Question 1

The record of transactions between the United States and its trading partners in the rest of the world over a particular period of time is called the

Accepted Answer

A) balance of goods and services. 
B) balance of capital account. 
C) balance of current account. 
D) balance of payments. 
A) balance of goods and services. 
B) balance of capital account. 
C) balance of current account. 
D) balance of payments.

Question 2

When the dollar depreciates relative to foreign currencies,

Accepted Answer

A) a trade deficit results. 
B) U.S. exports and imports become more expensive. 
C) U.S. exports become cheaper and U.S. imports become more expensive. 
D) the United States experiences a balance of payments deficit. 
A) a trade deficit results. 
B) U.S. exports and imports become more expensive. 
C) U.S. exports become cheaper and U.S. imports become more expensive. 
D) the United States experiences a balance of payments deficit.

Question 3

The depreciation of the dollar would tend to affect the foreign price of U.S.-made goods by causing the foreign prices of U.S. goods to

Accepted Answer

A) decrease. 
B) increase. 
C) remain unchanged. 
D) None of the above 
A) decrease. 
B) increase. 
C) remain unchanged. 
D) None of the above

Question 4

If inflation in Canada slows relative to inflation in the United States, Canadians will

Accepted Answer

A) increase their demand for dollars. 
B) decrease their demand for dollars. 
C) increase their quantity demanded of dollars. 
D) decrease their quantity demanded of dollars. 
A) increase their demand for dollars. 
B) decrease their demand for dollars. 
C) increase their quantity demanded of dollars. 
D) decrease their quantity demanded of dollars.

Question 5

If a hotel room in New York City costs $200 a night, and the yen/dollar exchange rate is 150, what is the yen price of the hotel room?

Accepted Answer

A) ¥.75 
B) ¥7,500 
C) ¥30,000 
D) ¥20,000 
A) ¥.75 
B) ¥7,500 
C) ¥30,000 
D) ¥20,000

Question 6

Under flexible exchange rates, if a dollar can buy more foreign currency, the dollar has

Accepted Answer

A) appreciated. 
B) depreciated. 
C) gained. 
D) inflated. 
A) appreciated. 
B) depreciated. 
C) gained. 
D) inflated.

Question 7

If the nominal U.S. return (on an investment in a foreign instrument that earns the nominal foreign interest rate) is greater than the nominal foreign return plus the exchange rate adjustment, then lenders will supply ____ funds in the U.S. market and borrowers will borrow ___ funds in foreign markets.

Accepted Answer

A) less, less 
B) more, more 
C) more, less 
D) less, more 
A) less, less 
B) more, more 
C) more, less 
D) less, more

Question 8

An increase in the U.S. inflation rate relative to Sweden's will

Accepted Answer

A) shift the supply curve of dollars in the foreign exchange market to the left. 
B) shift the supply curve of dollars in the foreign exchange market to the right. 
C) increase the quantity supplied of money in the foreign exchange market. 
D) decrease the quantity supplied of money in the foreign exchange market. 
A) shift the supply curve of dollars in the foreign exchange market to the left. 
B) shift the supply curve of dollars in the foreign exchange market to the right. 
C) increase the quantity supplied of money in the foreign exchange market. 
D) decrease the quantity supplied of money in the foreign exchange market.

Question 9

The accounting procedure used for the balance of payments is based on

Accepted Answer

A) average costing. 
B) double-entry bookkeeping. 
C) net present value approach. 
D) asset structure. 
A) average costing. 
B) double-entry bookkeeping. 
C) net present value approach. 
D) asset structure.

Question 10

As the dollar appreciates, holding all other factors constant, dollar prices of foreign goods

Accepted Answer

A) decrease. 
B) increase. 
C) remain the same. 
D) increase, holding all foreign exchange constant. 
A) decrease. 
B) increase. 
C) remain the same. 
D) increase, holding all foreign exchange constant.

Question 11

The relationship between the supply of dollars in the foreign exchange market and the U.S. demand for foreign goods, services, and securities is

Accepted Answer

A) inverse. 
B) direct. 
C) negative. 
D) horizontal. 
A) inverse. 
B) direct. 
C) negative. 
D) horizontal.

Question 12

Foreign purchases of U.S. goods are

Accepted Answer

A) capital inflows. 
B) unilateral transfers. 
C) merchandise exports. 
D) merchandise imports. 
A) capital inflows. 
B) unilateral transfers. 
C) merchandise exports. 
D) merchandise imports.

Question 13

The relationship between the quantity supplied of dollars/month and the exchange rate is

Accepted Answer

A) inverse. 
B) direct. 
C) negative. 
D) horizontal. 
A) inverse. 
B) direct. 
C) negative. 
D) horizontal.

Question 14

If a hotel room in downtown Tokyo costs 15,000 yen per night and the yen/dollar exchange rate is 150, what is the room's dollar price?

Accepted Answer

A) $100 
B) $1,000 
C) $225 
D) $10 
A) $100 
B) $1,000 
C) $225 
D) $10

Question 15

The appreciation of the dollar would tend to affect the foreign price of U.S.-made goods by causing the foreign prices of U.S. goods to

Accepted Answer

A) decrease. 
B) increase. 
C) remain unchanged. 
D) None of the above 
A) decrease. 
B) increase. 
C) remain unchanged. 
D) None of the above

Question 16

As the dollar depreciates, holding all other factors constant, dollar prices of foreign goods

Accepted Answer

A) decrease. 
B) increase. 
C) remain the same. 
D) none of the above 
A) decrease. 
B) increase. 
C) remain the same. 
D) none of the above

Question 17

The financial flow of funds and securities between the United States and the rest of the world is measured in the

Accepted Answer

A) current account. 
B) capital account. 
C) foreign exchange market. 
D) transfers account. 
A) current account. 
B) capital account. 
C) foreign exchange market. 
D) transfers account.

Question 18

Which of the following is most likely to cause the demand for dollars to increase?

Accepted Answer

A) increases in the foreign price of U.S. goods relative to the foreign price of foreign goods 
B) increases in U.S. income 
C) increases in foreign income 
D) decreases in U.S. income 
A) increases in the foreign price of U.S. goods relative to the foreign price of foreign goods 
B) increases in U.S. income 
C) increases in foreign income 
D) decreases in U.S. income

Question 19

When the dollar depreciates, which of the following generally occurs?

Accepted Answer

A) exports increase. 
B) imports decrease. 
C) imports increase. 
D) Both a and b are correct. 
A) exports increase. 
B) imports decrease. 
C) imports increase. 
D) Both a and b are correct.

Question 20

When the exchange rate increases (e.g., when the dollar appreciates),

Accepted Answer

A) the dollar price of foreign goods becomes higher while the foreign price of U.S. goods becomes lower. 
B) the dollar price of foreign goods becomes higher and the foreign price of U.S. goods becomes higher. 
C) the dollar price of foreign goods becomes lower while the foreign price of U.S. goods becomes higher. 
D) Both a and c are correct. 
A) the dollar price of foreign goods becomes higher while the foreign price of U.S. goods becomes lower. 
B) the dollar price of foreign goods becomes higher and the foreign price of U.S. goods becomes higher. 
C) the dollar price of foreign goods becomes lower while the foreign price of U.S. goods becomes higher. 
D) Both a and c are correct.

Exam 16: How Exchange Rates Are Determined

The record of transactions between the United States and its trading partners in the rest of the world over a particular period of time is called the

When the dollar depreciates relative to foreign currencies,

The depreciation of the dollar would tend to affect the foreign price of U.S.-made goods by causing the foreign prices of U.S. goods to

If inflation in Canada slows relative to inflation in the United States, Canadians will

If a hotel room in New York City costs $200 a night, and the yen/dollar exchange rate is 150, what is the yen price of the hotel room?

Under flexible exchange rates, if a dollar can buy more foreign currency, the dollar has

An increase in the U.S. inflation rate relative to Sweden's will

The accounting procedure used for the balance of payments is based on

As the dollar appreciates, holding all other factors constant, dollar prices of foreign goods

The relationship between the supply of dollars in the foreign exchange market and the U.S. demand for foreign goods, services, and securities is

Foreign purchases of U.S. goods are

The relationship between the quantity supplied of dollars/month and the exchange rate is

If a hotel room in downtown Tokyo costs 15,000 yen per night and the yen/dollar exchange rate is 150, what is the room's dollar price?

The appreciation of the dollar would tend to affect the foreign price of U.S.-made goods by causing the foreign prices of U.S. goods to

As the dollar depreciates, holding all other factors constant, dollar prices of foreign goods

The financial flow of funds and securities between the United States and the rest of the world is measured in the

Which of the following is most likely to cause the demand for dollars to increase?

When the dollar depreciates, which of the following generally occurs?

When the exchange rate increases (e.g., when the dollar appreciates),

Introduction and Overview

Money and Its Role in the Economy

The Overseer: the Federal Reserve System

Financial Markets, Instruments, and Market Makers

Interest Rates and Bond Prices

The Structure of Interest Rates

Market Efficiency and the Flow of Funds Among Sectors

An Introduction to Financial Intermediaries and Risk

Commercial Banking Structure, Regulation, and Performance

Financial Innovation

Financial Instability and Strains on the Financial System

Regulation of the Banking System and the Financial Services Industry

The Debt Markets

The Stock Market

Securities Firms, Mutual Funds, and Financial Conglomerates

Forward, Futures, and Options Agreements

The International Financial System

The Fed, Depository Institutions, and the Money Supply Process

The Demand for Real Money Balances and Market Equilibrium

Financial Aspects of the Household, Business, Government, and Rest-Of-The-World Sectors

Aggregate Demand and Aggregate Supply

The Challenges of Monetary Policy

The Process of Monetary Policy Formation

Policy Implementation

Monetary Policy in a Globalized Financial System

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