Question 1

An excess supply of pounds will cause an appreciation of the pound.

Accepted Answer

A) True 
 B)False

Question 2

Figure 19.3
-Refer to Figure 19.3. The market for yen is currently at Point A. An increase in the U.S. interest rates causes the equilibrium to move to point _______.

Accepted Answer

A)  A 
B)  C 
C)  D 
D)  B

Question 3

A U.S. firm buys the copyrights of Beatles songs, formerly held by a British company. This transaction is recorded as:

Accepted Answer

A)  negative in the U.S. current account. 
B)  positive in the U.S. capital account. 
C)  negative in the U.S. capital account. 
D)  positive in the U.S. current account.

Question 4

Suppose that the price of a television set is $10 in the United States and 1,500 yen in Japan. If the current exchange rate is 100 yen to the dollar, then purchasing power parity would predict that in the long run:

Accepted Answer

A)  the price in Japan increases. 
B)  the price in the U.S. decreases. 
C)  the price in Japan decreases. 
D)  the price in the U.S. and Japan will remain unchanged.

Question 5

Which of the following increases the price of the dollar relative to the Mexican peso?

Accepted Answer

A)  an increase in the supply of dollars 
B)  an increase in the demand for dollars 
C)  a decrease in the supply of pesos 
D)  an increase in the demand for pesos

Question 6

If the current account is in deficit, we know that the capital account is in deficit.

Accepted Answer

A) True 
 B)False

Question 7

Recall Application 4, "The Argentine Financial Crisis," to answer the question below:
-The Argentine financial crisis of 2002 occurred because:

Accepted Answer

A)  the country experienced increasingly larger trade surpluses. 
B)  the Argentine peso was in a flexible exchange rate regime. 
C)  the Argentine peso was pegged to the sharply appreciating U.S. dollar. 
D)  the U.S. dollar continued to depreciate against other currencies.

Question 8

Recall Application 3, "A Downside to the Euro," to answer the following questions:
-According to the application, what caused the increase in wage rates in Greece?

Accepted Answer

A)  An export boom pushed the unemployment rate well below the natural rate. 
B)  The government instituted a new minimum wage law, raising minimum wages 50 percent. 
C)  Greece pursue expansionary monetary policies immediately after joining the Euro- zone. 
D)  An investment boom financed a wide range of projects in the country, increasing the demand for workers.

Question 9

Which of the following is not included in the U.S. financial account?

Accepted Answer

A)  change in U.S. government assets held abroad 
B)  change in foreign private assets held in the United States 
C)  Mexico's debt to the U.S. that was forgiven 
D)  change in private U.S. assets held abroad

Question 10

Which of the following is not included in the U.S. current account?

Accepted Answer

A)  imports of services 
B)  net investment income 
C)  net transfer payments 
D)  Canada's debt forgiven by the US.

Question 11

Under the Bretton Woods system, which country directly pegged its currency to gold?

Accepted Answer

A)  Germany 
B)  the UK 
C)  the U.S. 
D)  Japan

Question 12

Net international investment position refers to:

Accepted Answer

A)  foreign holdings of domestic assets minus domestic holdings of foreign assets. 
B)  domestic holdings of foreign assets minus the purchase of foreign goods and services by domestic residents. 
C)  domestic holdings of foreign assets minus foreign holdings of domestic assets. 
D)  foreign holdings of domestic assets minus the purchase of domestic goods and services by foreigners.

Question 13

Figure 19.1
-Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the U.S. dollar causes a movement to Point _______.

Accepted Answer

A)  D 
B)  E 
C)  B 
D)  C

Question 14

All other things equal, a depreciation of the U.S. real exchange rate causes consumers to buy _______ domestic goods and _______ foreign goods.

Accepted Answer

A)  fewer; fewer 
B)  more; fewer 
C)  fewer; more 
D)  more; more

Question 15

Figure 19.4
-Refer to Figure 19.4. Which of the following will shift the supply of pounds from S1 to S0?

Accepted Answer

A)  a decrease in the British price level 
B)  a decrease in British income 
C)  an increase in the British price level 
D)  an increase in U.S. income

Question 16

The Argentine financial crisis of 2002 was due to the prevalence of hyperinflation in Argentina at that time.

Accepted Answer

A) True 
 B)False

Question 17

In 1971, most countries, including the United States:

Accepted Answer

A)  adopted a new system of fixed exchange rates. 
B)  returned to the gold standard. 
C)  gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand. 
D)  adopted a single, internationally accepted currency whose use is limited to international transactions.

Question 18

Suppose that a laptop computer costs 840 British pounds in the United Kingdom and $1,400 in the United States. If the nominal exchange rate is 0.6 pounds per U.S. dollar, then the real exchange rate is:

Accepted Answer

A)  1 British laptop computer per U.S. laptop computer. 
B)  3/5 British laptop computer per U.S. laptop computer. 
C)  5/3 British laptop computer per U.S. laptop computer. 
D)  none of the above

Question 19

Those who supply _______ are holders of pounds seeking to exchange them for .

Accepted Answer

A)  pounds; dollars 
B)  both pounds and dollars; dollars 
C)  pounds; pounds 
D)  dollars; pounds

Question 20

Which of the following affects a country's net international investment position?

Accepted Answer

A)  real interest rates paid on domestic assets 
B)  real interest rates paid on foreign assets 
C)  government policies that affect foreign ownership of domestic assets 
D)  all of the above

Exam 19: The World of International Finance

An excess supply of pounds will cause an appreciation of the pound.

Figure 19.3 -Refer to Figure 19.3. The market for yen is currently at Point A. An increase in the U.S. interest rates causes the equilibrium to move to point _______.

A U.S. firm buys the copyrights of Beatles songs, formerly held by a British company. This transaction is recorded as:

Suppose that the price of a television set is $10 in the United States and 1,500 yen in Japan. If the current exchange rate is 100 yen to the dollar, then purchasing power parity would predict that in the long run:

Which of the following increases the price of the dollar relative to the Mexican peso?

If the current account is in deficit, we know that the capital account is in deficit.

Recall Application 4, "The Argentine Financial Crisis," to answer the question below: -The Argentine financial crisis of 2002 occurred because:

Recall Application 3, "A Downside to the Euro," to answer the following questions: -According to the application, what caused the increase in wage rates in Greece?

Which of the following is not included in the U.S. financial account?

Which of the following is not included in the U.S. current account?

Under the Bretton Woods system, which country directly pegged its currency to gold?

Net international investment position refers to:

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the U.S. dollar causes a movement to Point _______.

All other things equal, a depreciation of the U.S. real exchange rate causes consumers to buy _ domestic goods and _ foreign goods.

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S₁to S₀?

The Argentine financial crisis of 2002 was due to the prevalence of hyperinflation in Argentina at that time.

In 1971, most countries, including the United States:

Suppose that a laptop computer costs 840 British pounds in the United Kingdom and $1,400 in the United States. If the nominal exchange rate is 0.6 pounds per U.S. dollar, then the real exchange rate is:

Those who supply _______ are holders of pounds seeking to exchange them for .

Which of the following affects a country's net international investment position?

Exam 19: The World of International Finance

An excess supply of pounds will cause an appreciation of the pound.

Figure 19.3 -Refer to Figure 19.3. The market for yen is currently at Point A. An increase in the U.S. interest rates causes the equilibrium to move to point _______.

A U.S. firm buys the copyrights of Beatles songs, formerly held by a British company. This transaction is recorded as:

Suppose that the price of a television set is $10 in the United States and 1,500 yen in Japan. If the current exchange rate is 100 yen to the dollar, then purchasing power parity would predict that in the long run:

Which of the following increases the price of the dollar relative to the Mexican peso?

If the current account is in deficit, we know that the capital account is in deficit.

Recall Application 4, "The Argentine Financial Crisis," to answer the question below: -The Argentine financial crisis of 2002 occurred because:

Recall Application 3, "A Downside to the Euro," to answer the following questions: -According to the application, what caused the increase in wage rates in Greece?

Which of the following is not included in the U.S. financial account?

Which of the following is not included in the U.S. current account?

Under the Bretton Woods system, which country directly pegged its currency to gold?

Net international investment position refers to:

Figure 19.1 -Refer to Figure 19.1. The yen is currently at Point A. An appreciation of the U.S. dollar causes a movement to Point _______.

All other things equal, a depreciation of the U.S. real exchange rate causes consumers to buy _______ domestic goods and _______ foreign goods.

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S1 to S0?

The Argentine financial crisis of 2002 was due to the prevalence of hyperinflation in Argentina at that time.

In 1971, most countries, including the United States:

Suppose that a laptop computer costs 840 British pounds in the United Kingdom and $1,400 in the United States. If the nominal exchange rate is 0.6 pounds per U.S. dollar, then the real exchange rate is:

Those who supply _______ are holders of pounds seeking to exchange them for .

Which of the following affects a country's net international investment position?

All other things equal, a depreciation of the U.S. real exchange rate causes consumers to buy _ domestic goods and _ foreign goods.

Figure 19.4 -Refer to Figure 19.4. Which of the following will shift the supply of pounds from S₁to S₀?