Question 1

If the United States looks more economically and politically stable relative to the rest of the world, this will

Accepted Answer

A)  decrease the demand for dollars. 
B)  increase the demand for dollars. 
C)  have no effect on the demand for dollars. 
D)  stop all trading between the currencies of the United States and other countries. 
A)  decrease the demand for dollars. 
B)  increase the demand for dollars. 
C)  have no effect on the demand for dollars. 
D)  stop all trading between the currencies of the United States and other countries.

Question 2

If the price of the Brazilian real is 60 cents and a U.S. resident purchases a Brazilian-manufactured item for 60,000 real, there will be

Accepted Answer

A)  a quantity demanded of 60,000 real and a quantity supplied of $60,000. 
B)  a quantity demanded of 60,000 real and a quantity supplied of $36,000. 
C)  a quantity demanded of 60,000 real, but we cannot determine the effect in the market for dollars. 
D)  a quantity supplied of 60,000 real and a quantity demanded of 60,000 yen. 
A)  a quantity demanded of 60,000 real and a quantity supplied of $60,000. 
B)  a quantity demanded of 60,000 real and a quantity supplied of $36,000. 
C)  a quantity demanded of 60,000 real, but we cannot determine the effect in the market for dollars. 
D)  a quantity supplied of 60,000 real and a quantity demanded of 60,000 yen.

Question 3

If residents of the United States give more gifts to relatives abroad than they receive, unilateral transfers will be

Accepted Answer

A)  positive. 
B)  unaffected. 
C)  negative. 
D)  zeroed out. 
A)  positive. 
B)  unaffected. 
C)  negative. 
D)  zeroed out.

Question 4

Suppose the U.S. inflation rate falls while the inflation rate among the members of the European Monetary Union (EMU) holds constant. Other things equal, what will happen in the balance of payments accounts?

Accepted Answer

The lower inflation rate in th

Question 5

In a fixed exchange rate system

Accepted Answer

A)  market forces and the country's stock of gold determine its exchange rate. 
B)  a central bank affects the value of a currency by changing its foreign exchange reserves. 
C)  market forces play a role in determining the fixed value of a currency. 
D)  the International Monetary Fund determines exchange rates. 
A)  market forces and the country's stock of gold determine its exchange rate. 
B)  a central bank affects the value of a currency by changing its foreign exchange reserves. 
C)  market forces play a role in determining the fixed value of a currency. 
D)  the International Monetary Fund determines exchange rates.

Question 6

What does it mean when the dollar appreciates? What does it mean when the dollar depreciates?

Accepted Answer

If the dollar appreciates with respect t

Question 7

An accounting identity is

Accepted Answer

A)  when the balance of payments is running a surplus or deficits. 
B)  when the balance of trade is in surplus or deficit. 
C)  an expression of values that are equivalent by definition. 
D)  special drawing rights. 
A)  when the balance of payments is running a surplus or deficits. 
B)  when the balance of trade is in surplus or deficit. 
C)  an expression of values that are equivalent by definition. 
D)  special drawing rights.

Question 8

A currency swap can

Accepted Answer

A)  make foreign goods more expensive in the domestic market. 
B)  make the foreign exchange rate more volatile over time. 
C)  reduce foreign exchange risk. 
D)  make domestic goods more expensive in foreign countries. 
A)  make foreign goods more expensive in the domestic market. 
B)  make the foreign exchange rate more volatile over time. 
C)  reduce foreign exchange risk. 
D)  make domestic goods more expensive in foreign countries.

Question 9

A market in which national currencies are traded by households, firms and governments, is referred to as a(n)

Accepted Answer

A)  foreign exchange market. 
B)  fed funds market. 
C)  international reserves market. 
D)  gold certificate market. 
A)  foreign exchange market. 
B)  fed funds market. 
C)  international reserves market. 
D)  gold certificate market.

Question 10

The gold standard is a type of

Accepted Answer

A)  fixed exchange rate system. 
B)  flexible exchange rate system. 
C)  floating exchange rate system. 
D)  barter currency system. 
A)  fixed exchange rate system. 
B)  flexible exchange rate system. 
C)  floating exchange rate system. 
D)  barter currency system.

Question 11

When the dollar price of a British pound is $0.80, it is correct to state that an American traveling in England will receive ________ pounds per dollar.

Accepted Answer

A)  1.25 
B)  8 
C)  80 
D)  125 
A)  1.25 
B)  8 
C)  80 
D)  125

Question 12

The Japanese yen will appreciate against the dollar if

Accepted Answer

A)  U.S. residents demand more Japanese goods. 
B)  U.S. residents demand fewer Japanese goods. 
C)  Japanese residents demand more U.S. goods. 
D)  none of the above. 
A)  U.S. residents demand more Japanese goods. 
B)  U.S. residents demand fewer Japanese goods. 
C)  Japanese residents demand more U.S. goods. 
D)  none of the above.

Question 13

A surplus item is

Accepted Answer

A)  the import of goods or services that is not needed by residents of a country. 
B)  the import or export of products that are by-products of the manufacturing of export goods. 
C)  any transaction that leads to a receipt by a resident of a country or its government. 
D)  any transaction that leads to a payment by a resident of a country or its government. 
A)  the import of goods or services that is not needed by residents of a country. 
B)  the import or export of products that are by-products of the manufacturing of export goods. 
C)  any transaction that leads to a receipt by a resident of a country or its government. 
D)  any transaction that leads to a payment by a resident of a country or its government.

Question 14

When the value of exports exceeds the value of imports then

Accepted Answer

A)  changes in productivity will occur. 
B)  international trade is in balance. 
C)  the country is running a trade deficit. 
D)  the country is running a trade surplus. 
A)  changes in productivity will occur. 
B)  international trade is in balance. 
C)  the country is running a trade deficit. 
D)  the country is running a trade surplus.

Question 15

The financial account is

Accepted Answer

A)  the reserve assets created by the International Monetary Fund for countries to use in settling international payment obligations. 
B)  the price of one nation's currency in term of the currency of another country. 
C)  a category of the balance of payments transactions that measures flows of real and financial assets. 
D)  a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers. 
A)  the reserve assets created by the International Monetary Fund for countries to use in settling international payment obligations. 
B)  the price of one nation's currency in term of the currency of another country. 
C)  a category of the balance of payments transactions that measures flows of real and financial assets. 
D)  a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers.

Question 16

The United States' balance of payments is likely to improve when

Accepted Answer

A)  there is an increase in political instability in other countries. 
B)  the inflation rate in the United States rises relative to other countries. 
C)  the American government increases its spending on foreign aid. 
D)  American people want to invest more in foreign countries. 
A)  there is an increase in political instability in other countries. 
B)  the inflation rate in the United States rises relative to other countries. 
C)  the American government increases its spending on foreign aid. 
D)  American people want to invest more in foreign countries.

Question 17

Every transaction concerning the exportation of goods from the United States constitutes a

Accepted Answer

A)  supply of foreign currency with no effect on the market for the dollar. 
B)  demand for dollars with no effect on markets for foreign currencies. 
C)  supply of foreign currencies and a demand for dollars. 
D)  demand for foreign currencies and a supply of dollars. 
A)  supply of foreign currency with no effect on the market for the dollar. 
B)  demand for dollars with no effect on markets for foreign currencies. 
C)  supply of foreign currencies and a demand for dollars. 
D)  demand for foreign currencies and a supply of dollars.

Question 18

Which of the following would NOT increase German exports to the United States?

Accepted Answer

A)  an appreciation of the U.S. dollar 
B)  a depreciation of the euro 
C)  an appreciation of the euro 
D)  an increase in German demand for U.S. exports 
A)  an appreciation of the U.S. dollar 
B)  a depreciation of the euro 
C)  an appreciation of the euro 
D)  an increase in German demand for U.S. exports

Question 19

In the market for euros, the demand for euros (€) is

Accepted Answer

A)  downward sloping, because at lower dollar prices for the euro, U.S. residents will buy more European goods and services. 
B)  upward sloping, because at higher dollar prices for the euro, U.S. residents will buy more European goods and services. 
C)  upward sloping, because at higher dollar prices for the euro, Europeans will buy more U.S. goods and services. 
D)  horizontal, because dollar prices of euros and euro prices of dollars are directly related. 
A)  downward sloping, because at lower dollar prices for the euro, U.S. residents will buy more European goods and services. 
B)  upward sloping, because at higher dollar prices for the euro, U.S. residents will buy more European goods and services. 
C)  upward sloping, because at higher dollar prices for the euro, Europeans will buy more U.S. goods and services. 
D)  horizontal, because dollar prices of euros and euro prices of dollars are directly related.

Question 20

An increase in the U.S. interest rate will most likely

Accepted Answer

A)  reduce the attractiveness of investment in the United States. 
B)  lead to a decrease in the value of the U.S. dollar. 
C)  lead to an inflow of funds to the United States and an appreciation of the dollar. 
D)  provide a stimulus to U.S. export industries. 
A)  reduce the attractiveness of investment in the United States. 
B)  lead to a decrease in the value of the U.S. dollar. 
C)  lead to an inflow of funds to the United States and an appreciation of the dollar. 
D)  provide a stimulus to U.S. export industries.

Exam 33: Exchange Rates and the Balance of Payments

If the United States looks more economically and politically stable relative to the rest of the world, this will

If the price of the Brazilian real is 60 cents and a U.S. resident purchases a Brazilian-manufactured item for 60,000 real, there will be

If residents of the United States give more gifts to relatives abroad than they receive, unilateral transfers will be

Suppose the U.S. inflation rate falls while the inflation rate among the members of the European Monetary Union (EMU) holds constant. Other things equal, what will happen in the balance of payments accounts?

In a fixed exchange rate system

What does it mean when the dollar appreciates? What does it mean when the dollar depreciates?

An accounting identity is

A currency swap can

A market in which national currencies are traded by households, firms and governments, is referred to as a(n)

The gold standard is a type of

When the dollar price of a British pound is $0.80, it is correct to state that an American traveling in England will receive ________ pounds per dollar.

The Japanese yen will appreciate against the dollar if

A surplus item is

When the value of exports exceeds the value of imports then

The financial account is

The United States' balance of payments is likely to improve when

Every transaction concerning the exportation of goods from the United States constitutes a

Which of the following would NOT increase German exports to the United States?

In the market for euros, the demand for euros (€) is

An increase in the U.S. interest rate will most likely

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