of the following is most likely to significantly increase the U.S.savings rate?

Accepted Answer

A)  imports quotas 
B)  import tariffs 
C)  reducing the federal government deficit 
D)  lower interest rates 
A)  imports quotas 
B)  import tariffs 
C)  reducing the federal government deficit 
D)  lower interest rates

Question 10

Consider the exchange market for the U.S.dollar versus the Japanese yen.The demand for yen comes from:

Accepted Answer

A)  the United States only. 
B)  Japan only. 
C)  both the United States and Japan. 
D)  neither the United State nor Japan. 
A)  the United States only. 
B)  Japan only. 
C)  both the United States and Japan. 
D)  neither the United State nor Japan.

Question 11

An exchange rate system in which the exchange rate is allowed to float unless the exchange rate reaches certain bounds 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 12

Anyone who runs a persistent trade deficit with anyone else is likely to go bankrupt.

Accepted Answer

A) True 
 B)False

Question 13

Contractionary monetary policy,assuming demand for the currency stays constant,tends to result in:

Accepted Answer

A)  a currency depreciation. 
B)  a currency appreciation. 
C)  no change in exchange rates. 
D)  a change in only real,not nominal,exchange rates. 
A)  a currency depreciation. 
B)  a currency appreciation. 
C)  no change in exchange rates. 
D)  a change in only real,not nominal,exchange rates.

Question 14

The United States is currently running a net trade deficit with its trading partners.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  capital account 
B)  current account 
C)  national account 
D)  balance of payment 
A)  capital account 
B)  current account 
C)  national account 
D)  balance of payment

Question 16

Transactions included in the balance of payments are:

Accepted Answer

A)  foreign direct investment. 
B)  exports. 
C)  imports. 
D)  foreign direct investment,exports,and imports. 
A)  foreign direct investment. 
B)  exports. 
C)  imports. 
D)  foreign direct investment,exports,and imports.

Question 17

A currency union is a bad idea if the economies that compose it require different monetary policies.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is included in the current account?

Accepted Answer

A)  the capital account 
B)  foreign direct investment 
C)  net income on capital held abroad 
D)  portfolio investment 
A)  the capital account 
B)  foreign direct investment 
C)  net income on capital held abroad 
D)  portfolio investment

Question 19

What is the relationship between an increase in money supply and net exports?

Accepted Answer

A)  A monetary expansion leads to a depreciation of the home currency,and a decrease in net exports. 
B)  A monetary expansion leads to a depreciation of the home currency,and an increase in net exports. 
C)  A monetary expansion leads to an appreciation of the home currency,and a decrease in net exports. 
D)  A monetary expansion leads to an appreciation of the home currency,and an increase in net exports. 
A)  A monetary expansion leads to a depreciation of the home currency,and a decrease in net exports. 
B)  A monetary expansion leads to a depreciation of the home currency,and an increase in net exports. 
C)  A monetary expansion leads to an appreciation of the home currency,and a decrease in net exports. 
D)  A monetary expansion leads to an appreciation of the home currency,and an increase in net exports.

Question 20

A trade _____ occurs when the value of a country's imports exceeds the value of its exports.

Accepted Answer

A)  balance 
B)  shortage 
C)  surplus 
D)  deficit 
A)  balance 
B)  shortage 
C)  surplus 
D)  deficit

Exam 20: International Finance

A system in which the exchange rate is determined primarily by market forces is called:

Most economists think that the U.S.trade deficit is a problem.

In the long run,with a floating exchange rate,changes in _____ will have an impact on the real exchange rate.

If every country in the world adopted an open borders immigration policy,which of the following would happen?

Which of the following explains why a budget deficit can cause a trade deficit?

When you shop at Old Navy,you run a private _____ with Old Navy.

The United States currently has a net _____ with the rest of the world.

Foreign direct investment is part of the:

Which of the following is most likely to significantly increase the U.S.savings rate?

Consider the exchange market for the U.S.dollar versus the Japanese yen.The demand for yen comes from:

An exchange rate system in which the exchange rate is allowed to float unless the exchange rate reaches certain bounds is called a:

Anyone who runs a persistent trade deficit with anyone else is likely to go bankrupt.

Contractionary monetary policy,assuming demand for the currency stays constant,tends to result in:

The United States is currently running a net trade deficit with its trading partners.

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

Transactions included in the balance of payments are:

A currency union is a bad idea if the economies that compose it require different monetary policies.

Which of the following is included in the current account?

What is the relationship between an increase in money supply and net exports?

A trade _____ occurs when the value of a country's imports exceeds the value of its exports.

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