Question 1

The balance of payments is

Accepted Answer

A)  the value of goods and services bought and sold in the world market. 
B)  a summary record of a country's economic transactions with foreign residents and governments. 
C)  a summary record of a country's purchases and sales of goods and services in the world market. 
D)  the value of merchandise goods bought and sold in the world market. 
A)  the value of goods and services bought and sold in the world market. 
B)  a summary record of a country's economic transactions with foreign residents and governments. 
C)  a summary record of a country's purchases and sales of goods and services in the world market. 
D)  the value of merchandise goods bought and sold in the world market.

Question 2

An increase in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Accepted Answer

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

Question 3

If the inflation rate in Japan is higher than the inflation rate in the United States

Accepted Answer

A)  there will be an increase in U.S. imports from Japan. 
B)  there will be an increase in Japanese exports to the United States. 
C)  there will be no change is U.S. imports from Japan. 
D)  there will be a decrease in U.S. imports from Japan. 
A)  there will be an increase in U.S. imports from Japan. 
B)  there will be an increase in Japanese exports to the United States. 
C)  there will be no change is U.S. imports from Japan. 
D)  there will be a decrease in U.S. imports from Japan.

Question 4

As the dollar price of the euro increases

Accepted Answer

A)  the demand for euros will increase. 
B)  the price of French goods will fall for U.S. residents. 
C)  French residents will purchase more U.S. goods. 
D)  U. S. residents will increase their travel to France. 
A)  the demand for euros will increase. 
B)  the price of French goods will fall for U.S. residents. 
C)  French residents will purchase more U.S. goods. 
D)  U. S. residents will increase their travel to France.

Question 5

A nation's balance of payments can be affected by

Accepted Answer

A)  the country's inflation rate relative to other nations' inflation rates. 
B)  the country's population increases relative to other nations' populations. 
C)  per capita GDP relative to other nations' per capita GDP. 
D)  none of the above. 
A)  the country's inflation rate relative to other nations' inflation rates. 
B)  the country's population increases relative to other nations' populations. 
C)  per capita GDP relative to other nations' per capita GDP. 
D)  none of the above.

Question 6

Assume that $1 equals 100 yen (¥). A Japanese visitor to the United States wants to pay her $400 hotel bill. How many yen should she exchange in order to have enough dollars to pay the bill?

Accepted Answer

A)  ¥4 
B)  ¥40 
C)  ¥4,000 
D)  ¥40,000 
A)  ¥4 
B)  ¥40 
C)  ¥4,000 
D)  ¥40,000

Question 7

When numerous Japanese companies buy $100,000,000 worth of goods or services from U.S. producers, ceteris paribus, there will be

Accepted Answer

A)  appreciation in the value of the yen against the dollar. 
B)  depreciation in the value of the yen against the dollar. 
C)  depreciation of the dollar against the yen. 
D)  no change in values of the currencies. 
A)  appreciation in the value of the yen against the dollar. 
B)  depreciation in the value of the yen against the dollar. 
C)  depreciation of the dollar against the yen. 
D)  no change in values of the currencies.

Question 8

Which of the following combinations is plausible for a nation's balance of payments? (All numbers in billions.)

Accepted Answer

A)  current account = 10, capital account = 40, official reserve transaction account = 50 
B)  current account = 40, capital account = 20, official reserve transaction account = -50 
C)  current account = 50, capital account = -30, official reserve transaction account = 20 
D)  current account = 30, capital account = -20, official reserve transaction account = -10 
A)  current account = 10, capital account = 40, official reserve transaction account = 50 
B)  current account = 40, capital account = 20, official reserve transaction account = -50 
C)  current account = 50, capital account = -30, official reserve transaction account = 20 
D)  current account = 30, capital account = -20, official reserve transaction account = -10

Question 9

All of the following would be considered a current account transaction EXCEPT the

Accepted Answer

A)  importing of services. 
B)  exporting of goods. 
C)  importing of capital. 
D)  importing of goods. 
A)  importing of services. 
B)  exporting of goods. 
C)  importing of capital. 
D)  importing of goods.

Question 10

A financial strategy that reduces the chance of suffering losses arising from foreign exchange risk is referred to as

Accepted Answer

A)  hedging. 
B)  foreign exchange leverage. 
C)  conversion depletion. 
D)  transaction mitigation. 
A)  hedging. 
B)  foreign exchange leverage. 
C)  conversion depletion. 
D)  transaction mitigation.

Question 11

-Use the above figure. At equilibrium, the exchange rate is

Accepted Answer

A)  1 euro = $1.25. 
B)  $0.80 = 1.25 euro. 
C)  $1 = 1.25 euro. 
D)  $1 = 8 euros. 
A)  1 euro = $1.25. 
B)  $0.80 = 1.25 euro. 
C)  $1 = 1.25 euro. 
D)  $1 = 8 euros.

Question 12

-Refer to the above figure. Suppose the equilibrium moves from E' to point E. An event that could have caused this movement is

Accepted Answer

A)  an increase in the real interest rate in the United States. 
B)  an increase in U.S. productivity. 
C)  an increase in the perceived stability of the U.S. economy. 
D)  an increase in demand for Japanese-produced goods by U.S. residents. 
A)  an increase in the real interest rate in the United States. 
B)  an increase in U.S. productivity. 
C)  an increase in the perceived stability of the U.S. economy. 
D)  an increase in demand for Japanese-produced goods by U.S. residents.

Question 13

-In the diagram above, which of the following could cause a movement from point E' to point E?

Accepted Answer

A)  Japanese residents' incomes rise, so they increase their purchases of U.S. goods. 
B)  The dollar depreciates, inducing Japanese residents to buy more U.S. goods. 
C)  U.S. residents' incomes rise, so they increase their purchases of Japanese goods. 
D)  The dollar depreciates, inducing U.S. residents to buy more Japanese goods. 
A)  Japanese residents' incomes rise, so they increase their purchases of U.S. goods. 
B)  The dollar depreciates, inducing Japanese residents to buy more U.S. goods. 
C)  U.S. residents' incomes rise, so they increase their purchases of Japanese goods. 
D)  The dollar depreciates, inducing U.S. residents to buy more Japanese goods.

Question 14

If the foreign exchange rate for 1 Hungarian forint is 0.5 cent, then

Accepted Answer

A)  a dinner priced at 400 forints will cost $20. 
B)  a wine that sells for 600 forints will cost $3,000. 
C)  a Big Mac hamburger priced at 50 forints will cost $1. 
D)  a hotel room renting for 40,000 forints will cost $200. 
A)  a dinner priced at 400 forints will cost $20. 
B)  a wine that sells for 600 forints will cost $3,000. 
C)  a Big Mac hamburger priced at 50 forints will cost $1. 
D)  a hotel room renting for 40,000 forints will cost $200.

Question 15

A U.S. automobile dealer has ordered a fleet of Japanese cars worth 10 million yen. The terms of payment is C.O.D. (cash on delivery). At the time the order was placed, the exchange rate was 100 yen per U.S. dollar. When the fleet arrived the exchange rate had become 200 yen per U.S. dollar.

Accepted Answer

A)  This change in the foreign exchange rate will hurt the U.S. importer. 
B)  This change in the foreign exchange rate will hurt the Japanese exporter. 
C)  This change in the foreign exchange rate will benefit the U.S. importer. 
D)  This change in the foreign exchange rate will benefit the Japanese exporter. 
A)  This change in the foreign exchange rate will hurt the U.S. importer. 
B)  This change in the foreign exchange rate will hurt the Japanese exporter. 
C)  This change in the foreign exchange rate will benefit the U.S. importer. 
D)  This change in the foreign exchange rate will benefit the Japanese exporter.

Question 16

A summary of a country's economic transactions with foreign residents and governments is called the

Accepted Answer

A)  current account balance. 
B)  financial account balance. 
C)  balance of trade. 
D)  balance of payments. 
A)  current account balance. 
B)  financial account balance. 
C)  balance of trade. 
D)  balance of payments.

Question 17

Which of the following is NOT a deficit item on the international accounts balance sheet for a country?

Accepted Answer

A)  imports of merchandise 
B)  military spending abroad 
C)  purchases of foreign currency 
D)  exports of merchandise 
A)  imports of merchandise 
B)  military spending abroad 
C)  purchases of foreign currency 
D)  exports of merchandise

Question 18

A record of all transactions between households, firms, and the government of one country and the rest of the world is the

Accepted Answer

A)  balance of trade. 
B)  balance of payments. 
C)  International Monetary Fund. 
D)  government budget. 
A)  balance of trade. 
B)  balance of payments. 
C)  International Monetary Fund. 
D)  government budget.

Question 19

-Use the above figure. A rightward shift of the demand curve, ceteris paribus, would result in

Accepted Answer

A)  dollar depreciation. 
B)  dollar appreciation. 
C)  euro depreciation. 
D)  reducing the equilibrium quantity of euros. 
A)  dollar depreciation. 
B)  dollar appreciation. 
C)  euro depreciation. 
D)  reducing the equilibrium quantity of euros.

Question 20

The balance of payments consists of the

Accepted Answer

A)  current account, capital account, and gold flows. 
B)  current account, official reserve transactions account, and monetary account. 
C)  current account, capital account, and official reserve transactions account. 
D)  capital account, official reserve transactions account, and recent account. 
A)  current account, capital account, and gold flows. 
B)  current account, official reserve transactions account, and monetary account. 
C)  current account, capital account, and official reserve transactions account. 
D)  capital account, official reserve transactions account, and recent account.

Exam 33: Exchange Rates and the Balance of Payments

The balance of payments is

An increase in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

If the inflation rate in Japan is higher than the inflation rate in the United States

As the dollar price of the euro increases

A nation's balance of payments can be affected by

Assume that $1 equals 100 yen (¥). A Japanese visitor to the United States wants to pay her $400 hotel bill. How many yen should she exchange in order to have enough dollars to pay the bill?

When numerous Japanese companies buy $100,000,000 worth of goods or services from U.S. producers, ceteris paribus, there will be

Which of the following combinations is plausible for a nation's balance of payments? (All numbers in billions.)

All of the following would be considered a current account transaction EXCEPT the

A financial strategy that reduces the chance of suffering losses arising from foreign exchange risk is referred to as

-Use the above figure. At equilibrium, the exchange rate is

-Refer to the above figure. Suppose the equilibrium moves from E' to point E. An event that could have caused this movement is

-In the diagram above, which of the following could cause a movement from point E' to point E?

If the foreign exchange rate for 1 Hungarian forint is 0.5 cent, then

A U.S. automobile dealer has ordered a fleet of Japanese cars worth 10 million yen. The terms of payment is C.O.D. (cash on delivery). At the time the order was placed, the exchange rate was 100 yen per U.S. dollar. When the fleet arrived the exchange rate had become 200 yen per U.S. dollar.

A summary of a country's economic transactions with foreign residents and governments is called the

Which of the following is NOT a deficit item on the international accounts balance sheet for a country?

A record of all transactions between households, firms, and the government of one country and the rest of the world is the

-Use the above figure. A rightward shift of the demand curve, ceteris paribus, would result in

The balance of payments consists of the

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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