Question 1

The international financial system operated under a gold standard

Accepted Answer

A) from the 1500s through the present 
B) from 1879 through the present 
C) from 1879 to 1914 
D) from 1914 to 1939 
E) never 
A) from the 1500s through the present 
B) from 1879 through the present 
C) from 1879 to 1914 
D) from 1914 to 1939 
E) never

Question 2

Utopia would be a debtor nation

Accepted Answer

A) if consumers in other countries bought goods and services from Utopia 
B) only if it had a deficit in its current account 
C) only if it had a deficit in its balance of goods and services 
D) if it had a deficit in its balance of trade 
E) if it had a deficit after adding together the balances in both its current account and its capital account 
A) if consumers in other countries bought goods and services from Utopia 
B) only if it had a deficit in its current account 
C) only if it had a deficit in its balance of goods and services 
D) if it had a deficit in its balance of trade 
E) if it had a deficit after adding together the balances in both its current account and its capital account

Question 3

Assume the United States has only one trading partner.The U.S.demand curve for foreign currency is drawn while holding constant all of the following factors except one.Which is the exception?

Accepted Answer

A) incomes of U.S.consumers 
B) the exchange rate 
C) the expected rate of inflation in the U.S. 
D) the foreign prices of foreign goods 
E) U.S.interest rates relative to foreign interest rates 
A) incomes of U.S.consumers 
B) the exchange rate 
C) the expected rate of inflation in the U.S. 
D) the foreign prices of foreign goods 
E) U.S.interest rates relative to foreign interest rates

Question 4

If Europe and the United States were the only two regions in the world,then U.S.residents might desire to buy euros for all except one of the following reasons.Which is the exception?

Accepted Answer

A) to invest in Europe 
B) to buy European goods 
C) to improve the U.S.balance of payments 
D) to make loans in Europe 
E) to buy European stocks 
A) to invest in Europe 
B) to buy European goods 
C) to improve the U.S.balance of payments 
D) to make loans in Europe 
E) to buy European stocks

Question 5

Which of the following statements is true?

Accepted Answer

A) Foreigners owned $16.30 in U.S.assets 
B) U.S.residents owned $13.8 trillion in foreign assets 
C) U.S.residents owned $2.5 trillion more assets in the United States than foreigners owned abroad 
D) Foreign purchases of assets in the U.S.subtract from America's productive capacity 
E) Income from foreign-owned assets in the U.S.flows to Americans 
A) Foreigners owned $16.30 in U.S.assets 
B) U.S.residents owned $13.8 trillion in foreign assets 
C) U.S.residents owned $2.5 trillion more assets in the United States than foreigners owned abroad 
D) Foreign purchases of assets in the U.S.subtract from America's productive capacity 
E) Income from foreign-owned assets in the U.S.flows to Americans

Question 6

Suppose U.S.consumers start buying more English shoes and fewer U.S.shoes.What impact will this trend have on the foreign exchange market?

Accepted Answer

A) U.S.demand for foreign exchange,in general,and British pounds,in particular,will increase. 
B) U.S.demand for foreign exchange,in general,and British pounds,in particular,will decrease. 
C) U.S.demand for British pounds will increase,but the demand for foreign exchange will probably decrease. 
D) U.S.demand for British pounds will decrease,but the demand for foreign exchange will probably increase. 
E) There is no effect on foreign exchange. 
A) U.S.demand for foreign exchange,in general,and British pounds,in particular,will increase. 
B) U.S.demand for foreign exchange,in general,and British pounds,in particular,will decrease. 
C) U.S.demand for British pounds will increase,but the demand for foreign exchange will probably decrease. 
D) U.S.demand for British pounds will decrease,but the demand for foreign exchange will probably increase. 
E) There is no effect on foreign exchange.

Question 7

Exhibit 18-1
$\begin{array}{lr}
\text { Net exports of goods}&-2,000\
\text { Net exports of services}&500\
\text { Net unilateral transfers}&-1,000\
\text { Net investment}&100\
\text { Statistical discrepancy}&-20\
\end{array}$
-Given the hypothetical data in Exhibit 18-1,what is the balance on current account?

Accepted Answer

A) -$1,500 
B) -$2,000 
C) -$2,400 
D) -$2,420 
E) -$2,500 
A) -$1,500 
B) -$2,000 
C) -$2,400 
D) -$2,420 
E) -$2,500

Question 8

The supply curve of U.S.dollars is drawn assuming other things constant,such as

Accepted Answer

A) income in the rest of the world 
B) expectations about the rate of inflation in the United States relative to the rest of the world 
C) U.S.tastes and preferences for foreign goods 
D) the interest rate in the United States relative to the rest of the world 
E) tastes and preferences of the rest of the world for U.S.goods and services 
A) income in the rest of the world 
B) expectations about the rate of inflation in the United States relative to the rest of the world 
C) U.S.tastes and preferences for foreign goods 
D) the interest rate in the United States relative to the rest of the world 
E) tastes and preferences of the rest of the world for U.S.goods and services

Question 9

Contractionary policies help correct a balance of payments deficit by

Accepted Answer

A) lowering domestic incomes but raising demand for imports 
B) raising domestic incomes but lowering demand for imports 
C) raising both domestic incomes and demand for imports 
D) lowering both domestic incomes and demand for imports 
E) lowering interest rates and increasing aggregate spending 
A) lowering domestic incomes but raising demand for imports 
B) raising domestic incomes but lowering demand for imports 
C) raising both domestic incomes and demand for imports 
D) lowering both domestic incomes and demand for imports 
E) lowering interest rates and increasing aggregate spending

Question 10

The statistical discrepancy in the balance of payments

Accepted Answer

A) is always positive 
B) is always negative 
C) is always zero 
D) is either positive,negative,or zero 
E) is indeterminate 
A) is always positive 
B) is always negative 
C) is always zero 
D) is either positive,negative,or zero 
E) is indeterminate

Question 11

If the exchange rate changes from 20 cents per franc to 18 cents per franc,the U.S.dollar has

Accepted Answer

A) appreciated,since its value has increased 
B) appreciated,since its value has declined 
C) depreciated,making French goods more expensive in U.S.dollars 
D) depreciated,since its value has declined 
E) depreciated,since its value has increased 
A) appreciated,since its value has increased 
B) appreciated,since its value has declined 
C) depreciated,making French goods more expensive in U.S.dollars 
D) depreciated,since its value has declined 
E) depreciated,since its value has increased

Question 12

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called

Accepted Answer

A) speculators 
B) hedgers 
C) entrepreneurs 
D) arbitrageurs 
E) underwriters 
A) speculators 
B) hedgers 
C) entrepreneurs 
D) arbitrageurs 
E) underwriters

Question 13

When the international financial system operated under the gold standard,

Accepted Answer

A) the currencies of most countries were convertible into gold 
B) all international transactions were financed with gold 
C) the price of gold was determined by the supply and demand for foreign exchange 
D) the quantity of money demanded was always the same 
E) there was very little inflation 
A) the currencies of most countries were convertible into gold 
B) all international transactions were financed with gold 
C) the price of gold was determined by the supply and demand for foreign exchange 
D) the quantity of money demanded was always the same 
E) there was very little inflation

Question 14

Weak economies with shrinking incomes tend to buy more of everything,including imports.

Accepted Answer

A) True 
 B)False

Question 15

A floating exchange rate

Accepted Answer

A) is determined by the national governments involved 
B) remains extremely stable over long periods of time 
C) is determined by the actions of central banks 
D) is allowed to vary only within a narrow range 
E) adjusts in response to market forces 
A) is determined by the national governments involved 
B) remains extremely stable over long periods of time 
C) is determined by the actions of central banks 
D) is allowed to vary only within a narrow range 
E) adjusts in response to market forces

Question 16

The United States is a net importer of capital.This means

Accepted Answer

A) that U.S.citizens own more foreign assets than foreigners own U.S.assets 
B) that citizens of other countries are buying more U.S.assets than U.S.citizens are buying foreign assets 
C) only that U.S.citizens own foreign assets 
D) only that foreign citizens own U.S.assets 
E) either that U.S.citizens own foreign assets or that foreign citizens own U.S.assets 
A) that U.S.citizens own more foreign assets than foreigners own U.S.assets 
B) that citizens of other countries are buying more U.S.assets than U.S.citizens are buying foreign assets 
C) only that U.S.citizens own foreign assets 
D) only that foreign citizens own U.S.assets 
E) either that U.S.citizens own foreign assets or that foreign citizens own U.S.assets

Question 17

The current international financial system is a managed float system.

Accepted Answer

A) True 
 B)False

Question 18

President Nixon "closed the gold window"

Accepted Answer

A) as a political expediency 
B) to force the allies to devalue their currencies 
C) to try to save the Bretton Woods exchange rate system 
D) to halt dramatic inflows of gold into the United States 
E) to cure the U.S.domestic deflationary spiral 
A) as a political expediency 
B) to force the allies to devalue their currencies 
C) to try to save the Bretton Woods exchange rate system 
D) to halt dramatic inflows of gold into the United States 
E) to cure the U.S.domestic deflationary spiral

Question 19

When net unilateral transfers are added to the net exports of goods and services,the result is called the

Accepted Answer

A) merchandise trade balance 
B) official reserve transactions account 
C) balance of payments 
D) balance on capital account 
E) balance on current account 
A) merchandise trade balance 
B) official reserve transactions account 
C) balance of payments 
D) balance on capital account 
E) balance on current account

Question 20

When is a balance of payments account out of balance?

Accepted Answer

A) only when exports are greater than imports 
B) only when imports are greater than exports 
C) when exports are either greater or less than imports 
D) only when exports are greater or less than imports over a sustained period 
E) never 
A) only when exports are greater than imports 
B) only when imports are greater than exports 
C) when exports are either greater or less than imports 
D) only when exports are greater or less than imports over a sustained period 
E) never

Exam 20: International Finance

The international financial system operated under a gold standard

Utopia would be a debtor nation

Assume the United States has only one trading partner.The U.S.demand curve for foreign currency is drawn while holding constant all of the following factors except one.Which is the exception?

If Europe and the United States were the only two regions in the world,then U.S.residents might desire to buy euros for all except one of the following reasons.Which is the exception?

Which of the following statements is true?

Suppose U.S.consumers start buying more English shoes and fewer U.S.shoes.What impact will this trend have on the foreign exchange market?

Exhibit 18-1 Net exports of goods -2,000 Net exports of services 500 Net unilateral transfers -1,000 Net investment 100 Statistical discrepancy -20 -Given the hypothetical data in Exhibit 18-1,what is the balance on current account?

The supply curve of U.S.dollars is drawn assuming other things constant,such as

Contractionary policies help correct a balance of payments deficit by

The statistical discrepancy in the balance of payments

If the exchange rate changes from 20 cents per franc to 18 cents per franc,the U.S.dollar has

Those who simultaneously buy and sell currency to take advantage of exchange rate differences are called

When the international financial system operated under the gold standard,

Weak economies with shrinking incomes tend to buy more of everything,including imports.

A floating exchange rate

The United States is a net importer of capital.This means

The current international financial system is a managed float system.

President Nixon "closed the gold window"

When net unilateral transfers are added to the net exports of goods and services,the result is called the

When is a balance of payments account out of balance?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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