Question 1

If the dollar depreciates against the Indian rupee,

Accepted Answer

A)  Indian imports to the U.S. become less expensive. 
B)  U.S. exports to India become less expensive. 
C)  U.S. exports to India become more expensive. 
D)  The value of Indian imports to the United States does not change. 
A)  Indian imports to the U.S. become less expensive. 
B)  U.S. exports to India become less expensive. 
C)  U.S. exports to India become more expensive. 
D)  The value of Indian imports to the United States does not change.

Question 2

If the Fed is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

Accepted Answer

A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall. 
A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall.

Question 3

The level of saving in the United States has historically been low relative to the level of domestic investment. Based on this information, we would expect that

Accepted Answer

A)  U.S. net foreign investment has been relatively high. 
B)  U.S. net exports have been relatively low. 
C)  U.S. capital inflows are negative. 
D)  U.S. private saving is less than its public saving. 
A)  U.S. net foreign investment has been relatively high. 
B)  U.S. net exports have been relatively low. 
C)  U.S. capital inflows are negative. 
D)  U.S. private saving is less than its public saving.

Question 4

The large budget deficits of the early 1990s resulted in large current account deficits.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following transactions would be included in Japan's current account?

Accepted Answer

A)  A Japanese citizen purchases 50 shares of Google stock. 
B)  An American citizen purchases 50 shares of Toshiba stock. 
C)  A Japanese citizen purchases a new Toyota made in Japan. 
D)  An American citizen purchases a new Toyota made in Japan. 
A)  A Japanese citizen purchases 50 shares of Google stock. 
B)  An American citizen purchases 50 shares of Toshiba stock. 
C)  A Japanese citizen purchases a new Toyota made in Japan. 
D)  An American citizen purchases a new Toyota made in Japan.

Question 6

A federal budget deficit ________ interest rates, which ________ exchange rates (foreign currency per domestic currency), and ________ the balance of trade.

Accepted Answer

A)  raises; raises; reduces 
B)  reduces; raises; reduces 
C)  raises; reduces; reduces 
D)  reduces; reduces; raises 
A)  raises; raises; reduces 
B)  reduces; raises; reduces 
C)  raises; reduces; reduces 
D)  reduces; reduces; raises

Question 7

When the United States sends money to the Philippines to help typhoon survivors, the transaction is recorded in

Accepted Answer

A)  the capital account. 
B)  the current account. 
C)  the financial account. 
D)  the foreign exchange account. 
A)  the capital account. 
B)  the current account. 
C)  the financial account. 
D)  the foreign exchange account.

Question 8

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 9

You're traveling in Japan and are thinking about buying a new kimono. You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen. If the exchange rate is 89 yen per dollar, what is the highest price in yen you'd be willing to pay for a kimono? (Assume no taxes or duties are associated with the purchase.)

Accepted Answer

A)  1.97 yen 
B)  330.75 yen 
C)  15,575 yen 
D)  19,425 yen 
A)  1.97 yen 
B)  330.75 yen 
C)  15,575 yen 
D)  19,425 yen

Question 10

The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by

Accepted Answer

A)  federal budget deficits. 
B)  "flight to quality" as foreign investors favored U.S. investments. 
C)  a sharp decline in private saving. 
D)  Both B and C are correct. 
A)  federal budget deficits. 
B)  "flight to quality" as foreign investors favored U.S. investments. 
C)  a sharp decline in private saving. 
D)  Both B and C are correct.

Question 11

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

Accepted Answer

A)  Capital outflows are less than capital inflows. 
B)  Domestic investment must be less than national saving. 
C)  Net exports are negative. 
D)  None of the above are true when net foreign investment is positive. 
A)  Capital outflows are less than capital inflows. 
B)  Domestic investment must be less than national saving. 
C)  Net exports are negative. 
D)  None of the above are true when net foreign investment is positive.

Question 12

When the market value of the dollar rises relative to other currencies around the world, we say that

Accepted Answer

A)  the dollar has appreciated. 
B)  the dollar has depreciated. 
C)  the demand for dollars has increased. 
D)  the supply of dollars has increased. 
A)  the dollar has appreciated. 
B)  the dollar has depreciated. 
C)  the demand for dollars has increased. 
D)  the supply of dollars has increased.

Question 13

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 14

Which of the following will not shift the demand for the euro to the right?

Accepted Answer

A)  an increase in interest rates in the European Union 
B)  an increase in incomes in countries that buy goods from the European Union 
C)  expectations among speculators that the price of the euro will rise in the future 
D)  a decrease in the demand for European goods 
A)  an increase in interest rates in the European Union 
B)  an increase in incomes in countries that buy goods from the European Union 
C)  expectations among speculators that the price of the euro will rise in the future 
D)  a decrease in the demand for European goods

Question 15

Holding all else constant, a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Accepted Answer

A) True 
 B)False

Question 16

Saving exceeds domestic investment in Japan, which generates a financial account deficit in Japan's balance of payments.

Accepted Answer

A) True 
 B)False

Question 17

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

Accepted Answer

A)  the dollar has depreciated. 
B)  the dollar has appreciated. 
C)  the British pound has depreciated. 
D)  the British pound has stayed constant in value. 
A)  the dollar has depreciated. 
B)  the dollar has appreciated. 
C)  the British pound has depreciated. 
D)  the British pound has stayed constant in value.

Question 18

According to the saving and investment equation, if net foreign investment rises by $60 million,

Accepted Answer

A)  national saving will increase by $60 million. 
B)  national saving will fall by $60 million. 
C)  domestic investment will rise by $60 million. 
D)  private saving will fall by $60 million. 
A)  national saving will increase by $60 million. 
B)  national saving will fall by $60 million. 
C)  domestic investment will rise by $60 million. 
D)  private saving will fall by $60 million.

Exam 29: Macroeconomics in an Open Economy

If the dollar depreciates against the Indian rupee,

If the Fed is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

The level of saving in the United States has historically been low relative to the level of domestic investment. Based on this information, we would expect that

The large budget deficits of the early 1990s resulted in large current account deficits.

Which of the following transactions would be included in Japan's current account?

A federal budget deficit ________ interest rates, which ________ exchange rates (foreign currency per domestic currency), and ________ the balance of trade.

When the United States sends money to the Philippines to help typhoon survivors, the transaction is recorded in

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

The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

When the market value of the dollar rises relative to other currencies around the world, we say that

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 will not shift the demand for the euro to the right?

Holding all else constant, a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

Saving exceeds domestic investment in Japan, which generates a financial account deficit in Japan's balance of payments.

If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then

According to the saving and investment equation, if net foreign investment rises by $60 million,

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

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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

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