Question 1

The purchase of a British Rolls-Royce by a U.S. citizen would result in all of the following except a(n) :

Accepted Answer

A)   Supply of payments to England
B)   Sale of dollars and the purchase of British pounds
C)   Increase in imports to the United States
D)   Gain of foreign exchange for the United StatesE) All of the above
F) C) and D)

Question 2

1 and S1 represent the initial demand and supply curves. If the supply of British pounds in the foreign exchange market shifts to S3, and the British government wanted to fix the exchange rate at its initial level, then it should: A)  Sell U.S. dollars out of its reserves B)  Buy U.S. dollars to add to its reserves C)  Sell British pounds in the foreign exchange market D)  Buy British bonds in the open market" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above, which shows the supply and demand for British pounds. D1 and S1 represent the initial demand and supply curves. If the supply of British pounds in the foreign exchange market shifts to S3, and the British government wanted to fix the exchange rate at its initial level, then it should:

Accepted Answer

A)   Sell U.S. dollars out of its reserves
B)   Buy U.S. dollars to add to its reserves
C)   Sell British pounds in the foreign exchange market
D)   Buy British bonds in the open marketE) None of the above
F) B) and C)

Question 3

The current account portion of a nation's balance of payments statement includes net investment income.

Accepted Answer

A) True 
 B)False

Question 4

The following table contains data for the U.S. balance of payments in a prior year. Answer the question on the basis of this information. All figures are in billions of dollars. U.S. goods exports +$793
U.S. goods imports -1573
U.S. exports of service +280
U.S. imports of services -222
Net investment income +5
Net transfers -81
Capital account -5
Foreign purchases of assets in the U.S. +1198
U.S. purchases of foreign assets -395
Refer to the table above. The data indicate that Americans:

Accepted Answer

A)   Bought foreign assets abroad more than foreigners bought assets in the U.S.
B)   Invested abroad more than foreigners invested in America
C)   Earned more from their investments abroad than foreigners earned from their investments in America
D)   Sold more products to buyers abroad than what foreign producers sold to buyers in AmericaE) B) and D)
F) A) and B)

Question 5

In one year the dollar would buy 162 Japanese yen, but ten years later, it would buy only 123 yen. Relative to the yen, the value of the dollar:

Accepted Answer

A)   Increased by about 32 percent
B)   Decreased by about 24 percent
C)   Decreased by about 32 percent
D)   Increased by about 24 percentE) A) and B)
F) A) and C)

Question 6

People will have to exchange their currency for another only when they do exporting or importing.

Accepted Answer

A) True 
 B)False

Question 7

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign-exchange market.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the dollar price of the British pounds will:

Accepted Answer

A)   Increase the pound price of dollars
B)   Decrease the pound price of dollars
C)   Leave the pound price of dollars unchanged
D)   Cause Britain's terms of trade with the United States to deteriorateE) A) and C)
F) B) and D)

Question 9

A market basket of goods costs $350 in the United States and 200 pounds in the United Kingdom. According to the purchasing power parity theory, the exchange rate should move towards:

Accepted Answer

A)   $0.67 per British pound
B)   $1.50 per British pound
C)   $0.57 per British pound
D)   $1.75 per British poundE) C) and D)
F) A) and C)

Question 10

U.S. businesses are demanders of foreign currencies because they need them to:

Accepted Answer

A)   Sell goods and services exported to foreign countries
B)   Pay for goods and services imported from foreign countries
C)   Receive interest payments from foreign governments
D)   Receive interest payments from foreign businessesE) B) and C)
F) B) and D)

Question 11

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

Accepted Answer

A)   It requires less world liquidity or reserves
B)   It creates less confidence about future values of currencies
C)   It facilitates the transmission of shifts in economic conditions between countries
D)   It increases the role of the central banks in foreign exchange marketsE) A) and B)
F) A) and C)

Question 12

Relatively high rates of U.S. inflation compared to other countries will increase the supply of, and decrease the demand for, dollars in foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the graph above. If Canadian investors buy more U.S. financial and real assets, then:

Accepted Answer

A)   The demand curve will shift left
B)   The demand curve will shift right
C)   The supply curve will shift left
D)   The supply curve will shift rightE) A) and C)
F) A) and B)

Question 14

If a financial portfolio manager in the U.S. buys British company stocks in the London Stock Exchange, this would involve:

Accepted Answer

A)   A demand for British pounds in the foreign exchange market
B)   A supply of British pounds in the foreign exchange market
C)   No effect on the demand for British pounds in the foreign exchange market
D)   A demand for U.S. dollars in the foreign exchange marketE) C) and D)
F) B) and D)

Question 15

The following table contains data for the U.S. balance of payments in a prior year. Answer the question on the basis of this information. All figures are in billions of dollars. U.S. goods exports +$793
U.S. goods imports -1573
U.S. exports of service +280
U.S. imports of services -222
Net investment income +5
Net transfers -81
Capital account -5
Foreign purchases of assets in the U.S. +1198
U.S. purchases of foreign assets -395
By how much did Americans forgive debt owed to them by foreigners than foreigners forgave debt owed to them by Americans?

Accepted Answer

A)   +$5 billion
B)   -$5 billion
C)   +$72 billion
D)   -$72 billionE) B) and C)
F) A) and D)

Question 16

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

Accepted Answer

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

Question 17

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 fallsE) None of the above
F) A) and C)

Question 18

An inflow of investment funds into the United States from overseas is likely to result from a(n) :

Accepted Answer

A)   Decline in expectations for economic growth in the United States
B)   Growing belief among investors that the U.S. dollar ($)  is overvalued
C)   Rise in U.S. interest rates relative to world interest rates
D)   Increase in the U.S. inflation rateE) All of the above
F) A) and B)

Question 19

The following table contains hypothetical data for the U.S. balance of payments in a year. Answer the following question on the basis of these data. All figures are in billions of dollars. U.S. 
Refer to the table above. If there was a net inflow of $7 billion in official reserves in the capital and financial account that year, the United States experienced a balance-of-payments:

Accepted Answer

A)   Surplus of $7 billion
B)   Deficit of $7 billion
C)   Surplus of $99 billion
D)   Deficit of $99 billionE) B) and C)
F) A) and B)

Question 20

The flow of payments for purchases and sale of financial assets is included in the current account balance of a nation.

Accepted Answer

A) True 
 B)False

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

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign-exchange market.

Correct Answer
verified

The flow of payments for purchases and sale of financial assets is included in the current account balance of a nation.

Correct Answer
verified

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

Correct Answer
verified

People will have to exchange their currency for another only when they do exporting or importing.

Correct Answer
verified

The current account portion of a nation's balance of payments statement includes net investment income.

Correct Answer
verified

In one year the dollar would buy 162 Japanese yen, but ten years later, it would buy only 123 yen. Relative to the yen, the value of the dollar:

Correct Answer
verified

Relatively high rates of U.S. inflation compared to other countries will increase the supply of, and decrease the demand for, dollars in foreign exchange markets.

Correct Answer
verified

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

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

Refer to the graph above. If Canadian investors buy more U.S. financial and real assets, then:

Correct Answer
verified

Correct Answer
verified

A market basket of goods costs $350 in the United States and 200 pounds in the United Kingdom. According to the purchasing power parity theory, the exchange rate should move towards:

Correct Answer
verified

Correct Answer
verified

An increase in the dollar price of the British pounds will:

Correct Answer
verified

If a financial portfolio manager in the U.S. buys British company stocks in the London Stock Exchange, this would involve:

Correct Answer
verified

The purchase of a British Rolls-Royce by a U.S. citizen would result in all of the following except a(n) :

Correct Answer
verified

Correct Answer
verified

An inflow of investment funds into the United States from overseas is likely to result from a(n) :

Correct Answer
verified

U.S. businesses are demanders of foreign currencies because they need them to:

Correct Answer
verified

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

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign-exchange market.

Correct AnswerverifiedShow Answer

The flow of payments for purchases and sale of financial assets is included in the current account balance of a nation.

Correct AnswerverifiedShow Answer

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

Correct AnswerverifiedShow Answer

People will have to exchange their currency for another only when they do exporting or importing.

Correct AnswerverifiedShow Answer

The current account portion of a nation's balance of payments statement includes net investment income.

Correct AnswerverifiedShow Answer

In one year the dollar would buy 162 Japanese yen, but ten years later, it would buy only 123 yen. Relative to the yen, the value of the dollar:

Correct AnswerverifiedShow Answer

Relatively high rates of U.S. inflation compared to other countries will increase the supply of, and decrease the demand for, dollars in foreign exchange markets.

Correct AnswerverifiedShow Answer

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

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

Refer to the graph above. If Canadian investors buy more U.S. financial and real assets, then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A market basket of goods costs $350 in the United States and 200 pounds in the United Kingdom. According to the purchasing power parity theory, the exchange rate should move towards:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the dollar price of the British pounds will:

Correct AnswerverifiedShow Answer

If a financial portfolio manager in the U.S. buys British company stocks in the London Stock Exchange, this would involve:

Correct AnswerverifiedShow Answer

The purchase of a British Rolls-Royce by a U.S. citizen would result in all of the following except a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An inflow of investment funds into the United States from overseas is likely to result from a(n) :

Correct AnswerverifiedShow Answer

U.S. businesses are demanders of foreign currencies because they need them to:

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