Question 1

When the exchange rate between the U.S.dollar and the euro changes from 1.30 euros per dollar to 1.00 euro per dollar the dollar has ________ and European goods have become ________ to people in the United States so that quantity of U.S.dollars supplied ________.

Accepted Answer

A)  depreciated; cheaper; increases 
B)  depreciated; more expensive; decreases 
C)  depreciated; cheaper; decreases 
D)  appreciated; more expensive; decreases 
E)  appreciated; cheaper; increases

Question 2

The official settlements account balance is

Accepted Answer

A)  -$1,100 billion. 
B)  $1,100 billion. 
C)  $10 billion. 
D)  -$10 billion. 
E)  $0.

Question 3

In 2008, the current account balance was -$706 billion and the capital account balance was +$711 billion.Therefore, the official settlements account balance was ________ and the balance of all payments accounts summed was ________.

Accepted Answer

A)  -$5 billion; zero 
B)  +$5 billion; zero 
C)  not enough information to determine; negative 
D)  negative; negative 
E)  positive; positive

Question 4

U.S.official reserves are

Accepted Answer

A)  equal to the value of the government's oil reserves. 
B)  the government's holding of foreign currency. 
C)  equal to the government's holding of gold. 
D)  equal to the value of U.S.government debt in the hands of foreigners. 
E)  equal to the balance on the capital account.

Question 5

The figure above shows supply curves of dollars in the foreign exchange market.
-Based on the figure above, which of the following factors could lead the supply curve to shift rightward from S₀ to S₂?

Accepted Answer

A)  a rise in the U.S.exchange rate 
B)  a fall in the U.S.exchange rate 
C)  a fall in the U.S.interest rate 
D)  a rise in expected future U.S.exchange rate 
E)  a fall in foreign interest rates

Question 6

For many years, U.S.investment has exceeded savings and government expenditure has exceeded taxes. These imbalances (deficits) have been financed through international ________ by the United States as shown by the surplus on the balance of payments ________ account.

Accepted Answer

A)  borrowing; capital 
B)  lending; current 
C)  borrowing; current 
D)  lending; official settlements 
E)  borrowing; official settlements

Question 7

When the U.S.current account has a deficit, international payments from the United States ________ U.S.international receipts.To cover the current account deficit, there must be a ________ in the combined capital and official settlements accounts.

Accepted Answer

A)  are less than; surplus 
B)  exceed; surplus 
C)  are less than; deficit 
D)  equal; surplus 
E)  exceed; deficit

Question 8

Which of the following is a balance of payments account?
i. current account
ii. past account
iii. capital account

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii

Question 9

To appreciate the U.S.dollar against the Mexican peso, in the foreign exchange market the Fed could ________ dollars and ________ pesos.

Accepted Answer

A)  buy; buy 
B)  buy; sell 
C)  sell; buy 
D)  sell; sell 
E)  None of the above answers are correct because the Fed cannot affect the U.S.exchange rate.

Question 10

Foreign investment in the United States and U.S.investment abroad is recorded in the

Accepted Answer

A)  investment account. 
B)  official settlements account. 
C)  capital account. 
D)  current account. 
E)  creditor/debtor account.

Question 11

Assume the exchange rate is 1 U.S.dollar equals 1.10 Canadian dollars.If purchasing power parity is correct, a DVD that has a price of $10 in Rochester, New York, in Canada has a price of ________ Canadian dollars.

Accepted Answer

A)  11.00 
B)  9.09 
C)  10.00 
D)  11.11 
E)  10.10

Question 12

Yesterday, the dollar was trading in the foreign exchange market at 1.10 euros per dollar.Today, the dollar is trading at 1.05 euros per dollar.The dollar has ________ and a possible reason for the change is ________ in the U.S.interest rate.

Accepted Answer

A)  appreciated; an increase 
B)  appreciated; a decrease 
C)  depreciated; an increase 
D)  depreciated; a decrease 
E)  depreciated; because there has been no change

Question 13

In the foreign exchange market, how does a fall in the U.S.interest rate affect the supply of dollars?

Accepted Answer

The answer of In the foreign exchange market, how does...

Question 14

During the last year, foreign investment in a country was $500 billion and the country's investment abroad was $600 billion.Which of the following statements is true?

Accepted Answer

A)  The country has net borrowing of $100 billion. 
B)  The country has a current account deficit of $100 billion. 
C)  The country has a current account deficit of $1,100 billion. 
D)  The country has net lending of $100 billion. 
E)  The country has a capital account deficit of $1,100 billion.

Question 15

According to the U.S.balance of payments accounts in 2008, U.S.international borrowing is used for

Accepted Answer

A)  private and public investment. 
B)  private consumption. 
C)  government expenditure. 
D)  private and public saving. 
E)  private saving and public consumption.

Question 16

The official settlements account is the record of

Accepted Answer

A)  a nation's international trading, borrowing and lending. 
B)  payments for imports, receipts for exports, net interest, and net transfers. 
C)  foreign investment in the nation minus the nation's investment abroad. 
D)  changes in the government's holdings for foreign currency. 
E)  exports of capital goods minus imports of capital goods.

Question 17

When the U.S.interest rate ________ relative to foreign interest rates, the supply of dollars ________ and the supply curve of dollars shifts rightward.

Accepted Answer

A)  rises; decreases 
B)  rises; increases 
C)  falls; increases 
D)  falls; decreases 
E)  rises; does not change

Question 18

The foreign exchange rate is defined as the

Accepted Answer

A)  rate or the speed with which the currencies of the worlds are traded. 
B)  volume of the world currencies traded. 
C)  price at which one currency exchanges for another. 
D)  equal to the amount of the current account deficit. 
E)  equal to the amount of the capital account deficit.

Question 19

If the exchange rate changes from 1.00 euro per dollar to 1.10 euro per dollar, the dollar has

Accepted Answer

A)  depreciated against the euro. 
B)  appreciated against the euro. 
C)  fallen inversely in value. 
D)  appreciated against the dollar. 
E)  depreciated against the dollar.

Question 20

The current account is the record of

Accepted Answer

A)  a nation's international trading, borrowing, and lending. 
B)  payments for imports, receipts for exports, net interest, and net transfers. 
C)  foreign investment in the nation minus the nation's investment abroad. 
D)  changes in the government's holdings of foreign currency. 
E)  the nation's exports but not its imports.

Exam 19: International Finance

When the exchange rate between the U.S.dollar and the euro changes from 1.30 euros per dollar to 1.00 euro per dollar the dollar has and European goods have become to people in the United States so that quantity of U.S.dollars supplied .

The official settlements account balance is

In 2008, the current account balance was -$706 billion and the capital account balance was +$711 billion.Therefore, the official settlements account balance was and the balance of all payments accounts summed was .

U.S.official reserves are

The figure above shows supply curves of dollars in the foreign exchange market. -Based on the figure above, which of the following factors could lead the supply curve to shift rightward from S₀ to S₂?

For many years, U.S.investment has exceeded savings and government expenditure has exceeded taxes. These imbalances (deficits) have been financed through international by the United States as shown by the surplus on the balance of payments account.

When the U.S.current account has a deficit, international payments from the United States U.S.international receipts.To cover the current account deficit, there must be a in the combined capital and official settlements accounts.

Which of the following is a balance of payments account? i. current account ii. past account iii. capital account

To appreciate the U.S.dollar against the Mexican peso, in the foreign exchange market the Fed could dollars and pesos.