Question 1

If the balance on the current account in the United States is $750 billion,which of the following is most likely to be true?

Accepted Answer

A) The balance on the financial account is negative. 
B) The trade balance is negative. 
C) Net foreign investment is negative. 
D) The balance on the capital account is positive. 
A) The balance on the financial account is negative. 
B) The trade balance is negative. 
C) Net foreign investment is negative. 
D) The balance on the capital account is positive. A

Question 2

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

Accepted Answer

A) 94 
B) 115 
C) 128 
D) 153 
A) 94 
B) 115 
C) 128 
D) 153 C

Question 3

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

Accepted Answer

A) 1.19% 
B) 3.8% 
C) 27.8% 
D) 44.2% 
A) 1.19% 
B) 3.8% 
C) 27.8% 
D) 44.2% B

Question 4

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world except for Latin America.

Accepted Answer

A) deficit; deficit 
B) deficit; surplus 
C) surplus; deficit 
D) surplus; surplus 
E) deficit; balance 
A) deficit; deficit 
B) deficit; surplus 
C) surplus; deficit 
D) surplus; surplus 
E) deficit; balance

Question 5

Currency traders expect the dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

Accepted Answer

A) The dollar will appreciate,and the equilibrium quantity of dollars will decrease. 
B) The dollar will depreciate,and the equilibrium quantity of dollars exchanged will decrease. 
C) The dollar will appreciate,and the equilibrium quantity of dollars will increase. 
D) The dollar will depreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined. 
A) The dollar will appreciate,and the equilibrium quantity of dollars will decrease. 
B) The dollar will depreciate,and the equilibrium quantity of dollars exchanged will decrease. 
C) The dollar will appreciate,and the equilibrium quantity of dollars will increase. 
D) The dollar will depreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined.

Question 6

How does expansionary monetary policy affect net exports?

Accepted Answer

A) Expansionary monetary policy increases exports and reduces imports. 
B) Expansionary monetary policy reduces exports and increases imports. 
C) Expansionary monetary policy increases exports and increases imports. 
D) Expansionary monetary policy reduces exports and reduces imports. 
A) Expansionary monetary policy increases exports and reduces imports. 
B) Expansionary monetary policy reduces exports and increases imports. 
C) Expansionary monetary policy increases exports and increases imports. 
D) Expansionary monetary policy reduces exports and reduces imports.

Question 7

Figure 18-2  
-Refer to Figure 18-2.Consider the market for U.S.Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound

Accepted Answer

A) decreased; 0.46 
B) increased; 2.17 
C) decreased; 2.00 
D) increased; 0.50 
A) decreased; 0.46 
B) increased; 2.17 
C) decreased; 2.00 
D) increased; 0.50

Question 8

Suppose the Fed purchases Treasury Securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.

Accepted Answer

A) decrease; appreciate 
B) decrease; depreciate 
C) increase; depreciate 
D) increase; appreciate 
A) decrease; appreciate 
B) decrease; depreciate 
C) increase; depreciate 
D) increase; appreciate

Question 9

Which of the following is true about the occurrence of the twin deficits?

Accepted Answer

A) They always occur together. 
B) They only occur when exchange rates are fixed. 
C) They did not occur after 1990 in the United States. 
D) They occur consistently in all the economies of the world except the United States. 
A) They always occur together. 
B) They only occur when exchange rates are fixed. 
C) They did not occur after 1990 in the United States. 
D) They occur consistently in all the economies of the world except the United States.

Question 10

The United States has a closed economy.

Accepted Answer

A) True 
 B)False

Question 11

Table 18-3
  
-Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

Accepted Answer

A) 0.20 dollars per krone and 1.43 dollars per euro 
B) 2.00 dollars per krone and 7.14 dollars per euro 
C) 0.02 dollars per krone and 0.70 dollars per euro 
D) 0.05 dollars per krone and 1.30 dollars per euro 
A) 0.20 dollars per krone and 1.43 dollars per euro 
B) 2.00 dollars per krone and 7.14 dollars per euro 
C) 0.02 dollars per krone and 0.70 dollars per euro 
D) 0.05 dollars per krone and 1.30 dollars per euro

Question 12

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

Accepted Answer

A) more; more 
B) more; fewer 
C) fewer; more 
D) fewer; fewer 
A) more; more 
B) more; fewer 
C) fewer; more 
D) fewer; fewer

Question 13

Since 1999,the capital account has recorded

Accepted Answer

A) transactions that affect net capital flows in the economy. 
B) relatively minor transactions,such as migrants' transfers,and sales and purchases of nonproduced,nonfinancial assets. 
C) transactions that affect the balance of trade or the balance of services. 
D) statistical discrepancy between the current account and the financial account. 
A) transactions that affect net capital flows in the economy. 
B) relatively minor transactions,such as migrants' transfers,and sales and purchases of nonproduced,nonfinancial assets. 
C) transactions that affect the balance of trade or the balance of services. 
D) statistical discrepancy between the current account and the financial account.

Question 14

Figure 18-1  
-Refer to Figure 18-1.The appreciation of the euro is represented as a movement from

Accepted Answer

A) D to A. 
B) D to C. 
C) B to C. 
D) A to C. 
E) A to B. 
A) D to A. 
B) D to C. 
C) B to C. 
D) A to C. 
E) A to B.

Question 15

If the nominal exchange rate between the American dollar and the New Zealand dollar is 1.36 New Zealand dollars per American dollar,how many American dollars are required to buy a product that costs 3.50 New Zealand dollars?

Accepted Answer

A) $2.14 
B) $2.24 
C) $2.57 
D) $4.76 
A) $2.14 
B) $2.24 
C) $2.57 
D) $4.76

Question 16

Which of the following would cause the dollar to appreciate?

Accepted Answer

A) an increase in the demand for dollars 
B) a decrease in the demand for dollars 
C) an increase in the supply of dollars 
D) an increase in the demand for imports from foreign countries 
A) an increase in the demand for dollars 
B) a decrease in the demand for dollars 
C) an increase in the supply of dollars 
D) an increase in the demand for imports from foreign countries

Question 17

Based on the following information,what is the balance on the financial account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S.holdings of assets in foreign countries = -$1 billion

Accepted Answer

A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion 
A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion

Question 18

A decrease in United States net foreign direct investment would occur if

Accepted Answer

A) U.S.citizens have decreased the value of foreign stocks and bonds they own. 
B) U.S.citizens have decreased their building or purchasing of facilities in foreign countries. 
C) net foreign investment decreases. 
D) net capital flows increase. 
A) U.S.citizens have decreased the value of foreign stocks and bonds they own. 
B) U.S.citizens have decreased their building or purchasing of facilities in foreign countries. 
C) net foreign investment decreases. 
D) net capital flows increase.

Question 19

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

Accepted Answer

A) The demand for dollars falls,and the supply of dollars falls. 
B) The demand for dollars rises,and the supply of dollars rises. 
C) The demand for dollars rises,and the supply of dollars falls. 
D) The demand for dollars falls,and the supply of dollars rises. 
A) The demand for dollars falls,and the supply of dollars falls. 
B) The demand for dollars rises,and the supply of dollars rises. 
C) The demand for dollars rises,and the supply of dollars falls. 
D) The demand for dollars falls,and the supply of dollars rises.

Question 20

The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.

Accepted Answer

A) True 
 B)False

If the balance on the current account in the United States is $750 billion,which of the following is most likely to be true?

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

The United States has a trade with all its major trading partners and a trade with every region of the world except for Latin America.

Currency traders expect the dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

How does expansionary monetary policy affect net exports?

Figure 18-2 -Refer to Figure 18-2.Consider the market for U.S.Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has to dollars per pound

Suppose the Fed purchases Treasury Securities.Interest rates in the United States will and the U.S.dollar will against foreign currencies.

Which of the following is true about the occurrence of the twin deficits?

The United States has a closed economy.

Table 18-3 -Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

The United States usually exports goods than it imports and exports services than it imports.

Since 1999,the capital account has recorded

Figure 18-1 -Refer to Figure 18-1.The appreciation of the euro is represented as a movement from

If the nominal exchange rate between the American dollar and the New Zealand dollar is 1.36 New Zealand dollars per American dollar,how many American dollars are required to buy a product that costs 3.50 New Zealand dollars?

Which of the following would cause the dollar to appreciate?

A decrease in United States net foreign direct investment would occur if

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

The International Financial System

Filters

Exam 18: Macroeconomics in an Open Economy

If the balance on the current account in the United States is $750 billion,which of the following is most likely to be true?

If the price level in the United States is 110,the price level is 120 in Mexico,and the nominal exchange rate is 140 pesos per dollar,what is the real exchange rate from the U.S.perspective?

Suppose that domestic investment in Japan is 20.2% of GDP,and Japanese national savings is 24% of GDP.What is Japan's foreign investment as a percentage of GDP?

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world except for Latin America.

Currency traders expect the dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

How does expansionary monetary policy affect net exports?

Figure 18-2 -Refer to Figure 18-2.Consider the market for U.S.Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound

Suppose the Fed purchases Treasury Securities.Interest rates in the United States will ________ and the U.S.dollar will ________ against foreign currencies.

Which of the following is true about the occurrence of the twin deficits?

The United States has a closed economy.

Table 18-3 -Refer to Table 18-3.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Danish krone and U.S.dollars per EU euro respectively?

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

Since 1999,the capital account has recorded

Figure 18-1 -Refer to Figure 18-1.The appreciation of the euro is represented as a movement from

If the nominal exchange rate between the American dollar and the New Zealand dollar is 1.36 New Zealand dollars per American dollar,how many American dollars are required to buy a product that costs 3.50 New Zealand dollars?

Which of the following would cause the dollar to appreciate?

A decrease in United States net foreign direct investment would occur if

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

The International Financial System

Filters

The United States has a trade with all its major trading partners and a trade with every region of the world except for Latin America.

Figure 18-2 -Refer to Figure 18-2.Consider the market for U.S.Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has to dollars per pound

Suppose the Fed purchases Treasury Securities.Interest rates in the United States will and the U.S.dollar will against foreign currencies.

The United States usually exports goods than it imports and exports services than it imports.