Question 1

Which of the following is not an example of an international transfer payment?

Accepted Answer

A)   Myrna, a U.S. citizen, remits a gift of $300 to her aunt in Albania.
B)   The U.S. government has pledged $100 million in foreign aid to Ethiopia.
C)   The Melinda and Bill gates Foundation make a donation of $50 million dollars to an orphanage in Lithuania.
D)   The Red Cross purchases $50 million dollars of equipment for its operations abroad. D

Question 2

Which of the following statements is true?

Accepted Answer

A)   Current account balance = -(capital account balance) .
B)   A country's balance on current account equals its balance on capital account.
C)   If the market for a nation's currency is in equilibrium, a capital account surplus necessarily means a current account surplus.
D)   Capital accounts and current accounts balances are determined by governments. A

Question 3

Suppose that at the fixed exchange rate implied by the gold standard, the quantity supplied of Podgland's currency exceeded the quantity demanded. This implies that

Accepted Answer

A)   Podgland has a surplus in its balance of payments.
B)   Podgland has a deficit in its balance of payments.
C)   Podgland has a surplus in its capital account.
D)   The exchange rate will fall to restore equilibrium. B

Question 4

A higher exchange rate for the U.S. dollar means that a dollar buys

Accepted Answer

A)   more foreign currency and more foreign goods and services.
B)   less foreign currency and fewer goods and services.
C)   more foreign currency, and that U.S. exports will rise.
D)   less foreign currency and more foreign goods and services.

Question 5

Which of the following statements is false?

Accepted Answer

A)   Owners of factors of production used in industries in which a nation lacks a comparative advantage may be hurt by free trade.
B)   Trade based on comparative advantage enables a country to produce outside its production possibilities curve.
C)   Trade based on comparative advantage enables a country to consume outside its production possibilities curve.
D)   Generally, trade between two countries tends to be mutually beneficial.

Question 6

Use the following to answer questions .
Exhibit: Exchange Rates 
-(Exhibit: Exchange Rates) The equilibrium quantity, Q1 represents

Accepted Answer

A)   the quantity of U.S. dollars supplied by the Federal Reserve in foreign markets.
B)   the quantity of U.S. dollars supplied and demanded by foreign nationals.
C)   The quantity of U.S. dollars supplied by U.S. importers and U.S. nationals who purchased foreign assets.
D)   It represents the total amount foreigners spent in the United States during a given period.

Question 7

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion.
Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in its current account?

Accepted Answer

A)   $100 billion.
B)   -$100 billion.
C)   $300 billion.
D)   -$300 billion.

Question 8

An increase in net exports due to a change in the exchange rate will shift aggregate demand

Accepted Answer

A)   left by the amount of the initial increase in net exports.
B)   right by the amount of the initial increase in net exports.
C)   left by the amount of the initial change in net exports * the multiplier.
D)   right by the amount of the initial increase in net exports *the multiplier.

Question 9

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

Accepted Answer

A) True 
 B)False

Question 10

All other things unchanged, an increase in the value of the dollar against the euro

Accepted Answer

A)   increases U.S. net exports and shifts the investment demand curve to the right.
B)   decreases U.S. net exports and shifts the investment demand curve to the left.
C)   increases U.S. net exports and shifts the aggregate demand curve to the right.
D)   decreases U.S. net exports and shifts the aggregate demand curve to the left.

Question 11

Which of the following is possible with international trade?
I. Countries that engage in trade can consume at a point outside their respective production
Possibilities curves.
II. Global production will be increased.
III. World resources will be used more efficiently.

Accepted Answer

A)   I, II, and III
B)   I and II only
C)   I and III only
D)   II and III only

Question 12

A current account surplus exists when the balance on current account is positive.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and
Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's
Assets purchased by foreigners?

Accepted Answer

A)   $50 billion
B)   -$50 billion
C)   $850 billion
D)  -$850 billion

Question 14

Under the simplifying assumptions made in the text, a current account deficit

Accepted Answer

A)   arises when imports exceed exports.
B)   arises when the purchase of foreign assets by a nation's citizens exceed the purchase of domestic assets by a nation's citizens.
C)   is necessary for a long run economic growth.
D)   arises when a country's exchange rate falls.

Question 15

An exchange rate system in which governments and central banks do not participate in the
Currency market is a(n)

Accepted Answer

A)   managed float system.
B)   free-floating exchange rate system.
C)   commodity standard system.
D)   fixed exchange rate system.

Question 16

In the short run, an increase in net exports causes

Accepted Answer

A)   an increase in real GDP and the price level.
B)   an increase in real GDP and a decrease in the price level.
C)   a decrease in real GDP and an increase in the price level.
D)   a decrease in real GDP and the price level.

Question 17

It is impossible to have a current account deficit and a current account surplus at the same time.

Accepted Answer

A) True 
 B)False

Question 18

The newspapers often use the terms "a strong dollar" and "a weak dollar." a. What do these terms mean? b. Who might benefit from a strong currency and who might be hurt by a strong currency? c. Who might benefit from a weak currency and who might be hurt by a weak currency?

Accepted Answer

The answer of The newspapers often use the terms "a...

Question 19

The current account is

Accepted Answer

A)   an accounting statement that includes all spending flows within a nation's borders.
B)   an accounting statement that includes all spending flows across a nation's border, except those that represent the purchases of assets.
C)   equal to value of a country's exports.
D)   equal to value of a country's imports.

Question 20

Explain how exchange rates are determined in a managed float exchange rate system. Discuss the advantages and disadvantages of a managed float system.

Accepted Answer

The answer of Explain how exchange rates are determined in...

Exam 15: Net Exports and International Finance

Which of the following is not an example of an international transfer payment?

Which of the following statements is true?

Suppose that at the fixed exchange rate implied by the gold standard, the quantity supplied of Podgland's currency exceeded the quantity demanded. This implies that

A higher exchange rate for the U.S. dollar means that a dollar buys

Which of the following statements is false?

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) The equilibrium quantity, Q₁ represents

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in its current account?

An increase in net exports due to a change in the exchange rate will shift aggregate demand

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

All other things unchanged, an increase in the value of the dollar against the euro

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production Possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

A current account surplus exists when the balance on current account is positive.

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's Assets purchased by foreigners?

Under the simplifying assumptions made in the text, a current account deficit

An exchange rate system in which governments and central banks do not participate in the Currency market is a(n)

In the short run, an increase in net exports causes

It is impossible to have a current account deficit and a current account surplus at the same time.

The newspapers often use the terms "a strong dollar" and "a weak dollar." a. What do these terms mean? b. Who might benefit from a strong currency and who might be hurt by a strong currency? c. Who might benefit from a weak currency and who might be hurt by a weak currency?

The current account is

Explain how exchange rates are determined in a managed float exchange rate system. Discuss the advantages and disadvantages of a managed float system.

Exam 15: Net Exports and International Finance

Which of the following is not an example of an international transfer payment?

Which of the following statements is true?

Suppose that at the fixed exchange rate implied by the gold standard, the quantity supplied of Podgland's currency exceeded the quantity demanded. This implies that

A higher exchange rate for the U.S. dollar means that a dollar buys

Which of the following statements is false?

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) The equilibrium quantity, Q1 represents

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in its current account?

An increase in net exports due to a change in the exchange rate will shift aggregate demand

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

All other things unchanged, an increase in the value of the dollar against the euro

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production Possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

A current account surplus exists when the balance on current account is positive.

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's Assets purchased by foreigners?

Under the simplifying assumptions made in the text, a current account deficit

An exchange rate system in which governments and central banks do not participate in the Currency market is a(n)

In the short run, an increase in net exports causes

It is impossible to have a current account deficit and a current account surplus at the same time.

The newspapers often use the terms "a strong dollar" and "a weak dollar." a. What do these terms mean? b. Who might benefit from a strong currency and who might be hurt by a strong currency? c. Who might benefit from a weak currency and who might be hurt by a weak currency?

The current account is

Explain how exchange rates are determined in a managed float exchange rate system. Discuss the advantages and disadvantages of a managed float system.

Use the following to answer questions . Exhibit: Exchange Rates -(Exhibit: Exchange Rates) The equilibrium quantity, Q₁ represents