Question 1

Comparing what the United States owes to other nations against what other nations owe to the United States, the United States is currently a(n) :

Accepted Answer

A)   Net creditor
B)   Net debtor
C)   International banking asset
D)   International banking liabilityE) B) and D)
F) All of the above

Question 2

If real interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound 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 depreciateE) B) and D)
F) A) and B)

Question 3

U.S. exports represent two flows:

Accepted Answer

A)   An outflow of goods or services, and an outflow of payments
B)   An inflow of goods or services, and an outflow of payments
C)   An outflow of goods or services, and an inflow of payments
D)   An inflow of goods or services, and an inflow of paymentsE) All of the above
F) B) and D)

Question 4

1 and S1 represent the initial demand and supply curves. What will be the new equilibrium point as indicated in the graph if there is an increase in consumer spending by the British for American products and a decrease in consumer spending by Americans for British products? A)  A B)  C C)  H D)  J" 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. What will be the new equilibrium point as indicated in the graph if there is an increase in consumer spending by the British for American products and a decrease in consumer spending by Americans for British products?

Accepted Answer

A)   A
B)   C
C)   H
D)   JE) A) and B)
F) B) and D)

Question 5

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 airlinesE) B) and D)
F) A) and B)

Question 6

A nation's current account balance is equal to its exports less its imports of:

Accepted Answer

A)   Goods and services
B)   Goods and services, minus U.S. purchases of assets abroad
C)   Goods and services, plus net investment income and net transfers
D)   Goods and services, plus foreign purchases of assets in the United StatesE) C) and D)
F) A) and D)

Question 7

Answer the question on the basis of the following balance of payments data for the hypothetical nation of Econland. All figures are in billions of dollars. (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
Refer to the table above. Econland's balance of trade in goods and services shows a:

Accepted Answer

A)   Net inflow of payments of $109 billion
B)   Net outflow of payments of $109 billion
C)   Net inflow of payments of $108 billion
D)   Net outflow of payments of $108 billionE) A) and B)
F) None of the above

Question 8

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is:

Accepted Answer

A)   1 euro = $0.80
B)   1 euro = $0.90
C)   1 euro = $0.95
D)   1 euro = $1.11E) A) and C)
F) B) and D)

Question 9

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 dollarE) B) and D)
F) B) and C)

Question 10

When the U.S. dollar decreases in value relative to foreign currencies the:

Accepted Answer

A)   Demand for U.S. exports will decrease
B)   Supply of U.S. exports will decrease
C)   Demand for U.S. exports will increase
D)   Supply of U.S. exports will remain constantE) A) and B)
F) B) and C)

Question 11

The United States, Germany, Japan, Britain, France, Italy, Canada, and Russia are:

Accepted Answer

A)   G-8 nations
B)   Adjustable peg nations
C)   Gold standard nations
D)   Nations using the Bretton Woods SystemE) C) and D)
F) B) and D)

Question 12

Refer to the graph above, which shows a change in the demand for pounds from D to D'. Under a system of fixed exchange rates, the:

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 price and income levels, which reestablishes the original exchange rateE) A) and B)
F) All of the above

Question 13

Which of the following is an item in the current account balance of the United States? The purchase of:

Accepted Answer

A)   A U.S. company by a foreign company
B)   Stock in a foreign corporation by a U.S. company
C)   Insurance in the United States by a foreign company
D)   A United States Treasury bond by a wealthy foreignerE) B) and C)
F) A) and C)

Question 14

All else being equal, increased U.S. exports to nations in the European Union create a:

Accepted Answer

A)   Demand for euros
B)   Supply of euros
C)   Shortage of euros
D)   Surplus of eurosE) C) and D)
F) None of the above

Question 15

To Americans buyers, there is a decrease in the relative prices of Japanese goods when the:

Accepted Answer

A)   Yen appreciates
B)   Dollar appreciates
C)   Inflation rate in the United States is higher than the inflation rate in Japan, and there are flexible exchange rates
D)   Inflation rate in Japan is higher than the inflation rate in the United States and there are fixed exchange ratesE) B) and D)
F) A) and B)

Question 16

Which system would be accompanied by occasional currency interventions by central banks to stabilize or alter rates to avoid persistent balance of payments deficits or surpluses?

Accepted Answer

A)   The gold standard
B)   Fixed exchange rates
C)   Flexible exchange rates
D)   Managed floating exchange ratesE) B) and C)
F) B) and D)

Question 17

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. What does the figure 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 inflow 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 StatesE) A) and C)
F) None of the above

Question 18

When a Japanese company buys a U.S. software company, this transaction will be a:

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)   Credit on the financial account of the U.S. balance of payments
D)   Debit on the financial account of the U.S. balance of paymentsE) B) and D)
F) A) and B)

Question 19

U.S. imports:

Accepted Answer

A)   Increase the foreign demand for foreign currencies
B)   Increase the domestic demand for foreign currencies
C)   Decrease the foreign supply of foreign currencies
D)   Increase the domestic supply of foreign currenciesE) All of the above
F) B) and D)

Question 20

An increase in the income of country A relative to the income of country B will usually lead to an increase in country:

Accepted Answer

A)   A's exports to country B
B)   B's imports from country A
C)   A's demand for the currency of country B
D)   B's demand for the currency of country AE) B) and C)
F) All of the above

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

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

Correct Answer
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An increase in the income of country A relative to the income of country B will usually lead to an increase in country:

Correct Answer
verified

All else being equal, increased U.S. exports to nations in the European Union create a:

Correct Answer
verified

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

Correct Answer
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U.S. imports:

Correct Answer
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Refer to the graph above, which shows a change in the demand for pounds from D to D'. Under a system of fixed exchange rates, the:

Correct Answer
verified

To Americans buyers, there is a decrease in the relative prices of Japanese goods when the:

Correct Answer
verified

When a Japanese company buys a U.S. software company, this transaction will be a:

Correct Answer
verified

Correct Answer
verified

Which system would be accompanied by occasional currency interventions by central banks to stabilize or alter rates to avoid persistent balance of payments deficits or surpluses?

Correct Answer
verified

The United States, Germany, Japan, Britain, France, Italy, Canada, and Russia are:

Correct Answer
verified

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is:

Correct Answer
verified

A nation's current account balance is equal to its exports less its imports of:

Correct Answer
verified

When the U.S. dollar decreases in value relative to foreign currencies the:

Correct Answer
verified

If real interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to:

Correct Answer
verified

Which of the following is an item in the current account balance of the United States? The purchase of:

Correct Answer
verified

Correct Answer
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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. What does the figure for net investment income indicate?

Correct Answer
verified

U.S. exports represent two flows:

Correct Answer
verified

Comparing what the United States owes to other nations against what other nations owe to the United States, the United States is currently a(n) :

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

An increase in the income of country A relative to the income of country B will usually lead to an increase in country:

Correct AnswerverifiedShow Answer

All else being equal, increased U.S. exports to nations in the European Union create a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S. imports:

Correct AnswerverifiedShow Answer

Refer to the graph above, which shows a change in the demand for pounds from D to D'. Under a system of fixed exchange rates, the:

Correct AnswerverifiedShow Answer

To Americans buyers, there is a decrease in the relative prices of Japanese goods when the:

Correct AnswerverifiedShow Answer

When a Japanese company buys a U.S. software company, this transaction will be a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which system would be accompanied by occasional currency interventions by central banks to stabilize or alter rates to avoid persistent balance of payments deficits or surpluses?

Correct AnswerverifiedShow Answer

The United States, Germany, Japan, Britain, France, Italy, Canada, and Russia are:

Correct AnswerverifiedShow Answer

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is:

Correct AnswerverifiedShow Answer

A nation's current account balance is equal to its exports less its imports of:

Correct AnswerverifiedShow Answer

When the U.S. dollar decreases in value relative to foreign currencies the:

Correct AnswerverifiedShow Answer

If real interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to:

Correct AnswerverifiedShow Answer

Which of the following is an item in the current account balance of the United States? The purchase of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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. What does the figure for net investment income indicate?

Correct AnswerverifiedShow Answer

U.S. exports represent two flows:

Correct AnswerverifiedShow Answer

Comparing what the United States owes to other nations against what other nations owe to the United States, the United States is currently a(n) :

Correct AnswerverifiedShow Answer

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