Question 1

If the official settlements account is zero,whenever the United States has a current account deficit,it must also have a capital account deficit.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar.Then the peso has ________ against the dollar and the dollar has ________ against the peso.

Accepted Answer

A)  appreciated; depreciated 
B)  appreciated; appreciated 
C)  depreciated; appreciated 
D)  depreciated; depreciated

Question 3

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Item}\
\hline \text {Exports of goods and }\
\text {services}\
\hline \text {Imports of goods and}\ 
\text {services}\
\hline \text {Net interest income}\
\hline \text {Net transfers}\
\hline \text {Urland's investment }\
\text {abroad}\
\hline \text {Foreign investment in}\
\text {Urland }\
\hline
\end{array}
\begin{array}{c|}
\hline\text { Billions of dollars }\
\hline635 \
\
\hline-555\
\
\hline-18 \
\hline22 \
\hline-467 \
\
\hline 321 \
\
\hline 
\end{array}
\end{array}$

-The above table shows some of the balance of payments accounts for Urland.What is Urland's balance in the official settlements account?

Accepted Answer

A)  $405 billion 
B)  $62 billion 
C)  $99 billion 
D)  $37 billion

Question 4

In June 2008,the dollar bought 1.6 Brazilian reals and in October,the dollar bought 2.4 reals. This resulted in a

Accepted Answer

A)  a movement upward along the supply curve for dollars. 
B)  a movement downward along the supply curve for dollars. 
C)  rightward shift in the supply curve for dollars. 
D)  leftward shift in the supply curve for dollars.

Question 5

The value of net exports increases when the value of ________.

Accepted Answer

A)  exports of goods and services minus imports of goods and services decreases 
B)  imports of goods and services increase 
C)  imports of goods and services decrease 
D)  exports of goods and services decrease

Question 6

If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world,the country is a

Accepted Answer

A)  net borrower. 
B)  debtor nation. 
C)  net lender. 
D)  creditor nation.

Question 7

The real exchange rate is

Accepted Answer

A)  the relative price of U.S. produced goods to foreign produced goods. 
B)  the nominal exchange rate multiplied by the ratio of the foreign price level to the U.S. price level. 
C)  the money price of foreign produced goods relative to the money price of U.S. produced goods. 
D)  a measure of how much currency exchanges for a unit of another currency.

Question 8

When the U.S.exchange rate rises,foreign goods become ________ and U.S.imports ________.

Accepted Answer

A)  less expensive; increase 
B)  more expensive; decrease 
C)  less expensive; decrease 
D)  more expensive; increase

Question 9

Suppose that the U.S.government gives foreign aid to Turkey.This transaction would directly

Accepted Answer

A)  increase the U.S. current account. 
B)  decrease the U.S. current account. 
C)  increase the U.S. capital and financial account. 
D)  decrease the U.S. capital and financial account.

Question 10

Last year the exchange rate between U.S.dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here,the dollar ________ against the peso,and the peso ________ against the dollar

Accepted Answer

A)  appreciated; depreciated 
B)  depreciated; appreciated 
C)  appreciated; appreciated 
D)  depreciated; depreciated

Question 11

Which of the following is included in a nation's capital and financial account?
I. the purchase of foreign stocks and bonds
II. the sale of foreign stocks and bonds
III. importing a piece of capital equipment

Accepted Answer

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

Question 12

The demand curve for U.S.dollars slopes downward because as the dollar ________ U.S.goods become ________ expensive to foreign residents,so they purchase fewer U.S.goods,and the quantity of dollars demanded decreases.

Accepted Answer

A)  appreciates; more 
B)  appreciates; less 
C)  depreciates; more 
D)  depreciates; less

Question 13

The ________ the expected profit from holding a foreign currency,the greater is the ________ in the foreign exchange market.

Accepted Answer

A)  larger; quantity demanded of dollars 
B)  smaller; quantity demanded of foreign currency 
C)  larger; quantity supplied of dollars 
D)  None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency.

Question 14

The private sector surplus or deficit equals

Accepted Answer

A)  saving minus investment. 
B)  net taxes minus government purchases. 
C)  investment minus saving. 
D)  government purchases minus net taxes.

Question 15

The exchange rate is the price at which the ________ of one country exchanges for the ________ of another country.

Accepted Answer

A)  currency; goods 
B)  goods; goods 
C)  currency; currency 
D)  currency; financial instruments

Question 16

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Item}\
\hline \text {Exports of goods and }\
\text {services}\
\hline \text {Imports of goods and}\ 
\text {services}\
\hline \text {Net interest income}\
\hline \text {Net transfers}\
\hline \text {Urland's investment }\
\text {abroad}\
\hline \text {Foreign investment in}\
\text {Urland }\
\hline
\end{array}
\begin{array}{c|}
\hline\text { Billions of dollars }\
\hline635 \
\
\hline-555\
\
\hline-18 \
\hline22 \
\hline-467 \
\
\hline 321 \
\
\hline 
\end{array}
\end{array}$

-The above table shows some of the balance of payments accounts for Urland.What is Urland's balance on the current account?

Accepted Answer

A)  $80 billion 
B)  $62 billion 
C)  $84 billion 
D)  $47 billion

Question 17

Which of the following occurrences would NOT shift the demand curve for U.S.dollars in the foreign exchange market?

Accepted Answer

A)  an increase in the U.S. exchange rate 
B)  an increase in the expected future U.S. exchange rate 
C)  an increase in U.S. interest rates 
D)  an increase in foreign interest rates

Question 18

If the nominal exchange rate rises and price levels stay constant,the real exchange rate will

Accepted Answer

A)  rise 
B)  fall 
C)  stay constant 
D)  could rise, fall or stay constant

Question 19

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars.Discuss whether the factor increases or decreases the number of dollars people want to hold.

Accepted Answer

The answer of Name three factors in the foreign exchange...

Question 20

-The figure above shows the demand and supply of dollars in the foreign exchange market. At a price of 2.40 Brazilian reals per dollar,

Accepted Answer

A)  there will be a shortage of dollars. 
B)  $40 billion dollars will be demanded. 
C)  $40 billion dollars will be supplied. 
D)  there will be a surplus of dollars.

Exam 9: The Exchange Rate and the Balance of Payments

If the official settlements account is zero,whenever the United States has a current account deficit,it must also have a capital account deficit.

Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar.Then the peso has against the dollar and the dollar has against the peso.

In June 2008,the dollar bought 1.6 Brazilian reals and in October,the dollar bought 2.4 reals. This resulted in a

The value of net exports increases when the value of ________.

If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world,the country is a

The real exchange rate is

When the U.S.exchange rate rises,foreign goods become and U.S.imports .

Suppose that the U.S.government gives foreign aid to Turkey.This transaction would directly

Last year the exchange rate between U.S.dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here,the dollar against the peso,and the peso against the dollar

Which of the following is included in a nation's capital and financial account? I. the purchase of foreign stocks and bonds II. the sale of foreign stocks and bonds III. importing a piece of capital equipment

The demand curve for U.S.dollars slopes downward because as the dollar U.S.goods become expensive to foreign residents,so they purchase fewer U.S.goods,and the quantity of dollars demanded decreases.

The the expected profit from holding a foreign currency,the greater is the in the foreign exchange market.

The private sector surplus or deficit equals

The exchange rate is the price at which the of one country exchanges for the of another country.

Which of the following occurrences would NOT shift the demand curve for U.S.dollars in the foreign exchange market?

If the nominal exchange rate rises and price levels stay constant,the real exchange rate will

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars.Discuss whether the factor increases or decreases the number of dollars people want to hold.

-The figure above shows the demand and supply of dollars in the foreign exchange market. At a price of 2.40 Brazilian reals per dollar,