Question 1

Which of the following would not be a part of the merchandise trade balance?

Accepted Answer

A)  Exports of consumer durables 
B)  Merchandise imports 
C)  International freight costs 
D)  Computer hardware exports 
E)  Sale of domestically produced cars to foreigners 
A)  Exports of consumer durables 
B)  Merchandise imports 
C)  International freight costs 
D)  Computer hardware exports 
E)  Sale of domestically produced cars to foreigners C

Question 2

Tourism requires the actual movement of currency notes while investment in international bank deposits does not.

Accepted Answer

A) True 
 B)False  True

Question 3

The euro began trading in January 1999.

Accepted Answer

A) True 
 B)False  True

Question 4

The _____ account reflects the movement of goods and services into and out of the country. The _____ account reflects the flow of financial assets into and out of the country.

Accepted Answer

A)  universal transfer; financial 
B)  universal transfer; current 
C)  current; financial 
D)  capital; current 
E)  capital; financial 
A)  universal transfer; financial 
B)  universal transfer; current 
C)  current; financial 
D)  capital; current 
E)  capital; financial

Question 5

The statistical discrepancy account is also referred to as:

Accepted Answer

A)  omissions and errors. 
B)  econometric discrepancy. 
C)  statistical influence. 
D)  human flaws. 
E)  arbitrary human discrepancy. 
A)  omissions and errors. 
B)  econometric discrepancy. 
C)  statistical influence. 
D)  human flaws. 
E)  arbitrary human discrepancy.

Question 6

Foreign aid, royalties earned abroad, and long-term capital flows are part of the current account.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following correctly describes a foreign exchange market?

Accepted Answer

A)  A place where foreign goods are bought and sold in any country 
B)  A market in which foreign tourists can buy domestic goods 
C)  A global market in which people exchange one currency for another 
D)  A place where contracts to deliver agricultural products across countries are exchanged 
E)  A market where the central banks of different countries exchange government bonds 
A)  A place where foreign goods are bought and sold in any country 
B)  A market in which foreign tourists can buy domestic goods 
C)  A global market in which people exchange one currency for another 
D)  A place where contracts to deliver agricultural products across countries are exchanged 
E)  A market where the central banks of different countries exchange government bonds

Question 8

A U.S. citizen's income from investment in foreign countries is _____ in the U.S. current account.

Accepted Answer

A)  recorded as a deficit 
B)  recorded as a surplus 
C)  recorded as a debit 
D)  recorded as a credit 
E)  not recorded 
A)  recorded as a deficit 
B)  recorded as a surplus 
C)  recorded as a debit 
D)  recorded as a credit 
E)  not recorded

Question 9

Exchange rates allow for a comparison of the trade values of goods and services across countries.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following transactions will be included in the financial account of the balance of payments of any country?

Accepted Answer

A)  Travel and tourism expenses 
B)  Import of goods 
C)  Investment in stock 
D)  Export of services 
E)  Payment of insurance premium 
A)  Travel and tourism expenses 
B)  Import of goods 
C)  Investment in stock 
D)  Export of services 
E)  Payment of insurance premium

Question 11

If the current dollars/peso exchange rate is $0.10 per peso, so that 10 pesos buy you a dollar, then how many dollars do you need to buy something that costs 50 pesos?

Accepted Answer

A)  $50 
B)  $5 
C)  $15 
D)  $0.50 
E)  $1.50 
A)  $50 
B)  $5 
C)  $15 
D)  $0.50 
E)  $1.50

Question 12

In the balance of payment accounts, transactions that bring in money are treated as debit and the transactions that take away money are treated as credits.

Accepted Answer

A) True 
 B)False

Question 13

An exchange rate can be described as:

Accepted Answer

A)  the price of a foreign currency as determined by the World Bank. 
B)  the price of one country's currency in terms of another country's currency. 
C)  the dollar value of imports and exports undertaken in the world economy during a year. 
D)  the price of foreign currency as established by the relative amount of tourism. 
E)  the dollar value of U.S. international trade. 
A)  the price of a foreign currency as determined by the World Bank. 
B)  the price of one country's currency in terms of another country's currency. 
C)  the dollar value of imports and exports undertaken in the world economy during a year. 
D)  the price of foreign currency as established by the relative amount of tourism. 
E)  the dollar value of U.S. international trade.

Question 14

Assume that the exchange rate moves from $1 = €1.2 to $1 = €0.97. This change in exchange rate indicates that:

Accepted Answer

A)  the euro has depreciated in value. 
B)  the price of a holiday in Europe has become less expensive for U.S. residents. 
C)  the U.S. dollar price of European chocolate has fallen. 
D)  the U.S. dollar has appreciated in value. 
E)  the euro has appreciated in value. 
A)  the euro has depreciated in value. 
B)  the price of a holiday in Europe has become less expensive for U.S. residents. 
C)  the U.S. dollar price of European chocolate has fallen. 
D)  the U.S. dollar has appreciated in value. 
E)  the euro has appreciated in value.

Question 15

Which of the following will be included in the services account of a country?

Accepted Answer

A)  Imports of goods from a foreign country 
B)  Gifts to the residents of a foreign country 
C)  Exports of goods to a foreign country 
D)  Purchase of land in a foreign country 
E)  Transportation costs involved in international travel 
A)  Imports of goods from a foreign country 
B)  Gifts to the residents of a foreign country 
C)  Exports of goods to a foreign country 
D)  Purchase of land in a foreign country 
E)  Transportation costs involved in international travel

Question 16

If Michelle can buy a woolen jacket for 40 yuan in China, and Rebecca pays $40 for the same jacket in the U.S., it implies that the exchange rate between these two nations is 10 yuan = $1.

Accepted Answer

A) True 
 B)False

Question 17

A majority of international transactions involve the buying and selling of _____.

Accepted Answer

A)  bank deposits denominated in foreign currency 
B)  currency notes 
C)  traveler's checks 
D)  stocks denominated in domestic currency 
E)  bills of exchange 
A)  bank deposits denominated in foreign currency 
B)  currency notes 
C)  traveler's checks 
D)  stocks denominated in domestic currency 
E)  bills of exchange

Question 18

When one country buys more from another country than it sells to the country, it is said to be experiencing:

Accepted Answer

A)  economic dualism. 
B)  double counting. 
C)  symmetrical trade. 
D)  internationalization. 
E)  bilateral trade deficit. 
A)  economic dualism. 
B)  double counting. 
C)  symmetrical trade. 
D)  internationalization. 
E)  bilateral trade deficit.

Question 19

Which of the following is true of a net debtor nation?

Accepted Answer

A)  It experiences a trade surplus for five consecutive years. 
B)  It experiences a trade deficit for five consecutive years. 
C)  It owes more to the rest of the world than it is owed. 
D)  It owes less to the rest of the world than it is owed. 
E)  It experiences persistent current account surplus. 
A)  It experiences a trade surplus for five consecutive years. 
B)  It experiences a trade deficit for five consecutive years. 
C)  It owes more to the rest of the world than it is owed. 
D)  It owes less to the rest of the world than it is owed. 
E)  It experiences persistent current account surplus.

Question 20

If a bank is selling Russian rubles (RUB) for $0.16, then the implied ruble price of the dollar is RUB 6.25.

Accepted Answer

A) True 
 B)False

Exam 6: An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Which of the following would not be a part of the merchandise trade balance?

Tourism requires the actual movement of currency notes while investment in international bank deposits does not.

The euro began trading in January 1999.

The _____ account reflects the movement of goods and services into and out of the country. The _____ account reflects the flow of financial assets into and out of the country.

The statistical discrepancy account is also referred to as:

Foreign aid, royalties earned abroad, and long-term capital flows are part of the current account.

Which of the following correctly describes a foreign exchange market?

A U.S. citizen's income from investment in foreign countries is _____ in the U.S. current account.

Exchange rates allow for a comparison of the trade values of goods and services across countries.

Which of the following transactions will be included in the financial account of the balance of payments of any country?

If the current dollars/peso exchange rate is $0.10 per peso, so that 10 pesos buy you a dollar, then how many dollars do you need to buy something that costs 50 pesos?

In the balance of payment accounts, transactions that bring in money are treated as debit and the transactions that take away money are treated as credits.

An exchange rate can be described as:

Assume that the exchange rate moves from $1 = €1.2 to $1 = €0.97. This change in exchange rate indicates that:

Which of the following will be included in the services account of a country?

If Michelle can buy a woolen jacket for 40 yuan in China, and Rebecca pays $40 for the same jacket in the U.S., it implies that the exchange rate between these two nations is 10 yuan = $1.

A majority of international transactions involve the buying and selling of _____.

When one country buys more from another country than it sells to the country, it is said to be experiencing:

Which of the following is true of a net debtor nation?

If a bank is selling Russian rubles (RUB) for $0.16, then the implied ruble price of the dollar is RUB 6.25.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

The _ account reflects the movement of goods and services into and out of the country. The _ account reflects the flow of financial assets into and out of the country.