Question 1

Whenever there is a deficit in the current account, the capital account:

Accepted Answer

A) ​will be negative. 
B) ​will be positive. 
C) ​will be zero. 
D) ​could be negative, positive, or zero. 
A) ​will be negative. 
B) ​will be positive. 
C) ​will be zero. 
D) ​could be negative, positive, or zero.

Question 2

Under a system of flexible exchange rates, a decrease in the demand for a country's currency on the foreign exchange market will:

Accepted Answer

A) ​cause the country's currency to depreciate in value. 
B) ​cause the country's currency to appreciate in value. 
C) ​make the country's goods more expensive to foreigners. 
D) ​make foreign goods less expensive to the country's citizens. 
A) ​cause the country's currency to depreciate in value. 
B) ​cause the country's currency to appreciate in value. 
C) ​make the country's goods more expensive to foreigners. 
D) ​make foreign goods less expensive to the country's citizens.

Question 3

A country would tend to experience currency depreciation relative to other countries if:

Accepted Answer

A) ​the profitability of investments within the country increases relative to the rest of the world. 
B) ​people in the foreign currency markets expect the value of the currency to rise in the near future. 
C) ​the foreign demand for its exports decreases. 
D) ​none of the above 
A) ​the profitability of investments within the country increases relative to the rest of the world. 
B) ​people in the foreign currency markets expect the value of the currency to rise in the near future. 
C) ​the foreign demand for its exports decreases. 
D) ​none of the above

Question 4

Which of the following would cause a decrease in the exchange value of the U.S. dollar?

Accepted Answer

A) ​A decrease in the amount of foreign debt purchased by U.S.citizens 
B) ​An increase in U.S.exports 
C) ​An increase in U.S.imports 
D) ​Increased demand by foreigners to buy U.S.government securities 
A) ​A decrease in the amount of foreign debt purchased by U.S.citizens 
B) ​An increase in U.S.exports 
C) ​An increase in U.S.imports 
D) ​Increased demand by foreigners to buy U.S.government securities

Question 5

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, exports of U.S. goods to Japan will 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 6

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, the price of U.S. goods to Japanese importers will:

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 7

The exchange rate:

Accepted Answer

A) ​states the price of one currency in terms of another currency. 
B) ​is the rate at which one country's money is flowing to a second country. 
C) ​is closely related to the concept of comparative advantage. 
D) ​is closely related to the concept of absolute advantage. 
A) ​states the price of one currency in terms of another currency. 
B) ​is the rate at which one country's money is flowing to a second country. 
C) ​is closely related to the concept of comparative advantage. 
D) ​is closely related to the concept of absolute advantage.

Question 8

If there is a surplus of euros at the current exchange rate, the exchange value of euros will tend to fall.

Accepted Answer

A) True 
 B)False

Question 9

If the dollar appreciates relative to the yen, we would expect:

Accepted Answer

A) ​that the Japanese trade surplus with the United States would increase. 
B) ​that Japanese imports from the United States would decrease. 
C) ​that Japanese exports to the United States would decrease. 
D) ​both (a) and (b) 
A) ​that the Japanese trade surplus with the United States would increase. 
B) ​that Japanese imports from the United States would decrease. 
C) ​that Japanese exports to the United States would decrease. 
D) ​both (a) and (b)

Question 10

A country would tend to experience currency appreciation relative to other countries if:

Accepted Answer

A) ​the profitability of investments within the country increases relative to the rest of the world. 
B) ​people in the foreign currency markets expect the value of the currency to rise in the near future. 
C) ​the foreign demand for its exports increases. 
D) ​all of the above 
A) ​the profitability of investments within the country increases relative to the rest of the world. 
B) ​people in the foreign currency markets expect the value of the currency to rise in the near future. 
C) ​the foreign demand for its exports increases. 
D) ​all of the above

Question 11

What factors will shift the supply and demand for currency?

Accepted Answer

Any changes in tastes, income

Question 12

The dollar appreciates when U.S. demands for foreign currencies decrease.

Accepted Answer

A) True 
 B)False

Question 13

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, the price of U.S. goods to British importers will:

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 14

With flexible exchange rates, the imbalance between debits and credits arising from shifts in currency demand and/or supply is accommodated through special financial borrowings or reserve movements.

Accepted Answer

A) True 
 B)False

Question 15

At any given moment there is one exchange rate:

Accepted Answer

A) ​for all the world's currencies. 
B) ​for currencies in the free world. 
C) ​between every pair of currencies. 
D) ​established by the Federal Reserve System. 
A) ​for all the world's currencies. 
B) ​for currencies in the free world. 
C) ​between every pair of currencies. 
D) ​established by the Federal Reserve System.

Question 16

An appreciation of the exchange value of the U.S. dollar would:

Accepted Answer

A) ​increase the dollar prices of U.S.imports and the foreign cost of exports from the U.S. 
B) ​decrease the dollar prices of U.S.imports and the foreign cost of exports from the U.S. 
C) ​increase the dollar prices of U.S.imports, but decrease the foreign cost of exports from the U.S. 
D) ​decrease the dollar prices of U.S.imports, but increase the foreign cost of exports from the U.S. 
A) ​increase the dollar prices of U.S.imports and the foreign cost of exports from the U.S. 
B) ​decrease the dollar prices of U.S.imports and the foreign cost of exports from the U.S. 
C) ​increase the dollar prices of U.S.imports, but decrease the foreign cost of exports from the U.S. 
D) ​decrease the dollar prices of U.S.imports, but increase the foreign cost of exports from the U.S.

Question 17

Critics of fixed exchange rates argue that fixed rates:

Accepted Answer

A) ​reduce uncertainty in international trade. 
B) ​result in currency shortages just as wage and price controls lead to shortages in markets for goods and services. 
C) ​make nations less constrained in carrying out in internal macroeconomic policies. 
D) ​lead to constant, day-to-day changes in the exchange values of currencies. 
A) ​reduce uncertainty in international trade. 
B) ​result in currency shortages just as wage and price controls lead to shortages in markets for goods and services. 
C) ​make nations less constrained in carrying out in internal macroeconomic policies. 
D) ​lead to constant, day-to-day changes in the exchange values of currencies.

Question 18

If the dollar depreciates relative to other currencies, which of the following is true?

Accepted Answer

A) ​It takes more of the other currency to buy a dollar. 
B) ​It takes less of the other currency to buy a dollar. 
C) ​There is no change in the amount of the currency needed to buy a dollar. 
D) ​Not enough information to determine. 
A) ​It takes more of the other currency to buy a dollar. 
B) ​It takes less of the other currency to buy a dollar. 
C) ​There is no change in the amount of the currency needed to buy a dollar. 
D) ​Not enough information to determine.

Question 19

Ceteris paribus, if the U.S. dollar depreciated in relation to the Canadian dollar, which of the following would be true?

Accepted Answer

A) ​U.S.goods would become less expensive to Canadian consumers. 
B) ​Canadian goods would become more expensive to Canadian consumers. 
C) ​U.S.goods would become less expensive to European consumers. 
D) ​all of the above 
A) ​U.S.goods would become less expensive to Canadian consumers. 
B) ​Canadian goods would become more expensive to Canadian consumers. 
C) ​U.S.goods would become less expensive to European consumers. 
D) ​all of the above

Question 20

A country would tend to experience currency depreciation relative to other countries if:

Accepted Answer

A) ​the profitability of investments in other countries increases relative to that country. 
B) ​people in the foreign currency markets expect the value of the currency to fall in the near future. 
C) ​the foreign demand for its exports decreases. 
D) ​any of the above occurs. 
A) ​the profitability of investments in other countries increases relative to that country. 
B) ​people in the foreign currency markets expect the value of the currency to fall in the near future. 
C) ​the foreign demand for its exports decreases. 
D) ​any of the above occurs.

Exam 21: Financial Markets, Saving, and Investment

Whenever there is a deficit in the current account, the capital account:

Under a system of flexible exchange rates, a decrease in the demand for a country's currency on the foreign exchange market will:

A country would tend to experience currency depreciation relative to other countries if:

Which of the following would cause a decrease in the exchange value of the U.S. dollar?

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, exports of U.S. goods to Japan will tend to:

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, the price of U.S. goods to Japanese importers will:

The exchange rate:

If there is a surplus of euros at the current exchange rate, the exchange value of euros will tend to fall.

If the dollar appreciates relative to the yen, we would expect:

A country would tend to experience currency appreciation relative to other countries if:

What factors will shift the supply and demand for currency?

The dollar appreciates when U.S. demands for foreign currencies decrease.

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, the price of U.S. goods to British importers will:

With flexible exchange rates, the imbalance between debits and credits arising from shifts in currency demand and/or supply is accommodated through special financial borrowings or reserve movements.

At any given moment there is one exchange rate:

An appreciation of the exchange value of the U.S. dollar would:

Critics of fixed exchange rates argue that fixed rates:

If the dollar depreciates relative to other currencies, which of the following is true?

Ceteris paribus, if the U.S. dollar depreciated in relation to the Canadian dollar, which of the following would be true?

A country would tend to experience currency depreciation relative to other countries if:

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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