Question 1

Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D1 and S1.The exchange rate will be:

Accepted Answer

A) $1 equals 5 British pounds. 
B) $4 equals 1 British pound. 
C) $5 equals 1 British pound. 
D) JQ3 British pounds per dollar. 
A) $1 equals 5 British pounds. 
B) $4 equals 1 British pound. 
C) $5 equals 1 British pound. 
D) JQ3 British pounds per dollar.

Question 2

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Accepted Answer

A) an increase in merchandise exports 
B) a decrease in exports of services 
C) an increase in official reserves 
D) an increase in net transfers 
A) an increase in merchandise exports 
B) a decrease in exports of services 
C) an increase in official reserves 
D) an increase in net transfers

Question 3

An increase in Canadian interest rates can be expected to:

Accepted Answer

A) adversely affect Canadian exporters. 
B) encourage investment spending by Canadian firms. 
C) lower the foreign exchange value of the dollar. 
D) cause a net outflow of foreign capital from Canada. 
A) adversely affect Canadian exporters. 
B) encourage investment spending by Canadian firms. 
C) lower the foreign exchange value of the dollar. 
D) cause a net outflow of foreign capital from Canada.

Question 4

The Canadian demand for pounds is:

Accepted Answer

A) downward sloping because a higher dollar price of pounds means British goods are cheaper to Canadians. 
B) downward sloping because a lower dollar price of pounds means British goods are more expensive to Canadians. 
C) upsloping because a lower dollar price of pounds means British goods are cheaper to Canadians. 
D) downward sloping because a lower dollar price of pounds means British goods are cheaper to Canadians. 
A) downward sloping because a higher dollar price of pounds means British goods are cheaper to Canadians. 
B) downward sloping because a lower dollar price of pounds means British goods are more expensive to Canadians. 
C) upsloping because a lower dollar price of pounds means British goods are cheaper to Canadians. 
D) downward sloping because a lower dollar price of pounds means British goods are cheaper to Canadians.

Question 5

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Accepted Answer

A) both our imports and our exports to rise. 
B) both our imports and our exports to fall. 
C) our exports to fall and our imports to increase. 
D) inflation to occur. 
A) both our imports and our exports to rise. 
B) both our imports and our exports to fall. 
C) our exports to fall and our imports to increase. 
D) inflation to occur.

Question 6

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Accepted Answer

A) $.005 
B) $.05. 
C) $.50. 
D) 5. 
A) $.005 
B) $.05. 
C) $.50. 
D) 5.

Question 7

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10.We conclude that:

Accepted Answer

A) 1 yen = 280 Swiss francs. 
B) 1 yen = 14 Swiss francs. 
C) 1 Swiss franc = 28 yen. 
D) 1 Swiss franc = 14 yen. 
A) 1 yen = 280 Swiss francs. 
B) 1 yen = 14 Swiss francs. 
C) 1 Swiss franc = 28 yen. 
D) 1 Swiss franc = 14 yen.

Question 8

It may be misleading to label a trade deficit as "unfavourable" or "adverse" because:

Accepted Answer

A) the multiplier does not apply to a trade deficit. 
B) it increases our aggregate output and employment. 
C) Canadian consumers benefit from a trade deficit during the period it occurs. 
D) all of the above reasons. 
A) the multiplier does not apply to a trade deficit. 
B) it increases our aggregate output and employment. 
C) Canadian consumers benefit from a trade deficit during the period it occurs. 
D) all of the above reasons.

Question 9

Critics of the managed floating exchange rate system argue that it:

Accepted Answer

A) is dominated by G-8 nations. 
B) is a "non-system" with unclear rules. 
C) increased the growth in world trade at too fast a rate. 
D) puts too much reliance on the adjustable-peg mechanism for stabilizing exchange rates. 
A) is dominated by G-8 nations. 
B) is a "non-system" with unclear rules. 
C) increased the growth in world trade at too fast a rate. 
D) puts too much reliance on the adjustable-peg mechanism for stabilizing exchange rates.

Question 10

Imports cause:

Accepted Answer

A) an outflow of money and an inflow of goods and services. 
B) an inflow of money and an inflow of goods and services. 
C) an outflow of money and an outflow of goods and services. 
D) an inflow of money and an outflow of goods and services. 
A) an outflow of money and an inflow of goods and services. 
B) an inflow of money and an inflow of goods and services. 
C) an outflow of money and an outflow of goods and services. 
D) an inflow of money and an outflow of goods and services.

Question 11

Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.The exchange rate will be:

Accepted Answer

A) M dollars for one peso. 
B) 1/B pesos for one dollar. 
C) A dollars for one peso. 
D) C dollars for one peso. 
A) M dollars for one peso. 
B) 1/B pesos for one dollar. 
C) A dollars for one peso. 
D) C dollars for one peso.

Question 12

Under freely flexible (floating)exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Accepted Answer

A) True 
 B)False

Question 13

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 a flexible exchange-rate system, the balance of payments position of Transylvania would cause the international value of its currency to depreciate.

Accepted Answer

A) True 
 B)False

Question 14

Under the international gold standard, exchange rates fluctuate without restraint to correct any international disequilibrium by affecting the relative attractiveness of domestic and foreign goods.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would contribute to a Canadian balance of payments deficit?

Accepted Answer

A) Kawasaki builds a motorcycle manufacturing plant in Vancouver 
B) Canadian tourists travel in large numbers to Europe 
C) a wealthy Iranian builds a mansion in Montreal 
D) Zaire pays interest on its debt to Canada 
A) Kawasaki builds a motorcycle manufacturing plant in Vancouver 
B) Canadian tourists travel in large numbers to Europe 
C) a wealthy Iranian builds a mansion in Montreal 
D) Zaire pays interest on its debt to Canada

Question 17

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Accepted Answer

A) is $1 = 2 pounds in Canada. 
B) is $2 = 1 pound in Canada. 
C) is $1 = 2 pounds in Great Britain. 
D) is $.5 = 1 pound in Great Britain. 
A) is $1 = 2 pounds in Canada. 
B) is $2 = 1 pound in Canada. 
C) is $1 = 2 pounds in Great Britain. 
D) is $.5 = 1 pound in Great Britain.

Question 18

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

Accepted Answer

A) gold bullion will flow into Switzerland. 
B) the Swiss franc will depreciate. 
C) the British pound will depreciate. 
D) the Swiss franc will appreciate. 
A) gold bullion will flow into Switzerland. 
B) the Swiss franc will depreciate. 
C) the British pound will depreciate. 
D) the Swiss franc will appreciate.

Question 19

In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:

Accepted Answer

A) limiting its imports to the dollar value of its exports. 
B) decreasing the nation's domestic price level. 
C) limiting its exports to the dollar value of its imports. 
D) appreciating the value of its currency. 
A) limiting its imports to the dollar value of its exports. 
B) decreasing the nation's domestic price level. 
C) limiting its exports to the dollar value of its imports. 
D) appreciating the value of its currency.

Question 20

The following table shows the trade between Canada and Transylvania for the year 2014.All the figures are in billions of dollars.   Refer to the above information.In 2014, Canada had a current account:

Accepted Answer

A) surplus of $3 billion. 
B) deficit of $11 billion. 
C) surplus of $10 billion. 
D) surplus of $15 billion. 
A) surplus of $3 billion. 
B) deficit of $11 billion. 
C) surplus of $10 billion. 
D) surplus of $15 billion.

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

Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D1 and S1.The exchange rate will be:

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

An increase in Canadian interest rates can be expected to:

The Canadian demand for pounds is:

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10.We conclude that:

It may be misleading to label a trade deficit as "unfavourable" or "adverse" because:

Critics of the managed floating exchange rate system argue that it:

Imports cause:

Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.The exchange rate will be:

Under freely flexible (floating)exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Under the international gold standard, exchange rates fluctuate without restraint to correct any international disequilibrium by affecting the relative attractiveness of domestic and foreign goods.

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

Which of the following would contribute to a Canadian balance of payments deficit?

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:

The following table shows the trade between Canada and Transylvania for the year 2014.All the figures are in billions of dollars. Refer to the above information.In 2014, Canada had a current account:

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

Filters

Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D₁ and S₁.The exchange rate will be:

Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.The exchange rate will be: