Question 1

Prior to 1973, the world operated on a system of fixed exchange rates called the Bretton Woods system.

Accepted Answer

A) True 
 B)False

Question 2

If as a result of NAFTA the demand for American exports rises, it would tend to increase the exchange value of the U.S. dollar as a result.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true?

Accepted Answer

A) ​When foreigners supply more funds than they demand, there is a capital inflow. 
B) ​When foreigners demand more funds than they demand, there is a capital outflow. 
C) ​Capital flows will tend to move real interest rates in different countries closer to one another. 
D) ​All of the above are true. 
A) ​When foreigners supply more funds than they demand, there is a capital inflow. 
B) ​When foreigners demand more funds than they demand, there is a capital outflow. 
C) ​Capital flows will tend to move real interest rates in different countries closer to one another. 
D) ​All of the above are true.

Question 4

The less foreigners demand U.S. products:

Accepted Answer

A) ​the more of their currencies they will supply in exchange for U.S.dollars. 
B) ​the more of their currencies they will demand in exchange for U.S.dollars. 
C) ​the less of their currencies they will supply in exchange for U.S.dollars. 
D) ​the less of their currencies they will demand in exchange for U.S.dollars. 
A) ​the more of their currencies they will supply in exchange for U.S.dollars. 
B) ​the more of their currencies they will demand in exchange for U.S.dollars. 
C) ​the less of their currencies they will supply in exchange for U.S.dollars. 
D) ​the less of their currencies they will demand in exchange for U.S.dollars.

Question 5

On January 12, 2011, one U.S. dollar was worth 0.78 euros. How many U.S. dollars did it take to buy one euro?

Accepted Answer

A) ​0.78 
B) ​1.28 
C) ​1.43 
D) ​1.70 
A) ​0.78 
B) ​1.28 
C) ​1.43 
D) ​1.70

Question 6

Under a system of fixed exchange rates, what will happen if the price of a currency is set above market equilibrium? How can this be remedied?

Accepted Answer

A nation whose currency is overvalued wi

Question 7

What are the three categories of transactions in the balance of payments? Give an example of each.

Accepted Answer

The current account includes records of

Question 8

In foreign exchange markets, the effect of an increase in the supply of dollars on the value of the dollar is the same as that of:

Accepted Answer

A) ​an increase in the supply of foreign currencies. 
B) ​a decrease in the supply of foreign currencies. 
C) ​a decrease in the demand for dollars. 
D) ​either (b) or (c) 
A) ​an increase in the supply of foreign currencies. 
B) ​a decrease in the supply of foreign currencies. 
C) ​a decrease in the demand for dollars. 
D) ​either (b) or (c)

Question 9

Which of the following would be included in the capital account section of the balance of payments?

Accepted Answer

A) ​government bond purchases by people in other countries 
B) ​net investment income 
C) ​imports and exports of goods 
D) ​imports and exports of services 
A) ​government bond purchases by people in other countries 
B) ​net investment income 
C) ​imports and exports of goods 
D) ​imports and exports of services

Question 10

If the United States purchases oil from Kuwait, what is the effect in the exchange market?

Accepted Answer

A) ​It will increase the supply of U.S.dollars. 
B) ​It will decrease the supply of U.S.dollars. 
C) ​It will increase the demand for U.S.dollars. 
D) ​It will decrease the demand for U.S.dollars. 
A) ​It will increase the supply of U.S.dollars. 
B) ​It will decrease the supply of U.S.dollars. 
C) ​It will increase the demand for U.S.dollars. 
D) ​It will decrease the demand for U.S.dollars.

Question 11

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the:

Accepted Answer

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

Question 12

If the Federal Reserve was to buy U.S. dollars on the foreign exchange market, a likely result will be:

Accepted Answer

A) ​a rightward shift in the dollar supply curve. 
B) ​at least a temporary decline in the exchange value of the U.S.dollar. 
C) ​at least a temporary increase in the exchange value of the U.S.dollar. 
D) ​both (a) and (b) 
A) ​a rightward shift in the dollar supply curve. 
B) ​at least a temporary decline in the exchange value of the U.S.dollar. 
C) ​at least a temporary increase in the exchange value of the U.S.dollar. 
D) ​both (a) and (b)

Question 13

Which of the following examples would lead to a demand for German marks?

Accepted Answer

A) ​Judy Potter, an American, wants to purchase a German automobile. 
B) ​Jim Potter, Judy's husband, wants to purchase German stocks. 
C) ​IBM, Judy's employer, wants to buy a small computer firm in Germany. 
D) ​All of the above. 
A) ​Judy Potter, an American, wants to purchase a German automobile. 
B) ​Jim Potter, Judy's husband, wants to purchase German stocks. 
C) ​IBM, Judy's employer, wants to buy a small computer firm in Germany. 
D) ​All of the above.

Question 14

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, imports of British goods into the U.S. tend to:

Accepted Answer

A) ​rise. 
B) ​fall. 
C) ​stay the same. 
D) ​change in an indeterminate direction. 
A) ​rise. 
B) ​fall. 
C) ​stay the same. 
D) ​change in an indeterminate direction.

Question 15

If the rate of inflation overseas falls relative to the rate of inflation in the United States, U.S. net exports will tend to ____, causing the exchange value of the U.S. dollar to ____.

Accepted Answer

A) ​rise; rise 
B) ​rise; fall 
C) ​fall; rise 
D) ​fall; fall 
A) ​rise; rise 
B) ​rise; fall 
C) ​fall; rise 
D) ​fall; fall

Question 16

If the dollar appreciates, it can be said that:

Accepted Answer

A) ​foreigners respect the United States more. 
B) ​other currencies depreciate. 
C) ​it increases in value within the United States. 
D) ​other currencies also appreciate. 
A) ​foreigners respect the United States more. 
B) ​other currencies depreciate. 
C) ​it increases in value within the United States. 
D) ​other currencies also appreciate.

Question 17

If at current exchange rates it was cheaper to buy a product in country B than country A, we would expect people to sell country A's currency and buy country B's currency, according to the purchasing power parity theory.

Accepted Answer

A) True 
 B)False

Question 18

What would be the statistical discrepancy for a current account balance of -$85 billion and a capital account balance of $80 billion?

Accepted Answer

A) ​-$165 billion 
B) ​-$5 billion 
C) ​$5 billion 
D) ​$165 billion 
A) ​-$165 billion 
B) ​-$5 billion 
C) ​$5 billion 
D) ​$165 billion

Question 19

Explain how an increase in the American demand for Chinese goods leads to a change in the Chinese yuan relative to the U.S. dollar.

Accepted Answer

Americans who wish to buy more Chinese g

Question 20

Since the advent of flexible exchange rates, world trade has not only continued but also expanded.

Accepted Answer

A) True 
 B)False

Exam 21: Financial Markets, Saving, and Investment

Prior to 1973, the world operated on a system of fixed exchange rates called the Bretton Woods system.

If as a result of NAFTA the demand for American exports rises, it would tend to increase the exchange value of the U.S. dollar as a result.

Which of the following is true?

The less foreigners demand U.S. products:

On January 12, 2011, one U.S. dollar was worth 0.78 euros. How many U.S. dollars did it take to buy one euro?

Under a system of fixed exchange rates, what will happen if the price of a currency is set above market equilibrium? How can this be remedied?

What are the three categories of transactions in the balance of payments? Give an example of each.

In foreign exchange markets, the effect of an increase in the supply of dollars on the value of the dollar is the same as that of:

Which of the following would be included in the capital account section of the balance of payments?

If the United States purchases oil from Kuwait, what is the effect in the exchange market?

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the:

If the Federal Reserve was to buy U.S. dollars on the foreign exchange market, a likely result will be:

Which of the following examples would lead to a demand for German marks?

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, imports of British goods into the U.S. tend to:

If the rate of inflation overseas falls relative to the rate of inflation in the United States, U.S. net exports will tend to ____, causing the exchange value of the U.S. dollar to ____.

If the dollar appreciates, it can be said that:

If at current exchange rates it was cheaper to buy a product in country B than country A, we would expect people to sell country A's currency and buy country B's currency, according to the purchasing power parity theory.

What would be the statistical discrepancy for a current account balance of -$85 billion and a capital account balance of $80 billion?

Explain how an increase in the American demand for Chinese goods leads to a change in the Chinese yuan relative to the U.S. dollar.

Since the advent of flexible exchange rates, world trade has not only continued but also expanded.

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

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If the rate of inflation overseas falls relative to the rate of inflation in the United States, U.S. net exports will tend to , causing the exchange value of the U.S. dollar to .