Question 1

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the supply-of-pounds curve is upsloping because

Accepted Answer

A)   fewer British pounds can be purchased per dollar if U.S. dollars become more expensive.
B)   fewer U.S. dollars can be purchased per pound if the British pounds become less expensive.
C)   the British will purchase more U.S. goods or services when the dollar price of pounds rises.
D)   the British will purchase more U.S. goods or services when the dollar price of pounds falls.E) A) and B)
F) C) and D)

Question 2

(1)   (2)   (3)   Quantity of Libras  Demanded (Billions)   Dollar Price  of Libras  Quantity of Libras  Supplied (Billions)  100$532520042003003100400275\begin{array} { | c | c | c | } \hline 	ext { (1)  } & 	ext { (2)  } & 	ext { (3)  } \\hline \begin{array} { c } 	ext { Quantity of Libras } \	ext { Demanded (Billions)  }\end{array} & \begin{array} { c } 	ext { Dollar Price } \	ext { of Libras }\end{array} & \begin{array} { c } 	ext { Quantity of Libras } \	ext { Supplied (Billions)  }\end{array} \\hline 100 & \$ 5 & 325 \\hline 200 & 4 & 200 \\hline 300 & 3 & 100 \\hline 400 & 2 & 75 \\hline\end{array} (1)   Quantity of Libras  Demanded (Billions)  ​100200300400​ (2)   Dollar Price  of Libras ​$5432​ (3)   Quantity of Libras  Supplied (Billions)  ​32520010075​​  The table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of ?exible exchange rates is in place. Suppose that Libra decided to import
More U.S. products. We would expect the quantity of libras

Accepted Answer

A)   demanded at each dollar price to rise and the dollar to depreciate relative to the libra.
B)   demanded at each dollar price to fall and the dollar to appreciate relative to the libra.
C)   supplied at each dollar price to rise and the dollar to appreciate relative to the libra.
D)   supplied at each dollar price to fall and the dollar to depreciate relative to the libra. E) None of the above
F) A) and B)

Question 3

Assume that Brazil and Mexico have ﬂoating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inﬂation,

Accepted Answer

A)   gold bullion will ﬂow into Brazil.
B)   the Brazilian real will depreciate.
C)   the Mexican peso will depreciate.
D)   the Brazilian real will appreciate.E) B) and D)
F) A) and B)

Question 4

In terms of individual nations, the largest U.S. trade deﬁcit is with

Accepted Answer

A)   Japan.
B)   Mexico.
C)   China.
D)   Canada.E) None of the above
F) B) and C)

Question 5

Suppose that a U.S. ﬁrm converts dollars into pounds in order to invest in a British enterprise in the U.K. A year later, the return on the investment is 12 percent in terms of pounds. If, during that period,
The dollar appreciated against the pound, then the return on the investment in dollar terms would be

Accepted Answer

A)   greater than 12 percent.
B)   less than 12 percent.
C)   also 12 percent.
D)   dependent on the inﬂation rate, not the exchange rate.E) B) and D)
F) B) and C)

Question 6

When a U.S. agribusiness company sells 10,000 units of cow vaccine to a company in France, this transaction will represent a(n)

Accepted Answer

A)   inﬂow of money on the current account of the U.S. balance of payments.
B)   outﬂow of money on the current account of the U.S. balance of payments.
C)   credit on the ﬁnancial account of the U.S. balance of payments.
D)   debit on the ﬁnancial account of the U.S. balance of payments.E) None of the above
F) B) and C)

Question 7

(1)  Goods exports +$220 (2)  Goods imports −328 (3)  Exports of services +54 (4)  Imports of services −55 (5)  Net investment income +18 (6)  Net transfers −11 (7)  Capital account −1 (8)  Foreign purchases of Econland assets +124 (9)  Econland purchases of foreign assets −21\begin{array} { | l | c | } \hline 	ext { (1)  Goods exports } & + \$ 220 \\hline 	ext { (2)  Goods imports } & - 328 \\hline 	ext { (3)  Exports of services } & + 54 \\hline 	ext { (4)  Imports of services } & - 55 \\hline 	ext { (5)  Net investment income } & + 18 \\hline 	ext { (6)  Net transfers } & - 11 \\hline 	ext { (7)  Capital account } & - 1 \\hline 	ext { (8)  Foreign purchases of Econland assets } & + 124 \\hline 	ext { (9)  Econland purchases of foreign assets } & - 21 \\hline\end{array} (1)  Goods exports  (2)  Goods imports  (3)  Exports of services  (4)  Imports of services  (5)  Net investment income  (6)  Net transfers  (7)  Capital account  (8)  Foreign purchases of Econland assets  (9)  Econland purchases of foreign assets ​+$220−328+54−55+18−11−1+124−21​​  The table contains balance of payments data for the hypothetical nation of Econland. All ?gures are in billions of dollars. Econland's balance on the capital and ?nancial accounts is a

Accepted Answer

A)   de?cit of $110 billion.
B)   surplus of $92 billion.
C)   surplus of $102 billion.
D)   surplus of $103 billion. E) All of the above
F) C) and D)

Question 8

In one year the United States had a current account deﬁcit of $461 billion. The balance on the capital account was −$8 billion. What was the balance on the ﬁnancial account?

Accepted Answer

A)   −$461 billion
B)   +$469 billion
C)   −$469 billion
D)   +$453 billionE) B) and D)
F) B) and C)

Question 9

In the balance of payments of the United States, U.S. goods imports are recorded as a

Accepted Answer

A)   positive entry.
B)   capital account entry.
C)   current account entry.
D)   ﬁnancial account entry.E) B) and C)
F) None of the above

Question 10

The exchange rate for the Mexican peso changes from $1 = 5 pesos to $1 = 6 pesos. This change will lead to

Accepted Answer

A)   U.S. goods becoming less expensive for Mexicans.
B)   Mexican goods becoming more expensive for Americans.
C)   an increase in U.S. exports to Mexico.
D)   a decrease in U.S. exports to Mexico.E) A) and C)
F) All of the above

Question 11

U.S. exports create a

Accepted Answer

A)   supply of foreign currencies and a demand for dollars in the foreign exchange markets.
B)   demand for foreign currencies and a supply of dollars in the foreign exchange markets.
C)   supply of foreign currencies and a supply of dollars in the foreign exchange markets.
D)   demand for foreign currencies and a demand for dollars in the foreign exchange markets.E) A) and B)
F) A) and C)

Question 12

Accepted Answer

A)   price of a pound will increase to $3.
B)   price of a dollar will increase to 3 pounds.
C)   shortage equal to ab would be met using international monetary reserves.
D)   payment deﬁcit will cause changes in domestic price and income levels, shifting demand to the left and supply to the right, and reestablishing the original exchange rate.E) A) and B)
F) A) and D)

Question 13

The basic type of intervention by central banks under the managed ﬂoating exchange rate system is to

Accepted Answer

A)   readjust the peg for exchange rates.
B)   buy and sell currencies to inﬂuence supply and demand for foreign exchange.
C)   renegotiate the rate at which foreign currencies can be converted into gold.
D)   make pronouncements but then do nothing and let the market set the exchange rate.E) B) and D)
F) A) and D)

Question 14

Deﬁne international asset transactions, and then give an example.

Accepted Answer

International asset transactions are the...

Question 15

Which of the following would call for inﬂows of money to the United States?

Accepted Answer

A)   Gold ﬂows into the United States.
B)   U.S. ﬁrms sell insurance to Brazilian shippers.
C)   The United States sends foreign aid to developing countries.
D)   The United States imports German automobiles.E) A) and D)
F) A) and C)

Question 16

Consider the currency market for British pounds and U.S. dollars. A decrease in the supply of British pounds results in

Accepted Answer

A)   an appreciation of the pound and a depreciation of the dollar.
B)   a depreciation of the pound and a depreciation of the dollar.
C)   an appreciation of the pound and an appreciation of the dollar.
D)   a depreciation of the pound and an appreciation of the dollar.E) A) and D)
F) B) and C)

Question 17

Which of the following has contributed to large U.S. trade deﬁcits in recent years?

Accepted Answer

A)   China ﬁxing its exchange rate
B)   rapid decreases in the price of oil that have triggered dramatic increases in oil imports
C)   a rising U.S. saving rate
D)   All of these have contributed.E) All of the above
F) B) and D)

Question 18

Assume that Japan and South Korea have ﬂexible exchange rates. Other things equal, if economic growth is more rapid in Japan than in South Korea,

Accepted Answer

A)   gold bullion will ﬂow out of Japan.
B)   the Japanese yen will depreciate.
C)   the South Korean won will depreciate.
D)   the yen and won exchange rate will stay constant.E) B) and D)
F) A) and D)

Question 19

When a Japanese company buys a U.S. software company, this transaction will be a(n)

Accepted Answer

A)   credit on the current account of the U.S. balance of payments.
B)   debit on the current account of the U.S. balance of payments.
C)   inﬂow of money on the ﬁnancial account of the U.S. balance of payments.
D)   outﬂow of money on the ﬁnancial account of the U.S. balance of payments.E) A) and B)
F) A) and C)

Question 20

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Accepted Answer

A)   money outﬂow.
B)   money inﬂow.
C)   current account item.
D)   debit, or outpayment.E) A) and B)
F) B) and C)

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

In the balance of payments of the United States, U.S. goods imports are recorded as a

Correct Answer
verified

Assume that Japan and South Korea have ﬂexible exchange rates. Other things equal, if economic growth is more rapid in Japan than in South Korea,

Correct Answer
verified

When a Japanese company buys a U.S. software company, this transaction will be a(n)

Correct Answer
verified

Deﬁne international asset transactions, and then give an example.

Correct Answer
verified
International asset transactions are the...
View Answer

Which of the following has contributed to large U.S. trade deﬁcits in recent years?

Correct Answer
verified

When a U.S. agribusiness company sells 10,000 units of cow vaccine to a company in France, this transaction will represent a(n)

Correct Answer
verified

In one year the United States had a current account deﬁcit of $461 billion. The balance on the capital account was −$8 billion. What was the balance on the ﬁnancial account?

Correct Answer
verified

The basic type of intervention by central banks under the managed ﬂoating exchange rate system is to

Correct Answer
verified

In terms of individual nations, the largest U.S. trade deﬁcit is with

Correct Answer
verified

Correct Answer
verified

U.S. exports create a

Correct Answer
verified

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the supply-of-pounds curve is upsloping because

Correct Answer
verified

Consider the currency market for British pounds and U.S. dollars. A decrease in the supply of British pounds results in

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following would call for inﬂows of money to the United States?

Correct Answer
verified

Assume that Brazil and Mexico have ﬂoating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inﬂation,

Correct Answer
verified

The exchange rate for the Mexican peso changes from $1 = 5 pesos to $1 = 6 pesos. This change will lead to

Correct Answer
verified

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Correct Answer
verified

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

In the balance of payments of the United States, U.S. goods imports are recorded as a

Correct AnswerverifiedShow Answer

Assume that Japan and South Korea have ﬂexible exchange rates. Other things equal, if economic growth is more rapid in Japan than in South Korea,

Correct AnswerverifiedShow Answer

When a Japanese company buys a U.S. software company, this transaction will be a(n)

Correct AnswerverifiedShow Answer

Deﬁne international asset transactions, and then give an example.

Correct AnswerverifiedInternational asset transactions are the...View AnswerShow Answer

Which of the following has contributed to large U.S. trade deﬁcits in recent years?

Correct AnswerverifiedShow Answer

When a U.S. agribusiness company sells 10,000 units of cow vaccine to a company in France, this transaction will represent a(n)

Correct AnswerverifiedShow Answer

In one year the United States had a current account deﬁcit of $461 billion. The balance on the capital account was −$8 billion. What was the balance on the ﬁnancial account?

Correct AnswerverifiedShow Answer

The basic type of intervention by central banks under the managed ﬂoating exchange rate system is to

Correct AnswerverifiedShow Answer

In terms of individual nations, the largest U.S. trade deﬁcit is with

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

U.S. exports create a

Correct AnswerverifiedShow Answer

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the supply-of-pounds curve is upsloping because

Correct AnswerverifiedShow Answer

Consider the currency market for British pounds and U.S. dollars. A decrease in the supply of British pounds results in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would call for inﬂows of money to the United States?

Correct AnswerverifiedShow Answer

Assume that Brazil and Mexico have ﬂoating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inﬂation,

Correct AnswerverifiedShow Answer

The exchange rate for the Mexican peso changes from $1 = 5 pesos to $1 = 6 pesos. This change will lead to

Correct AnswerverifiedShow Answer

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
International asset transactions are the...
View Answer

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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