Question 1

If Japanese tourists visit Disney World, what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen. 
A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen. C

Question 2

An inflow of capital and a trade deficit are more dangerous when

Accepted Answer

A) the inflow of capital is channeled into private investment. 
B) the inflow of capital is used to finance current consumption and/or channeled into unproductive projects. 
C) the unemployment rate of the country is low, because this will mean the capital inflow will be inflationary. 
D) the investment rate is already high and the unemployment rate low. 
A) the inflow of capital is channeled into private investment. 
B) the inflow of capital is used to finance current consumption and/or channeled into unproductive projects. 
C) the unemployment rate of the country is low, because this will mean the capital inflow will be inflationary. 
D) the investment rate is already high and the unemployment rate low. B

Question 3

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. C

Question 4

If the exchange rate between the U.S. dollar and the Euro were 1.50 ($1.50 = one Euro), what would be the price in dollars of a German automobile that cost 40,000 Euros?

Accepted Answer

A) $10,000 
B) $20,000 
C) $60,000 
D) $200,000 
A) $10,000 
B) $20,000 
C) $60,000 
D) $200,000

Question 5

Over time, which of the following will most likely result from a depreciation in the exchange rate of the dollar?

Accepted Answer

A) Inflation will decline. 
B) Foreign goods will cost Americans less, and therefore, the imports of Americans will rise. 
C) U.S.goods exported abroad will cost less in foreign countries, so foreigners will buy more of them. 
D) U.S.goods exported abroad will cost more in foreign countries, so foreigners will buy fewer of them. 
A) Inflation will decline. 
B) Foreign goods will cost Americans less, and therefore, the imports of Americans will rise. 
C) U.S.goods exported abroad will cost less in foreign countries, so foreigners will buy more of them. 
D) U.S.goods exported abroad will cost more in foreign countries, so foreigners will buy fewer of them.

Question 6

An increase in the U.S. demand for foreign exchange will cause

Accepted Answer

A) an increase in the price of foreign exchange, which is a depreciation of the U.S.dollar, making foreign goods cheaper to U.S.residents. 
B) an increase in the price of foreign exchange, which is a depreciation of the U.S.dollar, making foreign goods more expensive to U.S.residents. 
C) a decrease in the price of the U.S.dollar, which is an appreciation of the U.S.dollar. 
D) an increase in the price of foreign exchange, which is an appreciation of the U.S.dollar. 
E) a decrease in the price of foreign exchange, which is an appreciation of the U.S.dollar. 
A) an increase in the price of foreign exchange, which is a depreciation of the U.S.dollar, making foreign goods cheaper to U.S.residents. 
B) an increase in the price of foreign exchange, which is a depreciation of the U.S.dollar, making foreign goods more expensive to U.S.residents. 
C) a decrease in the price of the U.S.dollar, which is an appreciation of the U.S.dollar. 
D) an increase in the price of foreign exchange, which is an appreciation of the U.S.dollar. 
E) a decrease in the price of foreign exchange, which is an appreciation of the U.S.dollar.

Question 7

Suppose a German-produced car becomes very popular in the United States. This would tend to

Accepted Answer

A) affect the U.S.balance of payments but not the balance of trade. 
B) reduce any existing balance of trade deficit in the United States. 
C) increase a balance of trade surplus in the United States. 
D) increase a balance of trade deficit in the United States. 
A) affect the U.S.balance of payments but not the balance of trade. 
B) reduce any existing balance of trade deficit in the United States. 
C) increase a balance of trade surplus in the United States. 
D) increase a balance of trade deficit in the United States.

Question 8

Other things constant, if Americans suddenly increased their desire to vacation in Mexico, the dollar price of the Mexican peso would

Accepted Answer

A) increase, which is an appreciation of the Mexican peso. 
B) increase, which is a depreciation of the Mexican peso. 
C) decrease, which is an appreciation of the Mexican peso. 
D) decrease, which is a depreciation of the Mexican peso. 
A) increase, which is an appreciation of the Mexican peso. 
B) increase, which is a depreciation of the Mexican peso. 
C) decrease, which is an appreciation of the Mexican peso. 
D) decrease, which is a depreciation of the Mexican peso.

Question 9

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the

Accepted Answer

A) capital account. 
B) current account. 
C) balance of trade. 
D) balance of payments. 
A) capital account. 
B) current account. 
C) balance of trade. 
D) balance of payments.

Question 10

Under a flexible exchange rate system, the rate that equates demand and supply in the exchange rate market also equates the

Accepted Answer

A) value of the nation's merchandise exports with the value of its merchandise imports. 
B) value of the nation's purchases of goods, services, and assets from foreigners with the value of the nation's sales of these items to foreigners. 
C) debit and credit items on current account transactions. 
D) debit and credit items on capital account transactions. 
A) value of the nation's merchandise exports with the value of its merchandise imports. 
B) value of the nation's purchases of goods, services, and assets from foreigners with the value of the nation's sales of these items to foreigners. 
C) debit and credit items on current account transactions. 
D) debit and credit items on capital account transactions.

Question 11

Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

Accepted Answer

A) currency to depreciate in value. 
B) currency to appreciate in value. 
C) trade deficit to increase. 
D) products to become more expensive to foreigners. 
A) currency to depreciate in value. 
B) currency to appreciate in value. 
C) trade deficit to increase. 
D) products to become more expensive to foreigners.

Question 12

If the value of a nation's merchandise exports exceeds merchandise imports, the nation is running a

Accepted Answer

A) capital account deficit. 
B) capital account surplus. 
C) balance of trade surplus. 
D) balance of trade deficit. 
A) capital account deficit. 
B) capital account surplus. 
C) balance of trade surplus. 
D) balance of trade deficit.

Question 13

If a nation is running a trade deficit, it is

Accepted Answer

A) spending more on public services than it is raising in tax revenues. 
B) worse off as the result of its trade with foreign countries. 
C) importing more goods and services than it exports. 
D) encountering a balance of payments disequilibrium. 
A) spending more on public services than it is raising in tax revenues. 
B) worse off as the result of its trade with foreign countries. 
C) importing more goods and services than it exports. 
D) encountering a balance of payments disequilibrium.

Question 14

If a nation is experiencing an inflow of capital and a balance of trade deficit, this is a problem if

Accepted Answer

A) the capital inflow is channeled into productive projects. 
B) the capital inflow is channeled into unproductive projects. 
C) the country's rate of unemployment is low. 
D) the investment rate of the country is already high. 
A) the capital inflow is channeled into productive projects. 
B) the capital inflow is channeled into unproductive projects. 
C) the country's rate of unemployment is low. 
D) the investment rate of the country is already high.

Question 15

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

Accepted Answer

A) exports to Japan will likely decrease. 
B) Japanese tourists will be more likely to visit the United States. 
C) U.S.businesses will be more likely to use Japanese shipping lines to transport their products. 
D) U.S.consumers will be more likely to buy Japanese-made automobiles. 
A) exports to Japan will likely decrease. 
B) Japanese tourists will be more likely to visit the United States. 
C) U.S.businesses will be more likely to use Japanese shipping lines to transport their products. 
D) U.S.consumers will be more likely to buy Japanese-made automobiles.

Question 16

If a U.S. dollar exchanges for 0.6 English pounds, the dollar price of a pound is

Accepted Answer

A) $0.60. 
B) $1.50. 
C) $1.67. 
D) $1.75. 
A) $0.60. 
B) $1.50. 
C) $1.67. 
D) $1.75.

Question 17

An increase in the dollar price of the Mexican peso (an appreciation of the peso) would cause

Accepted Answer

A) Mexico's imports to increase and exports to decline. 
B) Mexico's exports to increase and imports to decline. 
C) both Mexico's imports and exports to decline. 
D) both Mexico's imports and exports to rise. 
A) Mexico's imports to increase and exports to decline. 
B) Mexico's exports to increase and imports to decline. 
C) both Mexico's imports and exports to decline. 
D) both Mexico's imports and exports to rise.

Question 18

If the dollar price of the euro goes from $1 to 90 cents, the euro has

Accepted Answer

A) appreciated, and Europeans will find U.S.goods cheaper. 
B) appreciated, and Europeans will find U.S.goods more expensive. 
C) depreciated, and Europeans will find U.S.goods cheaper. 
D) depreciated, and Europeans will find U.S.goods more expensive. 
A) appreciated, and Europeans will find U.S.goods cheaper. 
B) appreciated, and Europeans will find U.S.goods more expensive. 
C) depreciated, and Europeans will find U.S.goods cheaper. 
D) depreciated, and Europeans will find U.S.goods more expensive.

Question 19

Any country with highly attractive domestic investment opportunities and a low savings rate will tend to

Accepted Answer

A) run a current account deficit that is equal to its capital account surplus. 
B) run a current account surplus deficit over a long period. 
C) tend to be relatively poor (compared with other countries). 
D) run a current account deficit. 
A) run a current account deficit that is equal to its capital account surplus. 
B) run a current account surplus deficit over a long period. 
C) tend to be relatively poor (compared with other countries). 
D) run a current account deficit.

Question 20

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

Accepted Answer

A) The dollar will depreciate; the current account will move toward a deficit. 
B) The dollar will depreciate; the current account will move toward a surplus. 
C) The dollar will appreciate; the current account will move toward a deficit. 
D) The dollar will appreciate; the current account will move toward a surplus. 
A) The dollar will depreciate; the current account will move toward a deficit. 
B) The dollar will depreciate; the current account will move toward a surplus. 
C) The dollar will appreciate; the current account will move toward a deficit. 
D) The dollar will appreciate; the current account will move toward a surplus.

If Japanese tourists visit Disney World, what is the effect in the foreign exchange market?

An inflow of capital and a trade deficit are more dangerous when

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

If the exchange rate between the U.S. dollar and the Euro were 1.50 ($1.50 = one Euro), what would be the price in dollars of a German automobile that cost 40,000 Euros?

Over time, which of the following will most likely result from a depreciation in the exchange rate of the dollar?

An increase in the U.S. demand for foreign exchange will cause

Suppose a German-produced car becomes very popular in the United States. This would tend to

Other things constant, if Americans suddenly increased their desire to vacation in Mexico, the dollar price of the Mexican peso would

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the

Under a flexible exchange rate system, the rate that equates demand and supply in the exchange rate market also equates the

Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

If the value of a nation's merchandise exports exceeds merchandise imports, the nation is running a

If a nation is running a trade deficit, it is

If a nation is experiencing an inflow of capital and a balance of trade deficit, this is a problem if

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

If a U.S. dollar exchanges for 0.6 English pounds, the dollar price of a pound is

An increase in the dollar price of the Mexican peso (an appreciation of the peso) would cause

If the dollar price of the euro goes from $1 to 90 cents, the euro has

Any country with highly attractive domestic investment opportunities and a low savings rate will tend to

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Filters

Exam 19: International Finance and the Foreign Exchange Market

If Japanese tourists visit Disney World, what is the effect in the foreign exchange market?

An inflow of capital and a trade deficit are more dangerous when

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

If the exchange rate between the U.S. dollar and the Euro were 1.50 ($1.50 = one Euro), what would be the price in dollars of a German automobile that cost 40,000 Euros?

Over time, which of the following will most likely result from a depreciation in the exchange rate of the dollar?

An increase in the U.S. demand for foreign exchange will cause

Suppose a German-produced car becomes very popular in the United States. This would tend to

Other things constant, if Americans suddenly increased their desire to vacation in Mexico, the dollar price of the Mexican peso would

The record of all transactions with foreign nations that involve the exchange of merchandise goods and services or unilateral gifts is called the

Under a flexible exchange rate system, the rate that equates demand and supply in the exchange rate market also equates the

Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

If the value of a nation's merchandise exports exceeds merchandise imports, the nation is running a

If a nation is running a trade deficit, it is

If a nation is experiencing an inflow of capital and a balance of trade deficit, this is a problem if

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

If a U.S. dollar exchanges for 0.6 English pounds, the dollar price of a pound is

An increase in the dollar price of the Mexican peso (an appreciation of the peso) would cause

If the dollar price of the euro goes from $1 to 90 cents, the euro has

Any country with highly attractive domestic investment opportunities and a low savings rate will tend to

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

Filters