Question 1

The following are hypothetical exchange rates: 2 Swiss francs = 1 British pound and $1 = 2 British pound.We can conclude that:

Accepted Answer

A) $1 = 4 Swiss francs. 
B) $1 = .5 Swiss francs. 
C) 1 Swiss franc = $.50. 
D) 1 Swiss franc = $2. 
A) $1 = 4 Swiss francs. 
B) $1 = .5 Swiss francs. 
C) 1 Swiss franc = $.50. 
D) 1 Swiss franc = $2.

Question 2

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars.   Refer to the above data.In 2013, Transylvania had a $2 billion balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 3

Appreciation of the Swiss franc will:

Accepted Answer

A) intensify an existing disequilibrium in France's balance of payments. 
B) make France's exports less expensive and its imports more expensive. 
C) make France's exports more expensive and its imports less expensive. 
D) make France's exports and imports both more expensive. 
A) intensify an existing disequilibrium in France's balance of payments. 
B) make France's exports less expensive and its imports more expensive. 
C) make France's exports more expensive and its imports less expensive. 
D) make France's exports and imports both more expensive.

Question 4

The balance of payments must always balance, because:

Accepted Answer

A) capital account surplus means the outflow of capital. 
B) current account surpluses automatically generate transfer of assets to foreigners. 
C) current account deficits automatically generate transfer of assets from foreigners. 
D) current account deficits automatically generate transfer of assets to foreigners while current account surpluses automatically generate transfer of assets from foreigners. 
A) capital account surplus means the outflow of capital. 
B) current account surpluses automatically generate transfer of assets to foreigners. 
C) current account deficits automatically generate transfer of assets from foreigners. 
D) current account deficits automatically generate transfer of assets to foreigners while current account surpluses automatically generate transfer of assets from foreigners.

Question 5

Evidence of a chronic balance of payments deficit is:

Accepted Answer

A) a decline in amount of the nation's currency held by other nations. 
B) an excess of exports over imports. 
C) diminishing reserves of foreign currencies. 
D) an increase in the international value of the nation's currency. 
A) a decline in amount of the nation's currency held by other nations. 
B) an excess of exports over imports. 
C) diminishing reserves of foreign currencies. 
D) an increase in the international value of the nation's currency.

Question 6

If a nation's merchandise exports are $55 billion, while its merchandise imports are $50 billion, we can conclude with certainty that this nation is experiencing a:

Accepted Answer

A) balance of trade surplus. 
B) balance of payments surplus. 
C) positive balance on current account. 
D) positive balance on goods and services. 
A) balance of trade surplus. 
B) balance of payments surplus. 
C) positive balance on current account. 
D) positive balance on goods and services.

Question 7

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella.All figures are in billions of dollars.Current Account:   Refer to the above data.Zabella's is experiencing a balance of trade:

Accepted Answer

A) deficit of $10 billion. 
B) surplus of $5 billion. 
C) surplus of $10 billion. 
D) deficit of $5 billion. 
A) deficit of $10 billion. 
B) surplus of $5 billion. 
C) surplus of $10 billion. 
D) deficit of $5 billion.

Question 8

Which of the following is not included in the current account of a nation's balance of payments?

Accepted Answer

A) its merchandise exports 
B) its merchandise imports 
C) its net investment income 
D) its capital inflows 
A) its merchandise exports 
B) its merchandise imports 
C) its net investment income 
D) its capital inflows

Question 9

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 were virtually fixed. 
C) differences in exports and imports will be precisely balanced by long-term capital flows. 
D) exchange rates fluctuate freely in response to changes in the supply of, and demand for, foreign monies. 
A) nations can protect their domestic price and employment levels from changes in the volume and direction of world trade. 
B) exchange rates were virtually fixed. 
C) differences in exports and imports will be precisely balanced by long-term capital flows. 
D) exchange rates fluctuate freely in response to changes in the supply of, and demand for, foreign monies.

Question 10

If a British importer can purchase 12,000 Canadian Dollar for 8,000 British Pound, the rate of exchange between the two currencies:

Accepted Answer

A) is $.5 = 1 pound. 
B) is $2 = 1 pound. 
C) is $1 = 2 pounds. 
D) is $1.5 = 1 Pound. 
A) is $.5 = 1 pound. 
B) is $2 = 1 pound. 
C) is $1 = 2 pounds. 
D) is $1.5 = 1 Pound.

Question 11

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

Accepted Answer

A) the Canadian dollar has appreciated in value to the United States dollar. 
B) both countries are on the international gold standard. 
C) the American dollar has depreciated in value relative to the Canadian dollar. 
D) the Canadian dollar has depreciated in value relative to the United States dollar. 
A) the Canadian dollar has appreciated in value to the United States dollar. 
B) both countries are on the international gold standard. 
C) the American dollar has depreciated in value relative to the Canadian dollar. 
D) the Canadian dollar has depreciated in value relative to the United States dollar.

Question 12

The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

Accepted Answer

A) True 
 B)False

Question 13

Under a system of flexible exchange rates a Canadian trade deficit with Mexico will tend to cause:

Accepted Answer

A) the Canadian government to ration pesos to Canadian importers. 
B) a flow of gold from Canada to Mexico. 
C) an increase in the peso price of dollars. 
D) an increase in the dollar price of pesos. 
A) the Canadian government to ration pesos to Canadian importers. 
B) a flow of gold from Canada to Mexico. 
C) an increase in the peso price of dollars. 
D) an increase in the dollar price of pesos.

Question 14

In the balance of payments of Canada, an outflow of Canadian holdings of official international reserves is recorded as a:

Accepted Answer

A) current account entry. 
B) negative entry. 
C) net transfer. 
D) positive entry. 
A) current account entry. 
B) negative entry. 
C) net transfer. 
D) positive entry.

Question 15

If a nation has a balance of payments deficit and exchange rates are flexible, the price of that nation's currency in the foreign exchange markets will rise.

Accepted Answer

A) True 
 B)False

Question 16

Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Other things unchanged, under a system of flexible exchange rates we can expect the demand for pounds in Canada to:

Accepted Answer

A) decrease, the supply of pounds to increase, and the dollar to appreciate relative to the pound. 
B) increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate relative to the pound. 
C) increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound. 
D) decrease, the supply of pounds to increase, and the dollar to depreciate relative to the pound. 
A) decrease, the supply of pounds to increase, and the dollar to appreciate relative to the pound. 
B) increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate relative to the pound. 
C) increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound. 
D) decrease, the supply of pounds to increase, and the dollar to depreciate relative to the pound.

Question 17

Which of the following would call for a payment to Canada?

Accepted Answer

A) gold flows into Canada 
B) Canadian firms sell insurance to Brazilian shippers 
C) Canadian unilateral foreign aid to less developed countries 
D) Canadian imports of German automobiles 
A) gold flows into Canada 
B) Canadian firms sell insurance to Brazilian shippers 
C) Canadian unilateral foreign aid to less developed countries 
D) Canadian imports of German automobiles

Question 18

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars.   Refer to the above data.In 2013, Transylvania realized a $1 billion surplus on goods and services.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following will generate a demand for country X's currency in the foreign exchange market?

Accepted Answer

A) travel by foreigners in country X 
B) the desire of foreigners to buy stocks and bonds of firms in country X 
C) the exports of country X 
D) all of the above 
A) travel by foreigners in country X 
B) the desire of foreigners to buy stocks and bonds of firms in country X 
C) the exports of country X 
D) all of the above

Question 20

A market in which the money of one nation is exchanged for the money of another nation is a:

Accepted Answer

A) resource market. 
B) financial market. 
C) futures market. 
D) foreign exchange market. 
A) resource market. 
B) financial market. 
C) futures market. 
D) foreign exchange market.

Exam 18: Part A: The Balance of Payments and Exchange Rates

The following are hypothetical exchange rates: 2 Swiss francs = 1 British pound and $1 = 2 British pound.We can conclude that:

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania had a $2 billion balance of trade surplus.

Appreciation of the Swiss franc will:

The balance of payments must always balance, because:

Evidence of a chronic balance of payments deficit is:

If a nation's merchandise exports are $55 billion, while its merchandise imports are $50 billion, we can conclude with certainty that this nation is experiencing a:

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella.All figures are in billions of dollars.Current Account: Refer to the above data.Zabella's is experiencing a balance of trade:

Which of the following is not included in the current account of a nation's balance of payments?

Under the gold standard:

If a British importer can purchase 12,000 Canadian Dollar for 8,000 British Pound, the rate of exchange between the two currencies:

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

Under a system of flexible exchange rates a Canadian trade deficit with Mexico will tend to cause:

In the balance of payments of Canada, an outflow of Canadian holdings of official international reserves is recorded as a:

If a nation has a balance of payments deficit and exchange rates are flexible, the price of that nation's currency in the foreign exchange markets will rise.

Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Other things unchanged, under a system of flexible exchange rates we can expect the demand for pounds in Canada to:

Which of the following would call for a payment to Canada?

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania realized a $1 billion surplus on goods and services.

Which of the following will generate a demand for country X's currency in the foreign exchange market?

A market in which the money of one nation is exchanged for the money of another nation is a:

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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