Question 1

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a

Accepted Answer

A)   balance of trade (goods)  surplus.
B)   balance of payments surplus.
C)   positive balance on its current account.
D)   positive balance on goods and services.E) A) and B)
F) A) and C)

Question 2

In recent years, the United States has had large

Accepted Answer

A)   current account surpluses.
B)   capital and ﬁnancial account deﬁcits.
C)   balance of trade deﬁcits.
D)   balance of payments surpluses.E) B) and C)
F) A) and B)

Question 3

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Accepted Answer

A)   U.S. imports will increase more than U.S. exports.
B)   U.S. exports will increase more than U.S. imports.
C)   U.S. imports will decrease, but U.S. exports will increase.
D)   There will be no effect on U.S. imports and exports.E) B) and C)
F) C) and D)

Question 4

(1)  Goods Exports +$200 (2)  Balance on Capital Account 0 (3)  Net Transfers 0 (4)  Imports of Services −100 (5)  Net Investment Income 0 (6)  US Purchases of Assets Abroad −50 (7)  Goods Imports −250 (8)  Foreign Purchases of Assets in the US +150 (9)  Exports of Services +50\begin{array} { | l | r | } \hline 	ext { (1)  Goods Exports } & + \$ 200 \\hline 	ext { (2)  Balance on Capital Account } & 0 \\hline 	ext { (3)  Net Transfers } & 0 \\hline 	ext { (4)  Imports of Services } & - 100 \\hline 	ext { (5)  Net Investment Income } & 0 \\hline 	ext { (6)  US Purchases of Assets Abroad } & - 50 \\hline 	ext { (7)  Goods Imports } & - 250 \\hline 	ext { (8)  Foreign Purchases of Assets in the US } & + 150 \\hline 	ext { (9)  Exports of Services } & + 50 \\hline\end{array} (1)  Goods Exports  (2)  Balance on Capital Account  (3)  Net Transfers  (4)  Imports of Services  (5)  Net Investment Income  (6)  US Purchases of Assets Abroad  (7)  Goods Imports  (8)  Foreign Purchases of Assets in the US  (9)  Exports of Services ​+$20000−1000−50−250+150+50​​  The plus items in the table are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Zippo has

Accepted Answer

A)   a current account surplus.
B)   a ?nancial account de?cit.
C)   a trade surplus on goods and services.
D)   neither a balance of payments de?cit nor a surplus. E) A) and B)
F) A) and C)

Question 5

Explain the relationship between the current account and the capital and ﬁnancial account in the
balance of payments.

Accepted Answer

The balance on the current account and t...

Question 6

In 2018, the United States' balance on goods was

Accepted Answer

A)   −$891 billion.
B)   +$891 billion.
C)   −$486 billion.
D)   +$1,672 billion.E) None of the above
F) B) and C)

Question 7

Refer to the diagram, where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. Under
A system of ﬁxed exchange rates, the shift in demand from D to D' will require the United States to

Accepted Answer

A)   increase its foreign exchange reserves.
B)   increase the domestic money supply of dollars.
C)   reduce its foreign exchange reserves.
D)   appreciate the Swiss franc.E) A) and B)
F) B) and C)

Question 8

How would a substantial appreciation in the European euro in the foreign exchange market affect
the quantity of imports of European products by the U.S.? How would such an appreciation of the
European euro affect travel by Americans to Europe?

Accepted Answer

If the euro increased in value (apprecia...

Question 9

The oﬃcial reserves of a nation's central bank include

Accepted Answer

A)   foreign currencies only.
B)   foreign currencies, bonds issued by foreign governments, gold reserves, and special reserves held at the International Monetary Fund.
C)   its stock of domestic and foreign currencies.
D)   all domestic and foreign ﬁnancial assets held by the central bank, including gold reserves.E) A) and B)
F) All of the above

Question 10

In the balance of payments statement, a current account surplus will be matched by a

Accepted Answer

A)   capital and ﬁnancial accounts deﬁcit.
B)   capital and ﬁnancial accounts surplus.
C)   trade deﬁcit.
D)   trade surplus.E) C) and D)
F) A) and C)

Question 11

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $0.10. We can conclude that

Accepted Answer

A)   1 yen = 280 Swiss francs.
B)   1 yen = 14 Swiss francs.
C)   1 Swiss franc = 28 yen.
D)   1 Swiss franc = 14 yen.E) C) and D)
F) B) and D)

Question 12

(1)  US Goods Exports +$100 (2)  US Goods Imports −80 (3)  US Service Exports +40 (4)  US Service Imports −90 (5)  Net Investment Income +20 (6)  Net Transfers −15 (7)  Foreign Purchases of Assets in the United States +30 (8)  US Purchases of Foreign Assets Abroad −10 (9)  Balance on Capital Account +5\begin{array} { | l | c | } \hline 	ext { (1)  US Goods Exports } & + \$ 100 \\hline 	ext { (2)  US Goods Imports } & - 80 \\hline 	ext { (3)  US Service Exports } & + 40 \\hline 	ext { (4)  US Service Imports } & - 90 \\hline 	ext { (5)  Net Investment Income } & + 20 \\hline 	ext { (6)  Net Transfers } & - 15 \\hline 	ext { (7)  Foreign Purchases of Assets in the United States } & + 30 \\hline 	ext { (8)  US Purchases of Foreign Assets Abroad } & - 10 \\hline 	ext { (9)  Balance on Capital Account } & + 5 \\hline\end{array} (1)  US Goods Exports  (2)  US Goods Imports  (3)  US Service Exports  (4)  US Service Imports  (5)  Net Investment Income  (6)  Net Transfers  (7)  Foreign Purchases of Assets in the United States  (8)  US Purchases of Foreign Assets Abroad  (9)  Balance on Capital Account ​+$100−80+40−90+20−15+30−10+5​​  The table contains hypothetical data for the U.S. balance of payments. All ?gures are in billions of dollars. Item 6 indicates that

Accepted Answer

A)   the United States used $15 billion of its international monetary reserves to balance its international payments.
B)   the United States provided $15 billion of foreign aid to developing nations.
C)   Americans provided a net amount of $15 billion in remittances to the rest of the world.
D)   Americans received a net amount of $15 billion in remittances from the rest of the world. E) B) and D)
F) B) and C)

Question 13

(Last Word)  Which nations stand to lose the most from belonging to a common currency?

Accepted Answer

A)   those whose macroeconomic conditions differ signiﬁcantly from the rest of the nations in the currency area
B)   those who engage in the largest amount of foreign trade
C)   those with the largest economies of the nations in the currency area
D)   those with the least restrictive laws and lowest production costsE) A) and B)
F) B) and D)

Question 14

If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of U.S.
dollars, measured in terms of British pounds, is also rising.

Accepted Answer

A) True 
 B)False

Question 15

There must always be a balance of a nation's

Accepted Answer

A)   goods exports and gold imports.
B)   total international payments.
C)   imports and exports of goods and services.
D)   net transfers and net investment income.E) C) and D)
F) None of the above

Question 16

The exchange-rate system that we now have for major currencies like the U.S. dollar, yen, and euro
is a "managed-ﬂoating" system.

Accepted Answer

A) True 
 B)False

Question 17

If currency speculators believe South Korea will have much lower inﬂation in the future than the United States, then this event is most likely to cause the South Korean won to

Accepted Answer

A)   depreciate and the U.S. dollar to depreciate.
B)   depreciate and the U.S. dollar to appreciate.
C)   appreciate and the U.S. dollar to appreciate.
D)   appreciate and the U.S. dollar to depreciate.E) B) and D)
F) A) and D)

Question 18

What are the implications of persistent U.S. trade deﬁcits?

Accepted Answer

Most economists see both beneﬁts and cos...

Question 19

Under the managed ﬂoating system of exchange rates,

Accepted Answer

A)   all exchange rates vary with changes in the free-market prices of gold.
B)   industrialized nations meet once each year to negotiate readjustments in their exchange rates.
C)   exchange rates are essentially ﬂexible, but governments intervene to offset disorderly ﬂuctuations in rates.
D)   exchange rates are adjusted at the discretion of the IMF.E) A) and D)
F) A) and C)

Question 20

When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has

Accepted Answer

A)   depreciated.
B)   appreciated.
C)   inﬂated.
D)   deﬂated.E) A) and B)
F) A) and C)

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has

Correct Answer
verified

Explain the relationship between the current account and the capital and ﬁnancial account in the balance of payments.

Correct Answer
verified
The balance on the current account and t...
View Answer

How would a substantial appreciation in the European euro in the foreign exchange market affect the quantity of imports of European products by the U.S.? How would such an appreciation of the European euro affect travel by Americans to Europe?

Correct Answer
verified
If the euro increased in value (apprecia...
View Answer

Correct Answer
verified

Under the managed ﬂoating system of exchange rates,

Correct Answer
verified

If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of U.S. dollars, measured in terms of British pounds, is also rising.

Correct Answer
verified

There must always be a balance of a nation's

Correct Answer
verified

Refer to the diagram, where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. Under A system of ﬁxed exchange rates, the shift in demand from D to D' will require the United States to

Correct Answer
verified

What are the implications of persistent U.S. trade deﬁcits?

Correct Answer
verified
Most economists see both beneﬁts and cos...
View Answer

If currency speculators believe South Korea will have much lower inﬂation in the future than the United States, then this event is most likely to cause the South Korean won to

Correct Answer
verified

In recent years, the United States has had large

Correct Answer
verified

In the balance of payments statement, a current account surplus will be matched by a

Correct Answer
verified

(Last Word) Which nations stand to lose the most from belonging to a common currency?

Correct Answer
verified

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a

Correct Answer
verified

In 2018, the United States' balance on goods was

Correct Answer
verified

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $0.10. We can conclude that

Correct Answer
verified

The exchange-rate system that we now have for major currencies like the U.S. dollar, yen, and euro is a "managed-ﬂoating" system.

Correct Answer
verified

The oﬃcial reserves of a nation's central bank include

Correct Answer
verified

Correct Answer
verified

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Correct Answer
verified

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has

Correct AnswerverifiedShow Answer

Explain the relationship between the current account and the capital and ﬁnancial account in the balance of payments.

Correct AnswerverifiedThe balance on the current account and t...View AnswerShow Answer

How would a substantial appreciation in the European euro in the foreign exchange market affect the quantity of imports of European products by the U.S.? How would such an appreciation of the European euro affect travel by Americans to Europe?

Correct AnswerverifiedIf the euro increased in value (apprecia...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Under the managed ﬂoating system of exchange rates,

Correct AnswerverifiedShow Answer

If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of U.S. dollars, measured in terms of British pounds, is also rising.

Correct AnswerverifiedShow Answer

There must always be a balance of a nation's

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are the implications of persistent U.S. trade deﬁcits?

Correct AnswerverifiedMost economists see both beneﬁts and cos...View AnswerShow Answer

If currency speculators believe South Korea will have much lower inﬂation in the future than the United States, then this event is most likely to cause the South Korean won to

Correct AnswerverifiedShow Answer

In recent years, the United States has had large

Correct AnswerverifiedShow Answer

In the balance of payments statement, a current account surplus will be matched by a

Correct AnswerverifiedShow Answer

(Last Word) Which nations stand to lose the most from belonging to a common currency?

Correct AnswerverifiedShow Answer

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a

Correct AnswerverifiedShow Answer

In 2018, the United States' balance on goods was

Correct AnswerverifiedShow Answer

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $0.10. We can conclude that

Correct AnswerverifiedShow Answer

The exchange-rate system that we now have for major currencies like the U.S. dollar, yen, and euro is a "managed-ﬂoating" system.

Correct AnswerverifiedShow Answer

The oﬃcial reserves of a nation's central bank include

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The balance on the current account and t...
View Answer

Correct Answer
verified
If the euro increased in value (apprecia...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Most economists see both beneﬁts and cos...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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