Question 1

In the market for euros, the supply of euros (€) is

Accepted Answer

A)  downward sloping, because lower dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
B)  downward sloping, because higher dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
C)  upward sloping, because higher dollar prices of euros means that U.S. goods are cheaper to Europeans. 
D)  upward sloping, because lower dollar prices of euros means that U.S. goods are cheaper to Europeans. 
A)  downward sloping, because lower dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
B)  downward sloping, because higher dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
C)  upward sloping, because higher dollar prices of euros means that U.S. goods are cheaper to Europeans. 
D)  upward sloping, because lower dollar prices of euros means that U.S. goods are cheaper to Europeans.

Question 2

Which of the following would contribute to a positive trade balance for a country?

Accepted Answer

A)  having tourists visit the country 
B)  importing textiles 
C)  having foreign residents buy the government bonds of the country 
D)  importing financial services 
A)  having tourists visit the country 
B)  importing textiles 
C)  having foreign residents buy the government bonds of the country 
D)  importing financial services

Question 3

To know whether a particular situation for a family, business, or government involves an equilibrium or not, one must

Accepted Answer

A)  understand the circumstances fully. 
B)  determine whether the accounts are in balance. 
C)  determine whether the credits equal the debits. 
D)  determine whether a particular portion of the accounts are in balance or not. 
A)  understand the circumstances fully. 
B)  determine whether the accounts are in balance. 
C)  determine whether the credits equal the debits. 
D)  determine whether a particular portion of the accounts are in balance or not.

Question 4

In a flexible exchange rate system, which of the following would NOT cause the U.S. dollar to depreciate relative to the British pound?

Accepted Answer

A)  a decrease in demand for British goods in the United States 
B)  an increase in demand for British goods in the United States 
C)  a decrease in British demand for U.S. exports 
D)  a shift to the left in the supply of British goods to the United States 
A)  a decrease in demand for British goods in the United States 
B)  an increase in demand for British goods in the United States 
C)  a decrease in British demand for U.S. exports 
D)  a shift to the left in the supply of British goods to the United States

Question 5

In the balance of payments, any transaction that leads to a receipt by a resident of a country is a

Accepted Answer

A)  minus item. 
B)  debit item. 
C)  surplus item. 
D)  deficit item. 
A)  minus item. 
B)  debit item. 
C)  surplus item. 
D)  deficit item.

Question 6

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

Accepted Answer

A)  a dollar appreciation. 
B)  a dollar depreciation. 
C)  a euro appreciation. 
D)  increasing the equilibrium quantity of the euro. 
A)  a dollar appreciation. 
B)  a dollar depreciation. 
C)  a euro appreciation. 
D)  increasing the equilibrium quantity of the euro.

Question 7

When the supply and demand of currencies in the foreign exchange market determines their relative values, this is known as

Accepted Answer

A)  flexible exchange rates. 
B)  depreciation. 
C)  fixed exchange rates. 
D)  appreciation. 
A)  flexible exchange rates. 
B)  depreciation. 
C)  fixed exchange rates. 
D)  appreciation.

Question 8

The gold standard is

Accepted Answer

A)  a type of floating exchange rate system. 
B)  a type of managed flexible exchange rate system. 
C)  a type of fixed exchange rate system. 
D)  a currency exchange system without exchange rates. 
A)  a type of floating exchange rate system. 
B)  a type of managed flexible exchange rate system. 
C)  a type of fixed exchange rate system. 
D)  a currency exchange system without exchange rates.

Question 9

When a Chinese company builds an auto plant in the United States, the immediate result of this Chinese investment in the United States is a ________ item in the U.S. ________ account.

Accepted Answer

A)  surplus; current 
B)  surplus; financial 
C)  deficit; current 
D)  deficit; financial 
A)  surplus; current 
B)  surplus; financial 
C)  deficit; current 
D)  deficit; financial

Question 10

Suppose that the current exchange rate between the dollar and peso is $1 equals 10 pesos. If a firm in Mexico wanted to purchase $100,000 worth of U.S. televisions, how many pesos must they exchange?

Accepted Answer

A)  10,000 pesos 
B)  100,000 pesos 
C)  1,000,000 pesos 
D)  11,000,000 pesos 
A)  10,000 pesos 
B)  100,000 pesos 
C)  1,000,000 pesos 
D)  11,000,000 pesos

Question 11

Current account transactions are payments that are related to the purchase or sale of

Accepted Answer

A)  financial instruments only. 
B)  both goods and services. 
C)  goods only. 
D)  services only. 
A)  financial instruments only. 
B)  both goods and services. 
C)  goods only. 
D)  services only.

Question 12

Which of the following is a surplus item in the U.S. current account?

Accepted Answer

A)  The U.S. government reduces the tariff rates on some imported goods. 
B)  IBM pays dividends to British shareholders. 
C)  Finn vodka becomes more popular in the United States. 
D)  The U.S. government cuts back on military personnel stationed in S. Korea. 
A)  The U.S. government reduces the tariff rates on some imported goods. 
B)  IBM pays dividends to British shareholders. 
C)  Finn vodka becomes more popular in the United States. 
D)  The U.S. government cuts back on military personnel stationed in S. Korea.

Question 13

In the balance of payments, the buying and selling of real and financial assets is represented in

Accepted Answer

A)  current account. 
B)  financial account. 
C)  labor account. 
D)  official reserve transactions account. 
A)  current account. 
B)  financial account. 
C)  labor account. 
D)  official reserve transactions account.

Question 14

When there is a current account deficit, it is likely that

Accepted Answer

A)  exports exceed imports for the country. 
B)  the country is an exporter of capital. 
C)  the financial account has a surplus. 
D)  the country has a budget surplus. 
A)  exports exceed imports for the country. 
B)  the country is an exporter of capital. 
C)  the financial account has a surplus. 
D)  the country has a budget surplus.

Question 15

The exchange rate for a foreign currency that is determined by supply and demand is

Accepted Answer

A)  a fixed exchange rate. 
B)  a controlled exchange rate. 
C)  a constrained exchange rate. 
D)  a flexible exchange rate. 
A)  a fixed exchange rate. 
B)  a controlled exchange rate. 
C)  a constrained exchange rate. 
D)  a flexible exchange rate.

Question 16

Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 6 Chinese yuan, but it finds that the value of yuan is depreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend?

Accepted Answer

A)  Increase government spending within the U.S. 
B)  Buy U.S. dollars. 
C)  Sell U.S. dollars. 
D)  Increase the money supply in the U.S. 
A)  Increase government spending within the U.S. 
B)  Buy U.S. dollars. 
C)  Sell U.S. dollars. 
D)  Increase the money supply in the U.S.

Question 17

Suppose a currency's value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority, the currency has

Accepted Answer

A)  a fixed exchange rate. 
B)  a gold standard. 
C)  a price control in its exchange rate. 
D)  a floating exchange rate. 
A)  a fixed exchange rate. 
B)  a gold standard. 
C)  a price control in its exchange rate. 
D)  a floating exchange rate.

Question 18

If you go to Europe to work and send funds home to your family living in the United States, this is known as a

Accepted Answer

A)  service import. 
B)  merchandise import. 
C)  service export. 
D)  unilateral transfer. 
A)  service import. 
B)  merchandise import. 
C)  service export. 
D)  unilateral transfer.

Question 19

A depreciation of the U.S. dollar relative to the euro would tend to

Accepted Answer

A)  increase U.S. imports from Germany. 
B)  increase U.S. exports to Germany. 
C)  decrease U.S. exports to Germany. 
D)  increase both U.S. imports from Germany and U.S. exports to Germany. 
A)  increase U.S. imports from Germany. 
B)  increase U.S. exports to Germany. 
C)  decrease U.S. exports to Germany. 
D)  increase both U.S. imports from Germany and U.S. exports to Germany.

Question 20

In the balance of payments, a deficit item is any transaction

Accepted Answer

A)  that leads to a receipt by a resident of a country or its government. 
B)  that leads to a payment by a resident of a country or its government. 
C)  that is an export of a good or service. 
D)  that makes residents of a country worse off. 
A)  that leads to a receipt by a resident of a country or its government. 
B)  that leads to a payment by a resident of a country or its government. 
C)  that is an export of a good or service. 
D)  that makes residents of a country worse off.

Exam 33: Exchange Rates and the Balance of Payments

In the market for euros, the supply of euros (€) is

Which of the following would contribute to a positive trade balance for a country?

To know whether a particular situation for a family, business, or government involves an equilibrium or not, one must

In a flexible exchange rate system, which of the following would NOT cause the U.S. dollar to depreciate relative to the British pound?

In the balance of payments, any transaction that leads to a receipt by a resident of a country is a

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

When the supply and demand of currencies in the foreign exchange market determines their relative values, this is known as

The gold standard is

When a Chinese company builds an auto plant in the United States, the immediate result of this Chinese investment in the United States is a ________ item in the U.S. ________ account.

Suppose that the current exchange rate between the dollar and peso is $1 equals 10 pesos. If a firm in Mexico wanted to purchase $100,000 worth of U.S. televisions, how many pesos must they exchange?

Current account transactions are payments that are related to the purchase or sale of

Which of the following is a surplus item in the U.S. current account?

In the balance of payments, the buying and selling of real and financial assets is represented in

When there is a current account deficit, it is likely that

The exchange rate for a foreign currency that is determined by supply and demand is

Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 6 Chinese yuan, but it finds that the value of yuan is depreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend?

Suppose a currency's value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority, the currency has

If you go to Europe to work and send funds home to your family living in the United States, this is known as a

A depreciation of the U.S. dollar relative to the euro would tend to

In the balance of payments, a deficit item is any transaction

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

Filters

When a Chinese company builds an auto plant in the United States, the immediate result of this Chinese investment in the United States is a item in the U.S. account.