Question 1

A government may be able to keep the international value of its currency low by:

Accepted Answer

A) selling its currency in the foreign exchange market 
B) buying its currency in the foreign exchange market 
C) selling foreign currencies in the foreign exchange market 
D) increasing its domestic interest rates 
E) selling more exports to its trading partners 
A) selling its currency in the foreign exchange market 
B) buying its currency in the foreign exchange market 
C) selling foreign currencies in the foreign exchange market 
D) increasing its domestic interest rates 
E) selling more exports to its trading partners

Question 2

Depreciation of the Canadian dollar will tend to:

Accepted Answer

A) decrease the prices of both Canadian imports and exports 
B) increase the prices of both Canadian imports and exports 
C) decrease the prices of the products that Canadians import, but increase the prices to foreigners of the products that Canadians export 
D) increase the prices of the products that Canadians import, but decrease the prices to foreigners of the products that Canadians export 
E) have no effect on the prices of Canadian imports and exports 
A) decrease the prices of both Canadian imports and exports 
B) increase the prices of both Canadian imports and exports 
C) decrease the prices of the products that Canadians import, but increase the prices to foreigners of the products that Canadians export 
D) increase the prices of the products that Canadians import, but decrease the prices to foreigners of the products that Canadians export 
E) have no effect on the prices of Canadian imports and exports

Question 3

With a system of flexible exchange rates,an increase in demand for a country's currency will cause:

Accepted Answer

A) a temporary excess supply of the currency 
B) a temporary excess demand of the currency 
C) a drop in the value of the country's currency 
D) an ongoing balance of payments deficit 
E) an ongoing balance of payments surplus 
A) a temporary excess supply of the currency 
B) a temporary excess demand of the currency 
C) a drop in the value of the country's currency 
D) an ongoing balance of payments deficit 
E) an ongoing balance of payments surplus

Question 4

Canadian import transactions create a monetary:

Accepted Answer

A) inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
B) inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
C) outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
D) outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
E) circular flow with no effect on the balance of payments 
A) inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
B) inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
C) outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
D) outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
E) circular flow with no effect on the balance of payments

Question 5

Which of the following creates a negative payment in Italy's balance-of-payments accounts?

Accepted Answer

A) a French resident buys a bond issued by an Italian manufacturer 
B) a Canadian-based company pays dividends to an Italian shareholder 
C) a Canadian student takes a summer trip to Rome 
D) a Canadian importer buys 500 cases of Italian table wine 
E) an Italian company buys software from a Canadian business 
A) a French resident buys a bond issued by an Italian manufacturer 
B) a Canadian-based company pays dividends to an Italian shareholder 
C) a Canadian student takes a summer trip to Rome 
D) a Canadian importer buys 500 cases of Italian table wine 
E) an Italian company buys software from a Canadian business

Question 6

Appreciation of the Japanese yen will:

Accepted Answer

A) intensify any existing disequilibrium in Japan's balance of payments 
B) make Japan's exports less expensive and its imports more expensive 
C) make Japan's exports and imports both less expensive 
D) make Japan's exports and imports both more expensive 
E) make Japan's exports more expensive and its imports less expensive 
A) intensify any existing disequilibrium in Japan's balance of payments 
B) make Japan's exports less expensive and its imports more expensive 
C) make Japan's exports and imports both less expensive 
D) make Japan's exports and imports both more expensive 
E) make Japan's exports more expensive and its imports less expensive

Question 7

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } 
\hline \text { Merchandise exports } & \$ 137 \
\hline \text { Merchandise imports } & - 128 \
\hline \text { Service exports } & + 20 \
\hline \text { Service imports } & - 26 \
\hline \text { Investment income } & - 18 \
\hline \text { Transfers } & + 4 \
\hline \text { Other financial investments } & - 3 \
\hline \text { Portfolio and direct } & + 12 \
\text { investments } & \
\hline \text { Capital account flows } & + 11 \
\hline \text { Changes in official reserves } & - 9 \
\hline
\end{array}$
-Canada had a balance of trade:

Accepted Answer

A) surplus of $3 billion 
B) surplus of $9 billion 
C) surplus of $15 billion 
D) deficit of $9 billion 
E) deficit of $15 billion 
A) surplus of $3 billion 
B) surplus of $9 billion 
C) surplus of $15 billion 
D) deficit of $9 billion 
E) deficit of $15 billion

Question 8

In the balance-of-payments of Canada,the government purchase of Canadian dollars through the sale of official reserves of foreign currencies is recorded as:

Accepted Answer

A) a current account entry 
B) a negative entry 
C) transfers 
D) investment income 
E) a positive entry 
A) a current account entry 
B) a negative entry 
C) transfers 
D) investment income 
E) a positive entry

Question 9

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } 
\hline \text { Merchandise exports } & \$ 137 \
\hline \text { Merchandise imports } & - 128 \
\hline \text { Service exports } & + 20 \
\hline \text { Service imports } & - 26 \
\hline \text { Investment income } & - 18 \
\hline \text { Transfers } & + 4 \
\hline \text { Other financial investments } & - 3 \
\hline \text { Portfolio and direct } & + 12 \
\text { investments } & \
\hline \text { Capital account flows } & + 11 \
\hline \text { Changes in official reserves } & - 9 \
\hline
\end{array}$
-Canada had a merchandise trade:

Accepted Answer

A) surplus of $137 billion 
B) surplus of $9 billion 
C) deficit of $9 billion 
D) surplus of $3 billion 
E) deficit of $3 billion 
A) surplus of $137 billion 
B) surplus of $9 billion 
C) deficit of $9 billion 
D) surplus of $3 billion 
E) deficit of $3 billion

Question 10

-Given a change in demand from D0 to D1 and in supply from S0 to S1,Canada could maintain the value of Canadian dollars in terms of pounds by:

Accepted Answer

A) shifting the supply curve farther to the right through the use of domestic expansionary policies 
B) maintaining a balance-of-payments surplus 
C) using official international reserves to cover the Canadian dollars shortage of cd 
D) using official international reserves to cover the Canadian dollars surplus of cd 
E) shifting the demand curve farther to the left through the use of contractionary policies 
A) shifting the supply curve farther to the right through the use of domestic expansionary policies 
B) maintaining a balance-of-payments surplus 
C) using official international reserves to cover the Canadian dollars shortage of cd 
D) using official international reserves to cover the Canadian dollars surplus of cd 
E) shifting the demand curve farther to the left through the use of contractionary policies

Question 11

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } 
\hline \text { Merchandise exports } & \$ 137 \
\hline \text { Merchandise imports } & - 128 \
\hline \text { Service exports } & + 20 \
\hline \text { Service imports } & - 26 \
\hline \text { Investment income } & - 18 \
\hline \text { Transfers } & + 4 \
\hline \text { Other financial investments } & - 3 \
\hline \text { Portfolio and direct } & + 12 \
\text { investments } & \
\hline \text { Capital account flows } & + 11 \
\hline \text { Changes in official reserves } & - 9 \
\hline
\end{array}$
-The balance on Canada's non-merchandise transactions was a deficit of:

Accepted Answer

A) $17 billion 
B) $20 billion 
C) $24 billion 
D) $16 billion 
E) $3 billion 
A) $17 billion 
B) $20 billion 
C) $24 billion 
D) $16 billion 
E) $3 billion

Question 12

If the exchange rate changes so that fewer euros can be bought with a Canadian dollar,then:

Accepted Answer

A) the euro has depreciated in value 
B) Canadians will buy fewer European goods and services 
C) fewer Canadian goods and services will be demanded by Europeans 
D) the dollar has appreciated in value 
E) trade between Canada and Europe will be unaffected 
A) the euro has depreciated in value 
B) Canadians will buy fewer European goods and services 
C) fewer Canadian goods and services will be demanded by Europeans 
D) the dollar has appreciated in value 
E) trade between Canada and Europe will be unaffected

Question 13

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } 
\hline \text { Merchandise exports } & \$ 137 \
\hline \text { Merchandise imports } & - 128 \
\hline \text { Service exports } & + 20 \
\hline \text { Service imports } & - 26 \
\hline \text { Investment income } & - 18 \
\hline \text { Transfers } & + 4 \
\hline \text { Other financial investments } & - 3 \
\hline \text { Portfolio and direct } & + 12 \
\text { investments } & \
\hline \text { Capital account flows } & + 11 \
\hline \text { Changes in official reserves } & - 9 \
\hline
\end{array}$
-In a nation's balance of payments,which one of the following items is always recorded as a positive entry?

Accepted Answer

A) merchandise imports 
B) the effect of changes in foreign currency reserves on the flow of Canadian dollars 
C) capital flows 
D) exports of services 
E) investment income 
A) merchandise imports 
B) the effect of changes in foreign currency reserves on the flow of Canadian dollars 
C) capital flows 
D) exports of services 
E) investment income

Question 14

-Under a system of flexible exchange rates,the shift in demand from D0 to D1 and in supply from S0 to S1:

Accepted Answer

A) will ultimately cause Canada's exports to decline and its imports to rise 
B) causes the dollar to appreciate 
C) causes the pound to depreciate 
D) causes the dollar to depreciate 
E) has no effect on the values of the two currencies 
A) will ultimately cause Canada's exports to decline and its imports to rise 
B) causes the dollar to appreciate 
C) causes the pound to depreciate 
D) causes the dollar to depreciate 
E) has no effect on the values of the two currencies

Question 15

A government can keep the international value of its currency high by:

Accepted Answer

A) selling its currency in the foreign exchange market 
B) reducing its domestic interest rates 
C) buying its currency in the foreign exchange market 
D) running a balance of payments surplus 
E) loosening any barriers that stop residents from trading the currency on the foreign exchange market 
A) selling its currency in the foreign exchange market 
B) reducing its domestic interest rates 
C) buying its currency in the foreign exchange market 
D) running a balance of payments surplus 
E) loosening any barriers that stop residents from trading the currency on the foreign exchange market

Question 16

If the price of yen in terms of Canadian dollars rises,then:

Accepted Answer

A) the yen price of dollars also rises 
B) the dollar depreciates relative to the yen 
C) the yen depreciates relative to the dollar 
D) the yen price of dollars rises then falls 
E) the yen price of dollars stays the same 
A) the yen price of dollars also rises 
B) the dollar depreciates relative to the yen 
C) the yen depreciates relative to the dollar 
D) the yen price of dollars rises then falls 
E) the yen price of dollars stays the same

Question 17

Canadian export transactions create a monetary:

Accepted Answer

A) outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
B) outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
C) inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
D) inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
E) circular flow with no effect on the balance of payments 
A) outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
B) outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
C) inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts 
D) inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts 
E) circular flow with no effect on the balance of payments

Question 18

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } 
\hline \text { Merchandise exports } & \$ 137 \
\hline \text { Merchandise imports } & - 128 \
\hline \text { Service exports } & + 20 \
\hline \text { Service imports } & - 26 \
\hline \text { Investment income } & - 18 \
\hline \text { Transfers } & + 4 \
\hline \text { Other financial investments } & - 3 \
\hline \text { Portfolio and direct } & + 12 \
\text { investments } & \
\hline \text { Capital account flows } & + 11 \
\hline \text { Changes in official reserves } & - 9 \
\hline
\end{array}$
-Which of the following will directly alter Canada's balance of trade?

Accepted Answer

A) a transaction of Canadian dollars that increases official international reserves 
B) a decrease in merchandise exports 
C) an increase in transfers 
D) a decrease in capital outflows 
E) an increase in investment income flowing into Canada 
A) a transaction of Canadian dollars that increases official international reserves 
B) a decrease in merchandise exports 
C) an increase in transfers 
D) a decrease in capital outflows 
E) an increase in investment income flowing into Canada

Question 19

Assume the hypothetical exchange rates of $1 = 140 yen and 1 Mexican peso = $0.10.We can conclude that:

Accepted Answer

A) 1 yen = 280 pesos 
B) 1 yen = 14 pesos 
C) 1 peso = $0.50 
D) 1 peso = 1400 yen 
E) 1 peso = 14 yen 
A) 1 yen = 280 pesos 
B) 1 yen = 14 pesos 
C) 1 peso = $0.50 
D) 1 peso = 1400 yen 
E) 1 peso = 14 yen

Question 20

Under a system of flexible (floating)exchange rates,a higher Canadian trade deficit with Mexico will tend to cause:

Accepted Answer

A) the Canadian government to ration pesos to Canadian importers 
B) a flow of gold from Canada to Mexico 
C) an increase in the price of Canadian dollars, in terms of Mexican pesos 
D) a decrease in the price of Canadian dollars, in terms of Mexican pesos 
E) a flow of gold from Mexico to Canada 
A) the Canadian government to ration pesos to Canadian importers 
B) a flow of gold from Canada to Mexico 
C) an increase in the price of Canadian dollars, in terms of Mexican pesos 
D) a decrease in the price of Canadian dollars, in terms of Mexican pesos 
E) a flow of gold from Mexico to Canada

A government may be able to keep the international value of its currency low by:

Depreciation of the Canadian dollar will tend to:

With a system of flexible exchange rates,an increase in demand for a country's currency will cause:

Canadian import transactions create a monetary:

Which of the following creates a negative payment in Italy's balance-of-payments accounts?

Appreciation of the Japanese yen will:

In the balance-of-payments of Canada,the government purchase of Canadian dollars through the sale of official reserves of foreign currencies is recorded as:

-Given a change in demand from D₀ to D₁ and in supply from S₀ to S₁,Canada could maintain the value of Canadian dollars in terms of pounds by:

If the exchange rate changes so that fewer euros can be bought with a Canadian dollar,then:

-Under a system of flexible exchange rates,the shift in demand from D₀ to D₁ and in supply from S₀ to S₁:

A government can keep the international value of its currency high by:

If the price of yen in terms of Canadian dollars rises,then:

Canadian export transactions create a monetary:

Assume the hypothetical exchange rates of $1 = 140 yen and 1 Mexican peso = $0.10.We can conclude that:

Under a system of flexible (floating)exchange rates,a higher Canadian trade deficit with Mexico will tend to cause:

The Economic Problem

Demand and Supply

Elasticity

Costs of Production

Perfect Competition

Monopoly and Imperfect Competition

Economic Welfare and Income Distribution

Measures of Economic Activity

Inflation and Unemployment

Economic Fluctuations

Fiscal Policy

Money

Monetary Policy

Foreign Trade

Filters

Exam 14: The Foreign Sector

A government may be able to keep the international value of its currency low by:

Depreciation of the Canadian dollar will tend to:

With a system of flexible exchange rates,an increase in demand for a country's currency will cause:

Canadian import transactions create a monetary:

Which of the following creates a negative payment in Italy's balance-of-payments accounts?

Appreciation of the Japanese yen will:

In the balance-of-payments of Canada,the government purchase of Canadian dollars through the sale of official reserves of foreign currencies is recorded as:

-Given a change in demand from D0 to D1 and in supply from S0 to S1,Canada could maintain the value of Canadian dollars in terms of pounds by:

If the exchange rate changes so that fewer euros can be bought with a Canadian dollar,then:

-Under a system of flexible exchange rates,the shift in demand from D0 to D1 and in supply from S0 to S1:

A government can keep the international value of its currency high by:

If the price of yen in terms of Canadian dollars rises,then:

Canadian export transactions create a monetary:

Assume the hypothetical exchange rates of $1 = 140 yen and 1 Mexican peso = $0.10.We can conclude that:

Under a system of flexible (floating)exchange rates,a higher Canadian trade deficit with Mexico will tend to cause:

The Economic Problem

Demand and Supply

Elasticity

Costs of Production

Perfect Competition

Monopoly and Imperfect Competition

Economic Welfare and Income Distribution

Measures of Economic Activity

Inflation and Unemployment

Economic Fluctuations

Fiscal Policy

Money

Monetary Policy

Foreign Trade

Filters

-Given a change in demand from D₀ to D₁ and in supply from S₀ to S₁,Canada could maintain the value of Canadian dollars in terms of pounds by:

-Under a system of flexible exchange rates,the shift in demand from D₀ to D₁ and in supply from S₀ to S₁: