Question 1

A system of fixed exchange rates is more likely to result in exchange controls than is a system of flexible (floating)exchange rates.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  fewer British pounds can be purchased if pounds become less expensive.
B)  fewer U.S. dollars can be purchased if British pounds become less expensive.
C)  more U.S. dollars can be purchased if British pounds become more expensive.
D)  more British pounds can be purchased if pounds become less expensive.E) A) and B)
F) A) and C)

Question 3

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Accepted Answer

A)  an increase in the balance on capital account
B)  a decrease in U.S. goods exports
C)  an increase in net transfers
D)  a decrease in U.S. purchases of assets abroadE) All of the above
F) B) and C)

Question 4

Suppose the balance on the current account is +$100 billion and the balance on the capital account is −$1 billion. The balance on the financial account is

Accepted Answer

A)  +$101 billion.
B)  −$100 billion.
C)  −$99 billion.
D)  −$101 billion.E) B) and C)
F) A) and B)

Question 5

The table contains hypothetical data for the U.S. balance of payments. All figures are in billions of dollars. The United States has a balance of goods

Accepted Answer

A)  surplus of $30 billion.
B)  deficit of $20 billion.
C)  surplus of -$20billion.
D)  deficit of $170 billion.E) A) and C)
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) B) and C)
F) A) and B)

Question 7

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) A) and D)
F) C) and D)

Question 8

It may be misleading to label a trade deficit as unfavorable or adverse, because

Accepted Answer

A)  the multiplier does not apply to a trade deficit.
B)  a trade deficit increases a nation's aggregate output and employment.
C)  a nation's consumers benefit from a trade deficit during the period it occurs.
D)  a trade deficit precludes inflation.E) None of the above
F) A) and B)

Question 9

A nation's annual balance of payments statement must always balance because

Accepted Answer

A)  a nation's imports are limited to the value of its exports.
B)  a nation's exports and imports are always paid with dollars.
C)  all international transactions must be settled in one way or another.
D)  a trade deficit must be matched by an equal surplus of investment income.E) A) and B)
F) A) and C)

Question 10

As a result of the 2007-2009 recession,

Accepted Answer

A)  declining imports created a trade surplus for the United States.
B)  the U.S. trade deficit grew significantly.
C)  declining imports reduced the size of the U.S. trade deficit.
D)  roughly equivalent declines in both exports and imports left the U.S. trade balance unchanged.E) None of the above
F) A) and B)

Question 11

Which of the following lists of exchange-rate systems is arranged in proper historical order, from earliest to most current?

Accepted Answer

A)  Bretton Woods system, gold standard, managed float
B)  gold standard, managed float, Bretton Woods system
C)  managed float, Bretton Woods system, gold standard
D)  gold standard, Bretton Woods system, managed floatE) A) and B)
F) None of the above

Question 12

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is

Accepted Answer

A)  ¼ pound.
B)  4 pounds.
C)  $0.25.
D)  $1.00.E) A) and B)
F) All of the above

Question 13

Which of the following statements about the financing of international trade is correct?

Accepted Answer

A)  International trade means the trading of financial assets for foreign exchange.
B)  Most international transactions are made with gold.
C)  Imports are more important than exports to the economy of a nation.
D)  Exports provide the foreign currencies needed to pay for imports.E) C) and D)
F) All of the above

Question 14

If the U.S. dollar depreciates relative to the Russian ruble, the ruble

Accepted Answer

A)  will be less expensive to Americans.
B)  may either appreciate or depreciate relative to the dollar.
C)  will appreciate relative to the dollar.
D)  will depreciate relative to the dollar.E) None of the above
F) All of the above

Question 15

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance on the financial account was a

Accepted Answer

A)  $92 billion surplus.
B)  $97 billion surplus.
C)  $92 billion deficit.
D)  $97 billion deficit.E) A) and B)
F) B) and C)

Question 16

Which of the following transactions represents an inflow of money on the financial account of the U.S. balance of payments?

Accepted Answer

A)  Oil is imported from Venezuela.
B)  United States firms pay dividends to foreigners.
C)  United States citizens purchase foreign securities.
D)  A Canadian firm increases its direct investment in its U.S. branch.E) All of the above
F) A) and C)

Question 17

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

Accepted Answer

A)  depreciate the dollar.
B)  appreciate the euro.
C)  reduce the equilibrium quantity of euros.
D)  cause a surplus of euros.E) B) and C)
F) A) and D)

Question 18

According to the purchasing power parity theory of exchange rates,

Accepted Answer

A)  a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries.
B)  in equilibrium, national currencies have equal value in terms of gold.
C)  the higher a nation's price level in terms of its own currency, the greater is the amount of foreign exchange it can obtain for a unit of its currency.
D)  nominal currency values will tend to equalize (become 1 = 1) in the long run.E) All of the above
F) B) and D)

Question 19

Suppose that Econland has a fixed exchange-rate system. Econland's government (its central bank) will exchange as much local currency (say pesos) for foreign currency (say dollars) and as much foreign currency (say dollars) for local currency (say pesos) as is necessary to maintain the peg. Which of the following statements is not true?

Accepted Answer

A)  Satisfying requests by people to get local pesos in exchange for foreign dollars is easy for the central bank to do.
B)  The central bank has a restricted capacity to satisfy requests by people to get foreign dollars in exchange for local pesos.
C)  Being the central bank, it has an equal capacity to satisfy requests to exchange dollars for pesos, and pesos for dollars.
D)  The central bank needs to stockpile some foreign-exchange reserves in order to maintain the peg.E) A) and C)
F) B) and D)

Question 20

Under an international gold standard,

Accepted Answer

A)  a nation's exchange rate is virtually fixed.
B)  domestic output and the price level will fall in those nations receiving international gold flows.
C)  a nation's balance of payments surplus will be corrected by an outflow of gold.
D)  a nation's balance of payments deficit will be corrected by an inflow of gold.E) All of the above
F) A) and B)

Exam 27: The Balance of Payments, Exchange Rates, and Trade Deficits

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

Correct Answer
verified

As a result of the 2007-2009 recession,

Correct Answer
verified

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

Correct Answer
verified

A nation's annual balance of payments statement must always balance because

Correct Answer
verified

A system of fixed exchange rates is more likely to result in exchange controls than is a system of flexible (floating)exchange rates.

Correct Answer
verified

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance on the financial account was a

Correct Answer
verified

Which of the following statements about the financing of international trade is correct?

Correct Answer
verified

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Correct Answer
verified

If the U.S. dollar depreciates relative to the Russian ruble, the ruble

Correct Answer
verified

Which of the following transactions represents an inflow of money on the financial account of the U.S. balance of payments?

Correct Answer
verified

Under an international gold standard,

Correct Answer
verified

According to the purchasing power parity theory of exchange rates,

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Suppose the balance on the current account is +$100 billion and the balance on the capital account is −$1 billion. The balance on the financial account is

Correct Answer
verified

Which of the following lists of exchange-rate systems is arranged in proper historical order, from earliest to most current?

Correct Answer
verified

The table contains hypothetical data for the U.S. balance of payments. All figures are in billions of dollars. The United States has a balance of goods

Correct Answer
verified

It may be misleading to label a trade deficit as unfavorable or adverse, because

Correct Answer
verified

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is

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 27: The Balance of Payments, Exchange Rates, and Trade Deficits

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

Correct AnswerverifiedShow Answer

As a result of the 2007-2009 recession,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A nation's annual balance of payments statement must always balance because

Correct AnswerverifiedShow Answer

A system of fixed exchange rates is more likely to result in exchange controls than is a system of flexible (floating)exchange rates.

Correct AnswerverifiedShow Answer

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance on the financial account was a

Correct AnswerverifiedShow Answer

Which of the following statements about the financing of international trade is correct?

Correct AnswerverifiedShow Answer

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Correct AnswerverifiedShow Answer

If the U.S. dollar depreciates relative to the Russian ruble, the ruble

Correct AnswerverifiedShow Answer

Which of the following transactions represents an inflow of money on the financial account of the U.S. balance of payments?

Correct AnswerverifiedShow Answer

Under an international gold standard,

Correct AnswerverifiedShow Answer

According to the purchasing power parity theory of exchange rates,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the balance on the current account is +$100 billion and the balance on the capital account is −$1 billion. The balance on the financial account is

Correct AnswerverifiedShow Answer

Which of the following lists of exchange-rate systems is arranged in proper historical order, from earliest to most current?

Correct AnswerverifiedShow Answer

The table contains hypothetical data for the U.S. balance of payments. All figures are in billions of dollars. The United States has a balance of goods

Correct AnswerverifiedShow Answer

It may be misleading to label a trade deficit as unfavorable or adverse, because

Correct AnswerverifiedShow Answer

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified