Question 1

The net balance on the balance of payments accounts:

Accepted Answer

A)  always shows a surplus. 
B)  always shows a deficit. 
C)  is always zero. 
D)  is either positive or negative. 
E)  is arrived at without considering omissions and errors in transactions. 
A)  always shows a surplus. 
B)  always shows a deficit. 
C)  is always zero. 
D)  is either positive or negative. 
E)  is arrived at without considering omissions and errors in transactions.

Question 2

Which of the following is true of a current account surplus?

Accepted Answer

A)  A country that is running a current account surplus will have negative net exports. 
B)  A current account surplus is consistent with domestic spending being in excess of domestic production. 
C)  A current account surplus means that a country is also running a net surplus in its financial account. 
D)  A country can have a current account surplus only if it exports more services as compared to goods. 
E)  A country that is running a current account surplus buys more bonds from the rest of the world as compared to what it sells. 
A)  A country that is running a current account surplus will have negative net exports. 
B)  A current account surplus is consistent with domestic spending being in excess of domestic production. 
C)  A current account surplus means that a country is also running a net surplus in its financial account. 
D)  A country can have a current account surplus only if it exports more services as compared to goods. 
E)  A country that is running a current account surplus buys more bonds from the rest of the world as compared to what it sells.

Question 3

When the equation X = GDP - C- I - G yields a negative X, it represents a situation in which the country:

Accepted Answer

A)  experiences runaway inflation. 
B)  experiences robust GDP growth. 
C)  experiences a huge budget deficit. 
D)  borrows to cover the difference between production and spending. 
E)  lends to cover the difference between production and spending. 
A)  experiences runaway inflation. 
B)  experiences robust GDP growth. 
C)  experiences a huge budget deficit. 
D)  borrows to cover the difference between production and spending. 
E)  lends to cover the difference between production and spending.

Question 4

A hamburger costs $1.79 in New York and €2.54 in Paris. If the exchange rate is $0.93 per euro, what price difference exists in terms of the European currency?

Accepted Answer

A)  The hamburger sells for €0.13 less in New York. 
B)  The hamburger sells for €0.13 more in New York. 
C)  The hamburger sells for €0.62 less in Paris. 
D)  The hamburger sells for €0.62 more in Paris. 
E)  The hamburger sells for the same price in both cities. 
A)  The hamburger sells for €0.13 less in New York. 
B)  The hamburger sells for €0.13 more in New York. 
C)  The hamburger sells for €0.62 less in Paris. 
D)  The hamburger sells for €0.62 more in Paris. 
E)  The hamburger sells for the same price in both cities.

Question 5

A country that is running a current account deficit will have:

Accepted Answer

A)  zero net exports. 
B)  zero investments. 
C)  negative net investments. 
D)  positive net exports. 
E)  negative net exports. 
A)  zero net exports. 
B)  zero investments. 
C)  negative net investments. 
D)  positive net exports. 
E)  negative net exports.

Question 6

A computer sells for $800 in the United States and for 600 British pounds in England. Given an exchange rate of 0.65 British pounds = $1, how do the computer prices of these countries compare?

Accepted Answer

A)  The computer sells for the same price in both countries. 
B)  The computer costs $923 more in the United States. 
C)  The computer costs $95 more in England. 
D)  The computer costs $124 less in the United States. 
E)  The computer costs $124 less in England. 
A)  The computer sells for the same price in both countries. 
B)  The computer costs $923 more in the United States. 
C)  The computer costs $95 more in England. 
D)  The computer costs $124 less in the United States. 
E)  The computer costs $124 less in England.

Question 7

The balance of payments is an accounting statement known as a:

Accepted Answer

A)  trial balance. 
B)  depreciation account. 
C)  balance sheet. 
D)  trade account. 
E)  reconciliation statement. 
A)  trial balance. 
B)  depreciation account. 
C)  balance sheet. 
D)  trade account. 
E)  reconciliation statement.

Question 8

The balance of payments is:

Accepted Answer

A)  the difference between the dollar value of exports and the dollar value of imports. 
B)  the same as the merchandise account. 
C)  a summary statement of all international trade transactions of one country with the rest of the world. 
D)  a summary statement of all domestic exchanges of goods and services between producers and buyers. 
E)  a record of the amount of U.S. dollars held abroad. 
A)  the difference between the dollar value of exports and the dollar value of imports. 
B)  the same as the merchandise account. 
C)  a summary statement of all international trade transactions of one country with the rest of the world. 
D)  a summary statement of all domestic exchanges of goods and services between producers and buyers. 
E)  a record of the amount of U.S. dollars held abroad.

Question 9

The traders in the foreign exchange market need to interact personally while exchanging currencies.

Accepted Answer

A) True 
 B)False

Question 10

A dress manufactured in Hagen, Germany, costs 195 euros. What is the U.S. dollar value of the same dress if the exchange rate is $0.89 per euro?

Accepted Answer

A)  $173.55 
B)  $165.43 
C)  $219.10 
D)  $187.61 
E)  $195.00 
A)  $173.55 
B)  $165.43 
C)  $219.10 
D)  $187.61 
E)  $195.00

Question 11

If the U.S. dollar price of one Japanese yen was $0.009 in 1997 and $0.011 in 2001, then the reciprocal exchange rate adjusted from $1 = ¥111.1 in 1997 to $1 = ¥90.9 in 2001. This implies that over this time period, the U.S. dollar experienced a depreciation relative to the Japanese yen.

Accepted Answer

A) True 
 B)False

Question 12

The euro coins can be spent only in the countries where they are made, because one side of the coin has an image that is individualized for each of the countries of the European Union.

Accepted Answer

A) True 
 B)False

Question 13

The average household in Australia spends AUD 560 on groceries per month. What would this grocery bill amount to in U.S. dollars if the current exchange rate is AUD 1.55 per dollar?

Accepted Answer

A)  $868.00 
B)  $560.00 
C)  $447.91 
D)  $361.29 
E)  $222.00 
A)  $868.00 
B)  $560.00 
C)  $447.91 
D)  $361.29 
E)  $222.00

Question 14

An increase in the foreign price of the U.S. dollar is called:

Accepted Answer

A)  depreciation of the U.S. dollar. 
B)  appreciation of the U.S. dollar. 
C)  appreciation of the foreign currency. 
D)  readjustment of the U.S. dollar. 
E)  readjustment of the foreign currency. 
A)  depreciation of the U.S. dollar. 
B)  appreciation of the U.S. dollar. 
C)  appreciation of the foreign currency. 
D)  readjustment of the U.S. dollar. 
E)  readjustment of the foreign currency.

Question 15

Double-entry bookkeeping is a system of accounting in which:

Accepted Answer

A)  it is ideal for credits to be greater than debits. 
B)  it is ideal for debits to be greater than credits. 
C)  each transaction is recorded in the same account twice. 
D)  only foreign and domestic accounts are used. 
E)  the debit total must equal the credit total for the transactions as a whole. 
A)  it is ideal for credits to be greater than debits. 
B)  it is ideal for debits to be greater than credits. 
C)  each transaction is recorded in the same account twice. 
D)  only foreign and domestic accounts are used. 
E)  the debit total must equal the credit total for the transactions as a whole.

Question 16

The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714, where US$ represents the U.S. dollar and C$ represents the Canadian dollar. What does this mean?

Accepted Answer

A)  The Canadian dollar price of one U.S. dollar is US$0.714. 
B)  The Canadian dollar price of one U.S. dollar is C$0.714. 
C)  The U.S. dollar price of one Canadian dollar is C$1.40. 
D)  The U.S. dollar price of one Canadian dollar is US$1.40 
E)  The U.S. dollar price of one Canadian dollar is US$0.714. 
A)  The Canadian dollar price of one U.S. dollar is US$0.714. 
B)  The Canadian dollar price of one U.S. dollar is C$0.714. 
C)  The U.S. dollar price of one Canadian dollar is C$1.40. 
D)  The U.S. dollar price of one Canadian dollar is US$1.40 
E)  The U.S. dollar price of one Canadian dollar is US$0.714.

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. Calculate the current account balance for Germany for the year 2011.

Accepted Answer

A)  -€1,720 
B)  €500 
C)  -€870 
D)  €784 
E)  -€650 
A)  -€1,720 
B)  €500 
C)  -€870 
D)  €784 
E)  -€650

Question 18

A deficit in a country's current account means that:

Accepted Answer

A)  the country is running a net deficit in its financial account. 
B)  the country is a net lender to the rest of the world. 
C)  the country is running a net surplus in its financial account. 
D)  the country will have a positive value of net exports. 
E)  the domestic production is in excess of domestic spending. 
A)  the country is running a net deficit in its financial account. 
B)  the country is a net lender to the rest of the world. 
C)  the country is running a net surplus in its financial account. 
D)  the country will have a positive value of net exports. 
E)  the domestic production is in excess of domestic spending.

Question 19

The domestic currency of a country depreciates in value when:

Accepted Answer

A)  there is an increase in the foreign currency price of the domestic currency. 
B)  its value falls in relation to another currency. 
C)  the government of the country revaluates the domestic currency. 
D)  its value rises in relation to another currency. 
E)  there is a fall in the domestic demand for foreign currency. 
A)  there is an increase in the foreign currency price of the domestic currency. 
B)  its value falls in relation to another currency. 
C)  the government of the country revaluates the domestic currency. 
D)  its value rises in relation to another currency. 
E)  there is a fall in the domestic demand for foreign currency.

Question 20

The hours of trading of North American markets overlap with those of both the European markets and the Asian markets.

Accepted Answer

A) True 
 B)False

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

The net balance on the balance of payments accounts:

Which of the following is true of a current account surplus?

When the equation X = GDP - C- I - G yields a negative X, it represents a situation in which the country:

A hamburger costs $1.79 in New York and €2.54 in Paris. If the exchange rate is $0.93 per euro, what price difference exists in terms of the European currency?

A country that is running a current account deficit will have:

A computer sells for $800 in the United States and for 600 British pounds in England. Given an exchange rate of 0.65 British pounds = $1, how do the computer prices of these countries compare?

The balance of payments is an accounting statement known as a:

The balance of payments is:

The traders in the foreign exchange market need to interact personally while exchanging currencies.

A dress manufactured in Hagen, Germany, costs 195 euros. What is the U.S. dollar value of the same dress if the exchange rate is $0.89 per euro?

If the U.S. dollar price of one Japanese yen was $0.009 in 1997 and $0.011 in 2001, then the reciprocal exchange rate adjusted from $1 = ¥111.1 in 1997 to $1 = ¥90.9 in 2001. This implies that over this time period, the U.S. dollar experienced a depreciation relative to the Japanese yen.

The euro coins can be spent only in the countries where they are made, because one side of the coin has an image that is individualized for each of the countries of the European Union.

The average household in Australia spends AUD 560 on groceries per month. What would this grocery bill amount to in U.S. dollars if the current exchange rate is AUD 1.55 per dollar?

An increase in the foreign price of the U.S. dollar is called:

Double-entry bookkeeping is a system of accounting in which:

The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714, where US$ represents the U.S. dollar and C$ represents the Canadian dollar. What does this mean?

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. Calculate the current account balance for Germany for the year 2011.

A deficit in a country's current account means that:

The domestic currency of a country depreciates in value when:

The hours of trading of North American markets overlap with those of both the European markets and the Asian markets.

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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