Question 1

When the domestic currency depreciates, foreign demand for domestic goods increases.

Accepted Answer

A) True 
 B)False

Question 2

Other things equal, the currency price of U.S. dollars in terms of foreign currency is negatively related to foreign demand for U.S. goods and services.

Accepted Answer

A) True 
 B)False

Question 3

Assume that the Danish krone [DKK] price of one British pound is DKK 10.5. If it costs 45 pounds per day to rent a car in London and DKK 480.5 to do so in Copenhagen, which of the following is true?

Accepted Answer

A)  The cost of renting a car is the same in both cities. 
B)  The cost of renting a car is DKK 8 less in London. 
C)  The cost of renting a car is DKK 45.76 less in London. 
D)  The cost of renting a car is DKK 10.67 more in Copenhagen. 
E)  The cost of renting a car is DKK 4.28 less in London. 
A)  The cost of renting a car is the same in both cities. 
B)  The cost of renting a car is DKK 8 less in London. 
C)  The cost of renting a car is DKK 45.76 less in London. 
D)  The cost of renting a car is DKK 10.67 more in Copenhagen. 
E)  The cost of renting a car is DKK 4.28 less in London.

Question 4

When economists talk about a "balance of payments" deficit, they refer to a condition in which total debits exceed total credits in the balance of payments account.

Accepted Answer

A) True 
 B)False

Question 5

A gift from the British prime minister to the American president would be classified as a _____ in the balance of payments account.

Accepted Answer

A)  capital transfer 
B)  capital receipt 
C)  universal receipt 
D)  unilateral transfer 
E)  foreign aid 
A)  capital transfer 
B)  capital receipt 
C)  universal receipt 
D)  unilateral transfer 
E)  foreign aid

Question 6

If one U.S. dollar = 11.76 Mexican pesos [Ps], then the reciprocal exchange rate is:

Accepted Answer

A)  1 Ps = $11.76. 
B)  $1 = Ps 3.92. 
C)  $1 = Ps 0.008. 
D)  $1 = Ps 0.085. 
E)  1 Ps = $0.085. 
A)  1 Ps = $11.76. 
B)  $1 = Ps 3.92. 
C)  $1 = Ps 0.008. 
D)  $1 = Ps 0.085. 
E)  1 Ps = $0.085.

Question 7

The domestic currency value of the foreign currency price of a product is equal to:

Accepted Answer

A)  the reciprocal exchange rate between the domestic and foreign currency. 
B)  the reciprocal of the foreign currency price of the product. 
C)  the difference between the foreign currency price of the product and the exchange rate between the domestic and foreign currency. 
D)  the foreign currency price of the product multiplied by the exchange rate between the domestic and foreign currency. 
E)  the reciprocal exchange rate between the domestic and foreign currency divided by the foreign currency price of the product. 
A)  the reciprocal exchange rate between the domestic and foreign currency. 
B)  the reciprocal of the foreign currency price of the product. 
C)  the difference between the foreign currency price of the product and the exchange rate between the domestic and foreign currency. 
D)  the foreign currency price of the product multiplied by the exchange rate between the domestic and foreign currency. 
E)  the reciprocal exchange rate between the domestic and foreign currency divided by the foreign currency price of the product.

Question 8

All of the following components add up to the current account, except:

Accepted Answer

A)  unilateral transfers. 
B)  statistical discrepancies. 
C)  services. 
D)  merchandise. 
E)  investment income. 
A)  unilateral transfers. 
B)  statistical discrepancies. 
C)  services. 
D)  merchandise. 
E)  investment income.

Question 9

The statistical discrepancy account:

Accepted Answer

A)  accounts for services. 
B)  accounts for gifts to foreigners. 
C)  is included to ensure a balance between debits and credits in the capital account. 
D)  estimates transactions that were omitted from the official reporting process. 
E)  causes the net balance in the balance of payments to be negative. 
A)  accounts for services. 
B)  accounts for gifts to foreigners. 
C)  is included to ensure a balance between debits and credits in the capital account. 
D)  estimates transactions that were omitted from the official reporting process. 
E)  causes the net balance in the balance of payments to be negative.

Question 10

_____ is a specific location in New York City where contracts to deliver agricultural and metal products are bought and sold.

Accepted Answer

A)  The U.S. Department of Commerce 
B)  The New York Stock Exchange 
C)  The Commodity Exchange 
D)  The Barclays Bank 
E)  The U.S. Commodity Futures Trading Commission 
A)  The U.S. Department of Commerce 
B)  The New York Stock Exchange 
C)  The Commodity Exchange 
D)  The Barclays Bank 
E)  The U.S. Commodity Futures Trading Commission

Question 11

A trade deficit experienced by a country during a year generally signals the poor health of the economy.

Accepted Answer

A) True 
 B)False

Question 12

The four main components of the current account are:

Accepted Answer

A)  services, financial assets, unilateral transfers, and debits. 
B)  net exports, unilateral transfers, services, and domestic bank deposits abroad. 
C)  government asset holdings abroad, foreign official assets, private bank deposits abroad, and merchandise. 
D)  unilateral transfers, merchandise, services, and investment income. 
E)  capital exports, services, merchandise, and royalties. 
A)  services, financial assets, unilateral transfers, and debits. 
B)  net exports, unilateral transfers, services, and domestic bank deposits abroad. 
C)  government asset holdings abroad, foreign official assets, private bank deposits abroad, and merchandise. 
D)  unilateral transfers, merchandise, services, and investment income. 
E)  capital exports, services, merchandise, and royalties.

Question 13

Which of the following will increase the demand for U.S. products in the international market?

Accepted Answer

A)  An increase in the average price level in the U.S. 
B)  A depreciation of foreign currency 
C)  A depreciation of the U.S. dollar 
D)  A tariff imposed by the U.S. on imported goods 
E)  A rise in the domestic demand for goods and services 
A)  An increase in the average price level in the U.S. 
B)  A depreciation of foreign currency 
C)  A depreciation of the U.S. dollar 
D)  A tariff imposed by the U.S. on imported goods 
E)  A rise in the domestic demand for goods and services

Question 14

If the price of a digital SLR camera in Japan is ¥55,000, and the exchange rate is 93 ¥/$, calculate the dollar price of the digital SLR camera in Japan.

Accepted Answer

A)  $603.29 
B)  $397.48 
C)  $886.82 
D)  $591.40 
E)  $101 
A)  $603.29 
B)  $397.48 
C)  $886.82 
D)  $591.40 
E)  $101

Question 15

A rise in the value of a currency in relation to another currency in the international market is called:

Accepted Answer

A)  appreciation. 
B)  depreciation. 
C)  devaluation. 
D)  conservation. 
E)  redenomination. 
A)  appreciation. 
B)  depreciation. 
C)  devaluation. 
D)  conservation. 
E)  redenomination.

Question 16

All euro coins circulating in the different countries of the European Union have the same design.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?

Accepted Answer

A)  A U.S. car manufacturer selling a car to a resident of India. 
B)  A pub owner in Liverpool importing vodka from a U.S. manufacturer. 
C)  A U.S. textile manufacturer buying rawmaterial from farmers in Indonesia. 
D)  A Chinese car manufacturer importing car engines and other spare parts from a U.S. manufacturer. 
E)  A fashion designer from Michigan exporting readymade garments to a dealer in Copenhagen. 
A)  A U.S. car manufacturer selling a car to a resident of India. 
B)  A pub owner in Liverpool importing vodka from a U.S. manufacturer. 
C)  A U.S. textile manufacturer buying rawmaterial from farmers in Indonesia. 
D)  A Chinese car manufacturer importing car engines and other spare parts from a U.S. manufacturer. 
E)  A fashion designer from Michigan exporting readymade garments to a dealer in Copenhagen.

Question 18

Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:

Accepted Answer

A)  have a negative effect on Japan's balance of trade in merchandise. 
B)  have a negative effect on the U.S. balance of trade in merchandise. 
C)  have a positive effect on the U.S. balance of trade in merchandise. 
D)  bring money into the United States. 
E)  have no effect on Japan's balance of trade in merchandise. 
A)  have a negative effect on Japan's balance of trade in merchandise. 
B)  have a negative effect on the U.S. balance of trade in merchandise. 
C)  have a positive effect on the U.S. balance of trade in merchandise. 
D)  bring money into the United States. 
E)  have no effect on Japan's balance of trade in merchandise.

Question 19

The demand for foreign currency in the United States is based on the demand for:

Accepted Answer

A)  domestic goods and services. 
B)  domestic exports. 
C)  gold. 
D)  foreign goods and services. 
E)  U.S. dollars. 
A)  domestic goods and services. 
B)  domestic exports. 
C)  gold. 
D)  foreign goods and services. 
E)  U.S. dollars.

When the domestic currency depreciates, foreign demand for domestic goods increases.

Other things equal, the currency price of U.S. dollars in terms of foreign currency is negatively related to foreign demand for U.S. goods and services.

Assume that the Danish krone [DKK] price of one British pound is DKK 10.5. If it costs 45 pounds per day to rent a car in London and DKK 480.5 to do so in Copenhagen, which of the following is true?

When economists talk about a "balance of payments" deficit, they refer to a condition in which total debits exceed total credits in the balance of payments account.

A gift from the British prime minister to the American president would be classified as a _____ in the balance of payments account.

If one U.S. dollar = 11.76 Mexican pesos [Ps], then the reciprocal exchange rate is:

The domestic currency value of the foreign currency price of a product is equal to:

All of the following components add up to the current account, except:

The statistical discrepancy account:

_____ is a specific location in New York City where contracts to deliver agricultural and metal products are bought and sold.

A trade deficit experienced by a country during a year generally signals the poor health of the economy.

The four main components of the current account are:

Which of the following will increase the demand for U.S. products in the international market?

If the price of a digital SLR camera in Japan is ¥55,000, and the exchange rate is 93 ¥/$, calculate the dollar price of the digital SLR camera in Japan.

A rise in the value of a currency in relation to another currency in the international market is called:

All euro coins circulating in the different countries of the European Union have the same design.

Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?

Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:

The demand for foreign currency in the United States is based on the demand for:

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

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Exchapterange Rates and Financial Links Between Countries

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

When the domestic currency depreciates, foreign demand for domestic goods increases.

Other things equal, the currency price of U.S. dollars in terms of foreign currency is negatively related to foreign demand for U.S. goods and services.

Assume that the Danish krone [DKK] price of one British pound is DKK 10.5. If it costs 45 pounds per day to rent a car in London and DKK 480.5 to do so in Copenhagen, which of the following is true?

When economists talk about a "balance of payments" deficit, they refer to a condition in which total debits exceed total credits in the balance of payments account.

A gift from the British prime minister to the American president would be classified as a _____ in the balance of payments account.

If one U.S. dollar = 11.76 Mexican pesos [Ps], then the reciprocal exchange rate is:

The domestic currency value of the foreign currency price of a product is equal to:

All of the following components add up to the current account, except:

The statistical discrepancy account:

_____ is a specific location in New York City where contracts to deliver agricultural and metal products are bought and sold.

A trade deficit experienced by a country during a year generally signals the poor health of the economy.

The four main components of the current account are:

Which of the following will increase the demand for U.S. products in the international market?

If the price of a digital SLR camera in Japan is ¥55,000, and the exchange rate is 93 ¥/$, calculate the dollar price of the digital SLR camera in Japan.

A rise in the value of a currency in relation to another currency in the international market is called:

All euro coins circulating in the different countries of the European Union have the same design.

Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?

Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:

The demand for foreign currency in the United States is based on the demand for:

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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