Question 1

Which of the following is true of the balance of payments accounts?

Accepted Answer

A)  It records only the trade in tangible assets between any two nations. 
B)  It is a record of a country's merchandise trade. 
C)  It records the total external debt used to finance government budget deficits. 
D)  It is recorded biannually in most developed countries. 
E)  It records a country's trade in goods, services, and financial assets with the rest of the world. 
A)  It records only the trade in tangible assets between any two nations. 
B)  It is a record of a country's merchandise trade. 
C)  It records the total external debt used to finance government budget deficits. 
D)  It is recorded biannually in most developed countries. 
E)  It records a country's trade in goods, services, and financial assets with the rest of the world.

Question 2

The euro is the common currency of all European countries.

Accepted Answer

A) True 
 B)False

Question 3

If the dollar price of one South African rand (ZAR) increases from $0.076 in 1999 to $0.083 in 2003, we can say that the reciprocal exchange rate moved from:

Accepted Answer

A)  $1 = ZAR 13.2 in 1999 to $1 = ZAR 12.0 in 2003. 
B)  $1 = ZAR 12.0 in 1999 to $1 = ZAR 13.2 in 2003. 
C)  $1 = ZAR 0.076 in 1999 to $1 = ZAR 0.083 in 2003. 
D)  ZAR 1 = $0.083 in 1999 to ZAR 1 = $0.076 in 2003. 
E)  $1 = ZAR 176 in 1999 to $1 = ZAR 183 in 2003. 
A)  $1 = ZAR 13.2 in 1999 to $1 = ZAR 12.0 in 2003. 
B)  $1 = ZAR 12.0 in 1999 to $1 = ZAR 13.2 in 2003. 
C)  $1 = ZAR 0.076 in 1999 to $1 = ZAR 0.083 in 2003. 
D)  ZAR 1 = $0.083 in 1999 to ZAR 1 = $0.076 in 2003. 
E)  $1 = ZAR 176 in 1999 to $1 = ZAR 183 in 2003.

Question 4

On December 29th, the cost of a skiing trip to Finse, Norway, was 6,500 krone. Two weeks later, the American dollar appreciated against the Norwegian krone. If the price of the trip in Norway remains the same, _____.

Accepted Answer

A)  an American skier living in Florida will now view this trip as cheaper compared to before 
B)  an American skier living in Florida will now view this trip as highly expensive compared to before 
C)  an American skier living in Florida will now view this trip as of the same value as before 
D)  an American skier living in Florida will now value this trip less as compared to before 
E)  an American skier living in Florida will no longer take this trip 
A)  an American skier living in Florida will now view this trip as cheaper compared to before 
B)  an American skier living in Florida will now view this trip as highly expensive compared to before 
C)  an American skier living in Florida will now view this trip as of the same value as before 
D)  an American skier living in Florida will now value this trip less as compared to before 
E)  an American skier living in Florida will no longer take this trip

Question 5

A country that experiences a large deficit in the merchandise trade account should always aim at eliminating this trade deficit by adopting strict foreign trade policies.

Accepted Answer

A) True 
 B)False

Question 6

In the 1980s, the U.S. current account deficit was financed by:

Accepted Answer

A)  large outflows of domestic capital to other countries. 
B)  large inflows of capital from private foreign investment in the United States. 
C)  loans made by U.S. residents to the government. 
D)  large inflows of foreign government capital. 
E)  the Tax Reform Act of 1986, which increased income taxes for the wealthy. 
A)  large outflows of domestic capital to other countries. 
B)  large inflows of capital from private foreign investment in the United States. 
C)  loans made by U.S. residents to the government. 
D)  large inflows of foreign government capital. 
E)  the Tax Reform Act of 1986, which increased income taxes for the wealthy.

Question 7

An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except:

Accepted Answer

A)  a decrease in the dollar prices paid by U.S. importers. 
B)  an increase in the cost of vacations in Florida for Japanese tourists. 
C)  foreign holidays for U.S. residents to be less expensive. 
D)  an increase in the foreign currency prices paid for U.S. exports. 
E)  an increase in the demand for U.S. exports. 
A)  a decrease in the dollar prices paid by U.S. importers. 
B)  an increase in the cost of vacations in Florida for Japanese tourists. 
C)  foreign holidays for U.S. residents to be less expensive. 
D)  an increase in the foreign currency prices paid for U.S. exports. 
E)  an increase in the demand for U.S. exports.

Question 8

Which of the following would be included in the financial account of the U.S. balance of payments?

Accepted Answer

A)  The U.S. government's foreign aid 
B)  The purchase of a stock in a U.S. corporation by a foreigner 
C)  The purchase of a Japanese computer by a U.S. corporation 
D)  The purchase of a plane ticket from Australian Airlines by a U.S. resident 
E)  The purchase of a German car by a U.S. resident 
A)  The U.S. government's foreign aid 
B)  The purchase of a stock in a U.S. corporation by a foreigner 
C)  The purchase of a Japanese computer by a U.S. corporation 
D)  The purchase of a plane ticket from Australian Airlines by a U.S. resident 
E)  The purchase of a German car by a U.S. resident

Question 9

Given an exchange rate of 120 yen = $1, what is the U.S. dollar price of 1 yen?

Accepted Answer

A)  $0.025 
B)  $0.0083 
C)  $120 
D)  $0.0012 
E)  $1 
A)  $0.025 
B)  $0.0083 
C)  $120 
D)  $0.0012 
E)  $1

Question 10

If the exchange rate between the Canadian dollar (C$) and the U.S. dollar ($) changes from 1C$ = $1.30 to 1C$ = $1.05 we can say that:

Accepted Answer

A)  the U.S. dollar has depreciated with respect to all the currencies across the world. 
B)  the Canadian dollar has appreciated with respect to the U.S. dollar. 
C)  the U.S. dollar has appreciated with respect to the Canadian dollar. 
D)  the Canadian dollar has depreciated with respect to all the currencies across the world. 
E)  the Canadian dollar has appreciated with respect to all the currencies across the world. 
A)  the U.S. dollar has depreciated with respect to all the currencies across the world. 
B)  the Canadian dollar has appreciated with respect to the U.S. dollar. 
C)  the U.S. dollar has appreciated with respect to the Canadian dollar. 
D)  the Canadian dollar has depreciated with respect to all the currencies across the world. 
E)  the Canadian dollar has appreciated with respect to all the currencies across the world.

Question 11

Double-entry bookkeeping requires that the debit and credit entries for any transaction must balance.

Accepted Answer

A) True 
 B)False

Question 12

Currency and bank deposits that are denominated in foreign money are called:

Accepted Answer

A)  traveler's checks. 
B)  international funds. 
C)  foreign exchange. 
D)  foreign remittances. 
E)  international bonds. 
A)  traveler's checks. 
B)  international funds. 
C)  foreign exchange. 
D)  foreign remittances. 
E)  international bonds.

Question 13

A stereo system in Mexico costs 3,200 Mexican pesos. If the dollar price of one Mexican pesos is $0.11, then the U.S. dollar value of the same stereo system is $352.

Accepted Answer

A) True 
 B)False

Question 14

The capital account is the sum of the merchandise, services, and unilateral transfers accounts.

Accepted Answer

A) True 
 B)False

Question 15

If the U.S. dollar price of the New Zealand dollar (NZD) is $0.5709, then the NZD price of one U.S. dollar will be:

Accepted Answer

A)  1.5709 NZD. 
B)  1.75 NZD. 
C)  1.6711 NZD. 
D)  0.5709 NZD. 
A)  1.5709 NZD. 
B)  1.75 NZD. 
C)  1.6711 NZD. 
D)  0.5709 NZD.

Question 16

Double-entry bookkeeping for the balance of payments requires that:

Accepted Answer

A)  the current account always equal the balance of payments. 
B)  every transaction be recorded as a credit and a debit at the same time. 
C)  total credits always exceed total debits. 
D)  every transaction be recorded as either a credit or a debit. 
E)  total debits always exceed total credits. 
A)  the current account always equal the balance of payments. 
B)  every transaction be recorded as a credit and a debit at the same time. 
C)  total credits always exceed total debits. 
D)  every transaction be recorded as either a credit or a debit. 
E)  total debits always exceed total credits.

Question 17

The table given below reports the value of various international transactions in Germany for the year 2011. The negative sign denotes the outflow of euros from Germany.?
  
-Refer to Table 6.1. The statistical discrepancy in the balance of payments accounts for Germany in the year 2011 is:

Accepted Answer

A)  €525. 
B)  -€800. 
C)  €250. 
D)  -€125. 
E)  €370. 
A)  €525. 
B)  -€800. 
C)  €250. 
D)  -€125. 
E)  €370.

Question 18

The table given below reports the value of various international transactions in Germany for the year 2011. The negative sign denotes the outflow of euros from Germany.?
  
-Refer to Table 6.1. Compute the merchandise trade balance of Germany in 2011.

Accepted Answer

A)  -€800 
B)  -€130 
C)  -€40 
D)  €40 
E)  €130 
A)  -€800 
B)  -€130 
C)  -€40 
D)  €40 
E)  €130

Question 19

Which of the following will be included as a unilateral transfer in the balance of payments account of a country?

Accepted Answer

A)  Transportation costs involved in traveling from a foreign country to the domestic country 
B)  A foreign worker in the domestic country sending money to his home country 
C)  Compensation earned by foreign workers in the domestic country 
D)  Royalties paid to residents working in a foreign country 
E)  Income paid on foreign-owned investments in the domestic country 
A)  Transportation costs involved in traveling from a foreign country to the domestic country 
B)  A foreign worker in the domestic country sending money to his home country 
C)  Compensation earned by foreign workers in the domestic country 
D)  Royalties paid to residents working in a foreign country 
E)  Income paid on foreign-owned investments in the domestic country

Question 20

When imports of goods exceed exports of goods, the financial account shows a deficit.

Accepted Answer

A) True 
 B)False

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

Which of the following is true of the balance of payments accounts?

The euro is the common currency of all European countries.

If the dollar price of one South African rand (ZAR) increases from $0.076 in 1999 to $0.083 in 2003, we can say that the reciprocal exchange rate moved from:

On December 29th, the cost of a skiing trip to Finse, Norway, was 6,500 krone. Two weeks later, the American dollar appreciated against the Norwegian krone. If the price of the trip in Norway remains the same, _____.

A country that experiences a large deficit in the merchandise trade account should always aim at eliminating this trade deficit by adopting strict foreign trade policies.

In the 1980s, the U.S. current account deficit was financed by:

An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except:

Which of the following would be included in the financial account of the U.S. balance of payments?

Given an exchange rate of 120 yen = $1, what is the U.S. dollar price of 1 yen?

If the exchange rate between the Canadian dollar (C$) and the U.S. dollar ($) changes from 1C$ = $1.30 to 1C$ = $1.05 we can say that:

Double-entry bookkeeping requires that the debit and credit entries for any transaction must balance.

Currency and bank deposits that are denominated in foreign money are called:

A stereo system in Mexico costs 3,200 Mexican pesos. If the dollar price of one Mexican pesos is $0.11, then the U.S. dollar value of the same stereo system is $352.

The capital account is the sum of the merchandise, services, and unilateral transfers accounts.

If the U.S. dollar price of the New Zealand dollar (NZD) is $0.5709, then the NZD price of one U.S. dollar will be:

Double-entry bookkeeping for the balance of payments requires that:

The table given below reports the value of various international transactions in Germany for the year 2011. The negative sign denotes the outflow of euros from Germany.? -Refer to Table 6.1. The statistical discrepancy in the balance of payments accounts for Germany in the year 2011 is:

The table given below reports the value of various international transactions in Germany for the year 2011. The negative sign denotes the outflow of euros from Germany.? -Refer to Table 6.1. Compute the merchandise trade balance of Germany in 2011.

Which of the following will be included as a unilateral transfer in the balance of payments account of a country?

When imports of goods exceed exports of goods, the financial account shows a deficit.

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

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