Question 1

A trade deficit is balanced by a:

Accepted Answer

A)  trade surplus. 
B)  capital account surplus. 
C)  capital account deficit. 
D)  current account surplus.

Question 2

The real exchange rate is:

Accepted Answer

A)  an increase in the price of one currency in terms of another currency. 
B)  a decrease in the price of a currency in terms of another currency. 
C)  the rate at which you can exchange one currency for another. 
D)  the rate at which you can exchange the goods and services of one country for the goods and services of another.

Question 3

If the Federal Reserve made the decision to decrease the money supply in the United States,this would lead to:

Accepted Answer

A)  an appreciation of the U.S.dollar. 
B)  an increase in the relative price of U.S.exports. 
C)  a decrease in AD. 
D)  an appreciation of the U.S.dollar,an increase in the relative price of U.S.exports,and a decrease in AD.

Question 4

The IMF exists to:

Accepted Answer

A)  facilitate the flow of capital to poor countries. 
B)  help expand the monetary base of the European Union. 
C)  provide loans in a financial emergency. 
D)  oversee new private investment in all nations.

Question 5

The current account:

Accepted Answer

A)  is the sum of the balance of trade,net income on capital held abroad,and net transfer payments. 
B)  is the difference between exports and imports. 
C)  measures changes in foreign ownership of domestic assets,including financial assets like stocks and bonds,as well as physical assets. 
D)  is a summary of all of the economic transactions between residents of one country and residents of the rest of the world.

Question 6

The balance of payments is always balanced.

Accepted Answer

A) True 
 B)False

Question 7

A situation where foreign capital inflow exceeds domestic capital outflow to other nations is called a(n):

Accepted Answer

A)  trade surplus. 
B)  capital surplus. 
C)  balance of payments surplus. 
D)  exchange rate surplus.

Question 8

When a country has a pegged exchange rate,its government or central bank has promised to convert its currency into another currency at a fixed rate.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the demand for a country's exports tends to decrease the value of its currency.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would increase the demand for U.S.dollars?

Accepted Answer

A)  American consumers begin to import more automobiles manufactured abroad. 
B)  Japan increases its purchases of U.S.corn. 
C)  The credit rating of U.S.government bonds is downgraded. 
D)  More U.S.citizens begin to travel abroad.

Question 11

The balance of payments is an annual summary of the United States' federal budget transactions.

Accepted Answer

A) True 
 B)False

Question 12

Foreign portfolio investment is included in the _____ account.

Accepted Answer

A)  current 
B)  trade 
C)  direct investment 
D)  capital

Question 13

All over the world,drug dealers keep their wealth in the form of U.S.dollar bills,which they bury in their backyards.What would happen to the value of the dollar if drug dealers decided to switch to euros instead of U.S.dollars?

Accepted Answer

A)  The dollar would appreciate. 
B)  The dollar would depreciate. 
C)  There would be no change,since the dollars that were buried were not circulating. 
D)  There would be no change,since the euros that are to be buried won't circulate.

Question 14

The nominal exchange rate in Kenya is 94 Kenyan shillings per U.S.dollar.A burger in the United States costs $2.A similar burger at Steers Restaurant in Kenya costs 94 shillings.The real exchange rate in terms of U.S.burgers for Kenyan burgers is:

Accepted Answer

A)  1:1. 
B)  1:2. 
C)  1:1/2. 
D)  2:1.

Question 15

A low saving rate in the United States is one possible reason for the U.S.:

Accepted Answer

A)  current account deficit. 
B)  capital account surplus. 
C)  trade deficit. 
D)  current account deficit,capital account surplus,and trade deficit.

Question 16

Would you worry about a trade deficit with one country? Why or why not? How would a trade deficit with the rest of the world be different?

Accepted Answer

The answer of Would you worry about a trade deficit...

Question 17

A country with a negative current account (trade deficit)has:

Accepted Answer

A)  a negative capital account. 
B)  a positive capital account. 
C)  no capital account. 
D)  large budget deficits.

Question 18

With a floating exchange rate,when the Federal Reserve increases the U.S.money supply,the U.S.dollar will:

Accepted Answer

A)  appreciate. 
B)  depreciate. 
C)  become more scarce. 
D)  become more valuable.

Question 19

Ultimately,the value of a currency is derived from the value of what it can purchase.

Accepted Answer

A) True 
 B)False

Question 20

In which currency system is the exchange rate determined only by supply and demand in the currency market?

Accepted Answer

A)  floating exchange rate 
B)  pegged exchange rate 
C)  dollarization 
D)  managed float

Exam 20: International Finance

A trade deficit is balanced by a:

The real exchange rate is:

If the Federal Reserve made the decision to decrease the money supply in the United States,this would lead to:

The IMF exists to:

The current account:

The balance of payments is always balanced.

A situation where foreign capital inflow exceeds domestic capital outflow to other nations is called a(n) :

When a country has a pegged exchange rate,its government or central bank has promised to convert its currency into another currency at a fixed rate.

An increase in the demand for a country's exports tends to decrease the value of its currency.

Which of the following would increase the demand for U.S.dollars?

The balance of payments is an annual summary of the United States' federal budget transactions.

Foreign portfolio investment is included in the _____ account.

All over the world,drug dealers keep their wealth in the form of U.S.dollar bills,which they bury in their backyards.What would happen to the value of the dollar if drug dealers decided to switch to euros instead of U.S.dollars?

The nominal exchange rate in Kenya is 94 Kenyan shillings per U.S.dollar.A burger in the United States costs $2.A similar burger at Steers Restaurant in Kenya costs 94 shillings.The real exchange rate in terms of U.S.burgers for Kenyan burgers is:

A low saving rate in the United States is one possible reason for the U.S.:

Would you worry about a trade deficit with one country? Why or why not? How would a trade deficit with the rest of the world be different?

A country with a negative current account (trade deficit) has:

With a floating exchange rate,when the Federal Reserve increases the U.S.money supply,the U.S.dollar will:

Ultimately,the value of a currency is derived from the value of what it can purchase.

In which currency system is the exchange rate determined only by supply and demand in the currency market?