Question 1

An exchange rate regime is a rule governing policy for the exchange rate.

Accepted Answer

A) True 
 B)False

Question 2

If the government wants to increase the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

Accepted Answer

A) True 
 B)False

Question 3

In the 1970s most European countries were unhappy with floating exchange rates because they made each country's domestic monetary policy ineffective.

Accepted Answer

A) True 
 B)False

Question 4

A family from New York City eats in a restaurant in Mexico City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

A)  current account; to 
B)  current account; from 
C)  financial account; to 
D)  financial account; from

Question 5

Use the following to answer questions: 
-(Figure: The Loanable Funds Model in the U.S. Market) Refer to Figure: The Loanable Funds Model in the U.S. Market. If the actual interest rate is equal to 4% in the U.S. market, then the quantity supplied of loanable funds will be _____ the quantity of loanable funds demanded.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to

Question 6

Since they reduce uncertainty, fixed exchange rates are good for business.

Accepted Answer

A) True 
 B)False

Question 7

Countries with government budget surpluses are likely to have capital inflows, all other things equal.

Accepted Answer

A) True 
 B)False

Question 8

The benefits of fixed exchange rates served as one of the motivations for the international system of fixed rates established after World War II.

Accepted Answer

A) True 
 B)False

Question 9

After a revaluation, all other things equal, exports will likely _____ and imports will likely _____.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  increase; decrease 
D)  decrease; increase

Question 10

The Chinese yuan is on a fixed rate. If the government of China uses monetary policy to change the exchange rate of the yuan from $0.16 to $0.10, the Chinese yuan has appreciated.

Accepted Answer

A) True 
 B)False

Question 11

Which statement is NOT true of a fixed exchange rate system?

Accepted Answer

A)  It is good for business. 
B)  Foreign exchange reserves are costly. 
C)  It keeps a country from using inflationary policies. 
D)  It makes pursuing domestic macroeconomic objectives easier.

Question 12

In countries with rapidly growing economies, like China and India, the demand for loanable funds is _____ and interest rates are _____ than in countries with slowly growing economies.

Accepted Answer

A)  larger; higher 
B)  larger; lower 
C)  smaller; higher 
D)  smaller; lower

Question 13

After a revaluation, all other things equal, a country's balance of payments on the current account will likely:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  fluctuate randomly.

Question 14

If the United States exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers, the balance on the current account is:

Accepted Answer

A)  $250 billion. 
B)  -$250 billion. 
C)  $50 billion. 
D)  -$50 billion.

Question 15

Money flows into the United States from other countries as a direct result of:

Accepted Answer

A)  foreign purchases of U.S. goods and services. 
B)  U.S. purchases of foreign goods and services. 
C)  U.S. investment in foreign companies. 
D)  U.S. purchases of foreign assets.

Question 16

The pound sterling floats. If the exchange rate for the pound changes from $1.68 to $1.60, the pound has:

Accepted Answer

A)  depreciated. 
B)  been devalued. 
C)  appreciated. 
D)  been revalued.

Question 17

Major drawbacks of a fixed exchange rate do NOT include:

Accepted Answer

A)  exchange controls must be imposed at the cost of administrative red tape and corruption. 
B)  resources must be diverted to the accumulation of large foreign exchange reserves. 
C)  monetary policy cannot be used to stabilize output and the inflation rate. 
D)  commerce among countries is more uncertain and riskier.

Question 18

If the U.S. dollar changes from $1 = €1 to $0.80 = €1:

Accepted Answer

A)  the dollar has depreciated relative to the euro. 
B)  the dollar has been fixed by the United States and the euro bloc. 
C)  the dollar has appreciated relative to the euro. 
D)  U.S. goods are now cheaper in the eurozone.

Question 19

If the rate of exchange is €1 = US$2, then US$1 =

Accepted Answer

A)  €0.50. 
B)  €2. 
C)  $0.50. 
D)  $2.00.

Question 20

The value of accounting services purchased by clients in China is included in the merchandise trade balance.

Accepted Answer

A) True 
 B)False

Exam 18: International Macroeconomics

An exchange rate regime is a rule governing policy for the exchange rate.

If the government wants to increase the value of its currency in foreign exchange markets, it can use expansionary monetary policy.

In the 1970s most European countries were unhappy with floating exchange rates because they made each country's domestic monetary policy ineffective.

A family from New York City eats in a restaurant in Mexico City. In the accounting for U.S. international transactions, this transaction would appear in the _, and it would be entered as a payment _ foreigners.

Since they reduce uncertainty, fixed exchange rates are good for business.

Countries with government budget surpluses are likely to have capital inflows, all other things equal.

The benefits of fixed exchange rates served as one of the motivations for the international system of fixed rates established after World War II.

After a revaluation, all other things equal, exports will likely _ and imports will likely _.

The Chinese yuan is on a fixed rate. If the government of China uses monetary policy to change the exchange rate of the yuan from $0.16 to $0.10, the Chinese yuan has appreciated.

Which statement is NOT true of a fixed exchange rate system?

In countries with rapidly growing economies, like China and India, the demand for loanable funds is _ and interest rates are _ than in countries with slowly growing economies.

After a revaluation, all other things equal, a country's balance of payments on the current account will likely:

If the United States exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers, the balance on the current account is:

Money flows into the United States from other countries as a direct result of:

The pound sterling floats. If the exchange rate for the pound changes from $1.68 to $1.60, the pound has:

Major drawbacks of a fixed exchange rate do NOT include:

If the U.S. dollar changes from $1 = €1 to $0.80 = €1:

If the rate of exchange is €1 = US$2, then US$1 =

The value of accounting services purchased by clients in China is included in the merchandise trade balance.