Question 1

All of the following would add to the demand for U.S. dollars except

Accepted Answer

A)   long-term capital inﬂows.
B)   foreign travel by United States citizens.
C)   exports of commodities from the United States.
D)   travel by foreigners on United States airlines.E) A) and C)
F) A) and B)

Question 2

In recent years, the United States has had large

Accepted Answer

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

Question 3

If there is a recession in the United Kingdom and a reduction in British imports, and an economic boom in the United States and an increase in U.S. imports, then these events are most likely to
Cause the British pound to

Accepted Answer

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

Question 4

What are the major components of the current account in the balance of payments? How is the
current account balance determined?

Accepted Answer

The current account summarizes United St...

Question 5

U.S. goods exports +$390 U.S. goods imports −498 U.S. service exports +133 U.S. service imports −107 Net investment income +12 Net transfers −22 Capital account −5 Foreign purchases of U.S. assets +156 U.S. purchases of foreign assets −59\begin{array} { | l | r | } \hline 	ext { U.S. goods exports } & + \$ 390 \\hline 	ext { U.S. goods imports } & - 498 \\hline 	ext { U.S. service exports } & + 133 \\hline 	ext { U.S. service imports } & - 107 \\hline 	ext { Net investment income } & + 12 \\hline 	ext { Net transfers } & - 22 \\hline 	ext { Capital account } & - 5 \\hline 	ext { Foreign purchases of U.S. assets } & + 156 \\hline 	ext { U.S. purchases of foreign assets } & - 59 \\hline\end{array} U.S. goods exports  U.S. goods imports  U.S. service exports  U.S. service imports  Net investment income  Net transfers  Capital account  Foreign purchases of U.S. assets  U.S. purchases of foreign assets ​+$390−498+133−107+12−22−5+156−59​​  The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All ?gures are in billions of dollars. What does the ?gure for net investment income indicate?

Accepted Answer

A)   Americans invested more abroad than the amount foreigners invested in the U.S.
B)   the size of the net in?ow of foreign investment to the United States in that year
C)   the net amount Americans received as interest and dividends on existing American investments abroad
D)   the net amount Americans paid as interest and dividends on existing foreign investments in the United States E) A) and D)
F) B) and C)

Question 6

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Accepted Answer

A)   the peso has appreciated in value.
B)   Americans will buy more Mexican goods and services.
C)   more U.S. goods and services will be demanded by the Mexicans.
D)   the dollar has depreciated in value.E) C) and D)
F) B) and D)

Question 7

Consider the currency market for British pounds and U.S. dollars. An increase in the supply of British pounds

Accepted Answer

A)   results in an appreciation of the pound and a depreciation of the dollar.
B)   results in a depreciation of the pound and a depreciation of the dollar.
C)   is equivalent to an increase in the demand for the U.S. dollar.
D)   Is equivalent to a decrease in the demand for the U.S. dollar.E) B) and D)
F) B) and C)

Question 8

Two of the implications of large U.S. trade deﬁcits for the United States are

Accepted Answer

A)   decreased current consumption and decreased indebtedness to foreigners.
B)   reduced budget deﬁcits and decreased indebtedness to foreigners.
C)   reduced current consumption and higher saving.
D)   increased current consumption and increased indebtedness to foreigners.E) All of the above
F) A) and D)

Question 9

Suppose that the United States ﬁxes the dollar-pound exchange rate. In the process of maintaining the ﬁxed exchange rate, the U.S. central bank regularly ﬁnds itself in a position of having to increase
Its reserves of pounds. Based on this, we could conclude that

Accepted Answer

A)   the ﬁxed dollar-pound exchange rate is consistently below the equilibrium exchange rate that would be produced by a private foreign exchange market.
B)   the ﬁxed dollar-pound exchange rate consistently exceeds the equilibrium exchange rate that would be produced by a private foreign exchange market.
C)   the ﬁxed dollar-pound exchange rate is a good approximation of the exchange rate that would be produced by a private foreign exchange market.
D)   the U.S. central bank is regularly having to reduce the domestic money supply.E) A) and D)
F) B) and C)

Question 10

Under the gold standard,

Accepted Answer

A)   nations can protect their domestic price and employment levels from changes in the volume and direction of world trade.
B)   exchange rates are virtually ﬁxed.
C)   differences in exports and imports will be precisely balanced by capital account ﬂows, excluding gold.
D)   exchange rates ﬂuctuate freely in response to changes in the supply of, and demand for, foreign currencies.E) A) and B)
F) B) and C)

Question 11

If the dollar price of yen rises, then

Accepted Answer

A)   the yen price of dollars also rises.
B)   the dollar depreciates relative to the yen.
C)   the yen depreciates relative to the dollar.
D)   the dollar will buy fewer U.S. goods.E) A) and C)
F) C) and D)

Question 12

80 for 1 euro,

Accepted Answer

A)   the quantity of euros demanded equals the quantity supplied.
B)   the dollar-euro exchange rate is unstable.
C)   the dollar price of 1 euro equals the euro price of 1 dollar.
D)   there will be a surplus of euros in the foreign exchange market.E) B) and C)
F) A) and D)

Question 13

Explain the major causes of the large trade deﬁcits in the United States.

Accepted Answer

The large and rising trade deﬁcits in th...

Question 14

Which of the following was not something that several European nations did or experienced when they became members of the eurozone?

Accepted Answer

A)   They eliminated their own local currencies and adopted a single common currency.
B)   They in essence ﬁxed their exchange rates with one another, at a 1-to-1 peg.
C)   Cross-border trade among members suffered a huge decline.
D)   They gave up control of their own individual monetary policy.E) C) and D)
F) A) and B)

Question 15

A nation's capital and ﬁnancial account

Accepted Answer

A)   contains inﬂows of money but not outﬂows of money.
B)   includes service exports and service imports.
C)   includes both inﬂows of money and outﬂows of money.
D)   includes net investment income and net transfers.E) B) and C)
F) B) and D)

Question 16

U.S. goods exports +$390 U.S. goods imports −498 U.S. service exports +133 U.S. service imports −107 Net investment income +12 Net transfers −22 Capital account −5 Foreign purchases of U.S. assets +156 U.S. purchases of foreign assets −59\begin{array} { | l | r | } \hline 	ext { U.S. goods exports } & + \$ 390 \\hline 	ext { U.S. goods imports } & - 498 \\hline 	ext { U.S. service exports } & + 133 \\hline 	ext { U.S. service imports } & - 107 \\hline 	ext { Net investment income } & + 12 \\hline 	ext { Net transfers } & - 22 \\hline 	ext { Capital account } & - 5 \\hline 	ext { Foreign purchases of U.S. assets } & + 156 \\hline 	ext { U.S. purchases of foreign assets } & - 59 \\hline\end{array} U.S. goods exports  U.S. goods imports  U.S. service exports  U.S. service imports  Net investment income  Net transfers  Capital account  Foreign purchases of U.S. assets  U.S. purchases of foreign assets ​+$390−498+133−107+12−22−5+156−59​​  The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All ?gures are in billions of dollars. The balance of trade in goods and services was a(n)

Accepted Answer

A)   $107 billion surplus.
B)   $82 billion de?cit.
C)   $115 billion de?cit.
D)   $55 billion surplus. E) A) and B)
F) None of the above

Question 17

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Accepted Answer

A)   the U.S. government sending aid to natural-disaster victims in Asia
B)   American tourists spending money in the other countries
C)   the purchase of U.S. Treasury bonds by a foreign bank
D)   the payment of stock dividends by U.S. ﬁrms to foreign shareholdersE) C) and D)
F) B) and C)

Question 18

The accompanying diagram represents a ﬂexible exchange market for foreign currency. Other things equal, a rightward shift of the demand curve would

Accepted Answer

A)   depreciate the dollar.
B)   appreciate the dollar.
C)   reduce the equilibrium quantity of euros.
D)   depreciate the euro.E) All of the above
F) A) and B)

Question 19

Current Account  (1)  Goods Exports +$80 (2)  Goods Imports −70 (3)  Exports of Services +20 (4)  Imports of Services −25 (5)  Net Investment Income +5 (6)  Net Transfers −5 Financial Account  (7)  Foreign Purchases of Assets in the United States +13 (8)  US Purchases of Foreign Assets Abroad −23 Capital Account  (9)  Balance on Capital Account +5\begin{array} { | l | r | } \hline 	ext { Current Account } & \\hline 	ext { (1)  Goods Exports } & + \$ 80 \\hline 	ext { (2)  Goods Imports } & - 70 \\hline 	ext { (3)  Exports of Services } & + 20 \\hline 	ext { (4)  Imports of Services } & - 25 \\hline 	ext { (5)  Net Investment Income } & + 5 \\hline 	ext { (6)  Net Transfers } & - 5 \\hline 	ext { Financial Account } & \\hline 	ext { (7)  Foreign Purchases of Assets in the United States } & + 13 \\hline 	ext { (8)  US Purchases of Foreign Assets Abroad } & - 23 \\hline 	ext { Capital Account } &\\hline 	ext { (9)  Balance on Capital Account } & + 5 \\hline\end{array} Current Account  (1)  Goods Exports  (2)  Goods Imports  (3)  Exports of Services  (4)  Imports of Services  (5)  Net Investment Income  (6)  Net Transfers  Financial Account  (7)  Foreign Purchases of Assets in the United States  (8)  US Purchases of Foreign Assets Abroad  Capital Account  (9)  Balance on Capital Account ​+$80−70+20−25+5−5+13−23+5​​ 
The table contains balance of payments data (+ and -)  for the hypothetical nation of Zabella. All figures are in billions of dollars. Zabella's balance on the financial account shows a

Accepted Answer

A)   de?cit of $10 billion.
B)   surplus of $5 billion.
C)   de?cit of $28 billion.
D)   surplus of $13 billion. E) All of the above
F) None of the above

Question 20

The large trade deﬁcit that the United States has with China persists in part because

Accepted Answer

A)   the U.S. economy has grown slowly in recent years.
B)   China has ﬁxed its exchange rate to a basket of currencies that includes the dollar, and has not allowed the yuan to appreciate relative to the U.S. dollar.
C)   China has experienced rapid economic growth over the past decade.
D)   China has recently imposed or increased tariffs on most goods imported from the United States.E) A) and B)
F) A) and C)

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

Which of the following was not something that several European nations did or experienced when they became members of the eurozone?

Correct Answer
verified

Two of the implications of large U.S. trade deﬁcits for the United States are

Correct Answer
verified

Correct Answer
verified

What are the major components of the current account in the balance of payments? How is the current account balance determined?

Correct Answer
verified
The current account summarizes United St...
View Answer

If there is a recession in the United Kingdom and a reduction in British imports, and an economic boom in the United States and an increase in U.S. imports, then these events are most likely to Cause the British pound to

Correct Answer
verified

All of the following would add to the demand for U.S. dollars except

Correct Answer
verified

Under the gold standard,

Correct Answer
verified

Consider the currency market for British pounds and U.S. dollars. An increase in the supply of British pounds

Correct Answer
verified

Correct Answer
verified

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Correct Answer
verified

In recent years, the United States has had large

Correct Answer
verified

The large trade deﬁcit that the United States has with China persists in part because

Correct Answer
verified

The accompanying diagram represents a ﬂexible exchange market for foreign currency. Other things equal, a rightward shift of the demand curve would

Correct Answer
verified

80 for 1 euro,

Correct Answer
verified

If the dollar price of yen rises, then

Correct Answer
verified

A nation's capital and ﬁnancial account

Correct Answer
verified

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Correct Answer
verified

Explain the major causes of the large trade deﬁcits in the United States.

Correct Answer
verified
The large and rising trade deﬁcits in th...
View Answer

Suppose that the United States ﬁxes the dollar-pound exchange rate. In the process of maintaining the ﬁxed exchange rate, the U.S. central bank regularly ﬁnds itself in a position of having to increase Its reserves of pounds. Based on this, we could conclude that

Correct Answer
verified

Correct Answer
verified

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

Which of the following was not something that several European nations did or experienced when they became members of the eurozone?

Correct AnswerverifiedShow Answer

Two of the implications of large U.S. trade deﬁcits for the United States are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are the major components of the current account in the balance of payments? How is the current account balance determined?

Correct AnswerverifiedThe current account summarizes United St...View AnswerShow Answer

If there is a recession in the United Kingdom and a reduction in British imports, and an economic boom in the United States and an increase in U.S. imports, then these events are most likely to Cause the British pound to

Correct AnswerverifiedShow Answer

All of the following would add to the demand for U.S. dollars except

Correct AnswerverifiedShow Answer

Under the gold standard,

Correct AnswerverifiedShow Answer

Consider the currency market for British pounds and U.S. dollars. An increase in the supply of British pounds

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Correct AnswerverifiedShow Answer

In recent years, the United States has had large

Correct AnswerverifiedShow Answer

The large trade deﬁcit that the United States has with China persists in part because

Correct AnswerverifiedShow Answer

The accompanying diagram represents a ﬂexible exchange market for foreign currency. Other things equal, a rightward shift of the demand curve would

Correct AnswerverifiedShow Answer

80 for 1 euro,

Correct AnswerverifiedShow Answer

If the dollar price of yen rises, then

Correct AnswerverifiedShow Answer

A nation's capital and ﬁnancial account

Correct AnswerverifiedShow Answer

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Correct AnswerverifiedShow Answer

Explain the major causes of the large trade deﬁcits in the United States.

Correct AnswerverifiedThe large and rising trade deﬁcits in th...View AnswerShow Answer

Suppose that the United States ﬁxes the dollar-pound exchange rate. In the process of maintaining the ﬁxed exchange rate, the U.S. central bank regularly ﬁnds itself in a position of having to increase Its reserves of pounds. Based on this, we could conclude that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The current account summarizes United St...
View Answer

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
verified

Correct Answer
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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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Correct Answer
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The large and rising trade deﬁcits in th...
View Answer

Correct Answer
verified

Correct Answer
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