Question 1

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S.interest rate differential.

Accepted Answer

As the U.S.interest rate differential increases, international investors can obtain a greater return by holding U.S.assets.Therefore these investors want to buy more U.S.assets, such as bonds.But in order to buy more U.S.assets, they need more dollars.Hence the increase in the U.S.interest rate differential leads to an increase in the demand for dollars in the foreign exchange market and so the demand curve for U.S.dollars shifts rightward.

Question 2

If the exchange rate appreciates, then the

Accepted Answer

A)  quantity of dollars demanded decreases. 
B)  quantity of dollars demanded increases. 
C)  demand for dollars decreases. 
D)  demand for dollars increases. 
E)  supply of dollars decreases. 
A)  quantity of dollars demanded decreases. 
B)  quantity of dollars demanded increases. 
C)  demand for dollars decreases. 
D)  demand for dollars increases. 
E)  supply of dollars decreases. A

Question 3

If the exchange rate is constant and U.S.imports increase, then in the foreign exchange market the

Accepted Answer

A)  quantity of U.S.dollars supplied decreases. 
B)  quantity of U.S.dollars supplied increases. 
C)  supply of U.S.dollars decreases. 
D)  supply of U.S.dollars increases. 
E)  demand for U.S.dollars increases. 
A)  quantity of U.S.dollars supplied decreases. 
B)  quantity of U.S.dollars supplied increases. 
C)  supply of U.S.dollars decreases. 
D)  supply of U.S.dollars increases. 
E)  demand for U.S.dollars increases. D

Question 4

"The current account records foreign investment in a nation minus investment abroad." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The

Question 5

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

Accepted Answer

The official settlements account is the

Question 6

If the interest rate rises in the United States relative to other nations, then in the foreign exchange market the demand for dollars ________ and the supply of dollars ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change

Question 7

If the U.S.interest rate rises relative to the interest rate in other countries, then the supply of dollars ________ and the demand for dollars ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change

Question 8

In the foreign exchange market, which of the following shifts the supply curve of dollars leftward?

Accepted Answer

A)  the expected future exchange rate rises 
B)  the expected future exchange rate falls 
C)  the current exchange rate rises 
D)  the current exchange rate falls 
E)  None of the above answers is correct 
A)  the expected future exchange rate rises 
B)  the expected future exchange rate falls 
C)  the current exchange rate rises 
D)  the current exchange rate falls 
E)  None of the above answers is correct

Question 9

If the United States imports goods and services for a total of $45 billion, exports goods and services for a total of $40 billion, records $4 billion as net interest and zero as net transfers, then the U.S.current account balance is

Accepted Answer

A)  $89 billion. 
B)  $1 billion. 
C)  zero. 
D)  -$1 billion. 
E)  $81 billion. 
A)  $89 billion. 
B)  $1 billion. 
C)  zero. 
D)  -$1 billion. 
E)  $81 billion.

Question 10

If today the exchange rate is 1.00 euro per dollar and tomorrow the exchange rate is 0.98 euros per dollar, then the dollar ________ and the euro ________.

Accepted Answer

A)  appreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; appreciated 
D)  depreciated; depreciated 
E)  depreciated; did not change 
A)  appreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; appreciated 
D)  depreciated; depreciated 
E)  depreciated; did not change

Question 11

The demand for the U.S.dollar in the foreign exchange market is a derived demand.A derived demand means that the demand is derived from

Accepted Answer

A)  the supply of U.S.dollars. 
B)  government policy. 
C)  the demand for U.S.goods, services, and assets. 
D)  the domestic demand for U.S.goods and services. 
E)  the demand by U.S.residents for foreign goods, services, and assets. 
A)  the supply of U.S.dollars. 
B)  government policy. 
C)  the demand for U.S.goods, services, and assets. 
D)  the domestic demand for U.S.goods and services. 
E)  the demand by U.S.residents for foreign goods, services, and assets.

Question 12

Explain how the Fed intervenes in the foreign exchange market and what the effects are of the Fed's actions.

Accepted Answer

The Fed changes the value of the exchang

Question 13

Other things remaining the same, as U.S.imports increase, the quantity of

Accepted Answer

A)  U.S.dollars demanded increases. 
B)  foreign currency demanded decreases. 
C)  U.S.dollars supplied decreases. 
D)  foreign currency demanded increases. 
E)  foreign currency supplied increases. 
A)  U.S.dollars demanded increases. 
B)  foreign currency demanded decreases. 
C)  U.S.dollars supplied decreases. 
D)  foreign currency demanded increases. 
E)  foreign currency supplied increases.

Question 14

If the current account balance is -$100 billion, net interest = $0, net transfers = $0, then

Accepted Answer

A)  exports are greater than imports. 
B)  imports are greater than exports. 
C)  the capital account balance must be +$100 billion. 
D)  there was an increase in net foreign assets. 
E)  the country is loaning abroad. 
A)  exports are greater than imports. 
B)  imports are greater than exports. 
C)  the capital account balance must be +$100 billion. 
D)  there was an increase in net foreign assets. 
E)  the country is loaning abroad.

Question 15

"In the foreign exchange market, if the demand for the U.S.dollar increases, the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is correct.The increase in

Question 16

The balance of payments accounts record all of the following EXCEPT the country's

Accepted Answer

A)  domestic investment. 
B)  international borrowing. 
C)  international trading. 
D)  international lending. 
E)  change in official reserves. 
A)  domestic investment. 
B)  international borrowing. 
C)  international trading. 
D)  international lending. 
E)  change in official reserves.

Question 17

In 2008, the United States had

Accepted Answer

A)  a current account surplus because imports were greater than exports. 
B)  a capital account deficit because exports were greater than imports. 
C)  a current account deficit because imports were greater than exports. 
D)  no change in U.S.official reserves. 
E)  a current account deficit and a capital account deficit. 
A)  a current account surplus because imports were greater than exports. 
B)  a capital account deficit because exports were greater than imports. 
C)  a current account deficit because imports were greater than exports. 
D)  no change in U.S.official reserves. 
E)  a current account deficit and a capital account deficit.

Question 18

Looking at the U.S.balance of payments for the last two decades, how have the current account and the capital account changed?

Accepted Answer

Since the early 1980s, the U.S.current a

Question 19

When the exchange rate between the U.S.dollar and the euro changes from 1.00 euro per dollar to 1.30 euros per dollar, then the

Accepted Answer

A)  euro has appreciated against the dollar. 
B)  U.S.dollar has depreciated against the euro. 
C)  U.S.dollar has appreciated against the euro. 
D)  euro has depreciated against the euro. 
E)  U.S.dollar has depreciated against the dollar. 
A)  euro has appreciated against the dollar. 
B)  U.S.dollar has depreciated against the euro. 
C)  U.S.dollar has appreciated against the euro. 
D)  euro has depreciated against the euro. 
E)  U.S.dollar has depreciated against the dollar.

Question 20

The sum of the current account plus the capital account plus the official settlements account equals

Accepted Answer

A)  100 percent. 
B)  U.S.official reserves. 
C)  zero. 
D)  government expenditures. 
E)  U.S.exports. 
A)  100 percent. 
B)  U.S.official reserves. 
C)  zero. 
D)  government expenditures. 
E)  U.S.exports.

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S.interest rate differential.

If the exchange rate appreciates, then the

If the exchange rate is constant and U.S.imports increase, then in the foreign exchange market the

"The current account records foreign investment in a nation minus investment abroad." Is the previous statement correct or incorrect?

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

If the interest rate rises in the United States relative to other nations, then in the foreign exchange market the demand for dollars and the supply of dollars .

If the U.S.interest rate rises relative to the interest rate in other countries, then the supply of dollars and the demand for dollars .

In the foreign exchange market, which of the following shifts the supply curve of dollars leftward?

If the United States imports goods and services for a total of $45 billion, exports goods and services for a total of $40 billion, records $4 billion as net interest and zero as net transfers, then the U.S.current account balance is

If today the exchange rate is 1.00 euro per dollar and tomorrow the exchange rate is 0.98 euros per dollar, then the dollar and the euro .

The demand for the U.S.dollar in the foreign exchange market is a derived demand.A derived demand means that the demand is derived from

Explain how the Fed intervenes in the foreign exchange market and what the effects are of the Fed's actions.

Other things remaining the same, as U.S.imports increase, the quantity of

If the current account balance is -$100 billion, net interest = $0, net transfers = $0, then

"In the foreign exchange market, if the demand for the U.S.dollar increases, the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

The balance of payments accounts record all of the following EXCEPT the country's

In 2008, the United States had

Looking at the U.S.balance of payments for the last two decades, how have the current account and the capital account changed?

When the exchange rate between the U.S.dollar and the euro changes from 1.00 euro per dollar to 1.30 euros per dollar, then the

The sum of the current account plus the capital account plus the official settlements account equals

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 19: International Finance

Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S.interest rate differential.

If the exchange rate appreciates, then the

If the exchange rate is constant and U.S.imports increase, then in the foreign exchange market the

"The current account records foreign investment in a nation minus investment abroad." Is the previous statement correct or incorrect?

Define official settlements account and U.S.official reserves.Discuss the differences between the two terms.

If the interest rate rises in the United States relative to other nations, then in the foreign exchange market the demand for dollars ________ and the supply of dollars ________.

If the U.S.interest rate rises relative to the interest rate in other countries, then the supply of dollars ________ and the demand for dollars ________.

In the foreign exchange market, which of the following shifts the supply curve of dollars leftward?

If the United States imports goods and services for a total of $45 billion, exports goods and services for a total of $40 billion, records $4 billion as net interest and zero as net transfers, then the U.S.current account balance is

If today the exchange rate is 1.00 euro per dollar and tomorrow the exchange rate is 0.98 euros per dollar, then the dollar ________ and the euro ________.

The demand for the U.S.dollar in the foreign exchange market is a derived demand.A derived demand means that the demand is derived from

Explain how the Fed intervenes in the foreign exchange market and what the effects are of the Fed's actions.

Other things remaining the same, as U.S.imports increase, the quantity of

If the current account balance is -$100 billion, net interest = $0, net transfers = $0, then

"In the foreign exchange market, if the demand for the U.S.dollar increases, the U.S.dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect.

The balance of payments accounts record all of the following EXCEPT the country's

In 2008, the United States had

Looking at the U.S.balance of payments for the last two decades, how have the current account and the capital account changed?

When the exchange rate between the U.S.dollar and the euro changes from 1.00 euro per dollar to 1.30 euros per dollar, then the

The sum of the current account plus the capital account plus the official settlements account equals

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

If the interest rate rises in the United States relative to other nations, then in the foreign exchange market the demand for dollars and the supply of dollars .

If the U.S.interest rate rises relative to the interest rate in other countries, then the supply of dollars and the demand for dollars .

If today the exchange rate is 1.00 euro per dollar and tomorrow the exchange rate is 0.98 euros per dollar, then the dollar and the euro .