Question 1

Which of the following items is NOT a deficit item in the balance of payments?

Accepted Answer

A) imports of merchandise 
B) sales of domestic assets to foreigners 
C) purchases of gold from foreigners 
D) military spending abroad 
A) imports of merchandise 
B) sales of domestic assets to foreigners 
C) purchases of gold from foreigners 
D) military spending abroad B

Question 2

A hedge is

Accepted Answer

A) a financial strategy that reduces the change of suffering losses arising from foreign exchange risk. 
B) an exchange rate arrangement in which a country pegs the value of its currency to the exchange value. 
C) the possibility that changes in the value of a nation's currency will result in variations in the market value of assets. 
D) active management of a floating exchange rate on the part of a country's government. 
A) a financial strategy that reduces the change of suffering losses arising from foreign exchange risk. 
B) an exchange rate arrangement in which a country pegs the value of its currency to the exchange value. 
C) the possibility that changes in the value of a nation's currency will result in variations in the market value of assets. 
D) active management of a floating exchange rate on the part of a country's government. A

Question 3

Under the Bretton Woods system,a country could alter its exchange rate

Accepted Answer

A) by changing its value relative to gold. 
B) whenever it determined that there was a fundamental disequilibrium. 
C) only when the IMF permitted due to a fundamental disequilibrium. 
D) under no circumstances. 
A) by changing its value relative to gold. 
B) whenever it determined that there was a fundamental disequilibrium. 
C) only when the IMF permitted due to a fundamental disequilibrium. 
D) under no circumstances. C

Question 4

An increase in the value of a domestic currency in terms of other currencies is known as

Accepted Answer

A) an appreciation. 
B) a depreciation. 
C) a flexible exchange rate. 
D) a discount rate. 
A) an appreciation. 
B) a depreciation. 
C) a flexible exchange rate. 
D) a discount rate.

Question 5

The effect that a gift given to a U.S.citizen from a foreign resident will have on the balance of payments is to

Accepted Answer

A) increase the current account balance. 
B) have no effect on the balance of payments if the gift was made in the U.S. 
C) have no effect on the balance of payments if the gift was made by a foreign country. 
D) decrease the balance of payments. 
A) increase the current account balance. 
B) have no effect on the balance of payments if the gift was made in the U.S. 
C) have no effect on the balance of payments if the gift was made by a foreign country. 
D) decrease the balance of payments.

Question 6

If the Japanese yen depreciates against the U.S.dollar

Accepted Answer

A) the price of Japanese imports to the United States decreases. 
B) the price of United States exports to Japan decreases. 
C) the price of Japanese imports from the United States will decrease. 
D) there is no change in the price of Japanese exports to the United States. 
A) the price of Japanese imports to the United States decreases. 
B) the price of United States exports to Japan decreases. 
C) the price of Japanese imports from the United States will decrease. 
D) there is no change in the price of Japanese exports to the United States.

Question 7

If there is an outward shift in U.S.demand for French goods,the result will be

Accepted Answer

A) a decrease in the dollar price of a euro. 
B) an inward shift in French demand for U.S.goods. 
C) a decrease in euros traded. 
D) an increase in the dollar price of a euro. 
A) a decrease in the dollar price of a euro. 
B) an inward shift in French demand for U.S.goods. 
C) a decrease in euros traded. 
D) an increase in the dollar price of a euro.

Question 8

If the exchange rate is such that $1 equals 5 Indian rupees,then the price of a rupee is

Accepted Answer

A) $5. 
B) $1. 
C) $0.40. 
D) $0.20. 
A) $5. 
B) $1. 
C) $0.40. 
D) $0.20.

Question 9

The balance of payments consists of the

Accepted Answer

A) current account,capital account,and gold flows. 
B) current account,official reserve transactions account,and monetary account. 
C) current account,capital account,and official reserve transactions account. 
D) capital account,official reserve transactions account,and recent account. 
A) current account,capital account,and gold flows. 
B) current account,official reserve transactions account,and monetary account. 
C) current account,capital account,and official reserve transactions account. 
D) capital account,official reserve transactions account,and recent account.

Question 10

-Using the above figure.A rightward shift of the supply curve,ceteris paribus,would result in

Accepted Answer

A) dollar appreciation. 
B) euro appreciation. 
C) dollar depreciation. 
D) decreasing the equilibrium quantity of euros. 
A) dollar appreciation. 
B) euro appreciation. 
C) dollar depreciation. 
D) decreasing the equilibrium quantity of euros.

Question 11

An increase in the U.S.demand for Japanese yen causes

Accepted Answer

A) an increase in the dollar price of a yen. 
B) an increase in the yen price of a dollar. 
C) an increase in the demand for U.S.goods. 
D) a decrease in the supply of yens. 
A) an increase in the dollar price of a yen. 
B) an increase in the yen price of a dollar. 
C) an increase in the demand for U.S.goods. 
D) a decrease in the supply of yens.

Question 12

Assume there is an increased demand in the United States for Australian wines.If all other factors are held constant,this will result in

Accepted Answer

A) an increase in the U.S.dollar exchange rate for Australian dollars. 
B) an appreciation of the U.S.dollar. 
C) a movement along the demand curve for Australian wine. 
D) a decrease in the par value of the Australian dollar. 
A) an increase in the U.S.dollar exchange rate for Australian dollars. 
B) an appreciation of the U.S.dollar. 
C) a movement along the demand curve for Australian wine. 
D) a decrease in the par value of the Australian dollar.

Question 13

In the balance of payments,if there are no statistical errors or discrepancies,which of the following is true of the sum of the capital account balance,the current account balance,and the official reserve transactions account balance?

Accepted Answer

A) This sum is either positive or negative,depending on whether the sum of all surplus and deficit items associated with cross-border transactions is positive or negative. 
B) This sum must always be zero,because the sum of all surplus and deficit items associated with cross-border transactions must equal zero. 
C) This sum is positive only if the U.S.government operates with a budget surplus. 
D) This sum is positive only if the U.S.government operates with a budget deficit. 
A) This sum is either positive or negative,depending on whether the sum of all surplus and deficit items associated with cross-border transactions is positive or negative. 
B) This sum must always be zero,because the sum of all surplus and deficit items associated with cross-border transactions must equal zero. 
C) This sum is positive only if the U.S.government operates with a budget surplus. 
D) This sum is positive only if the U.S.government operates with a budget deficit.

Question 14

Special Drawing Rights are

Accepted Answer

A) a reserve asset created by the International Monetary Fund that can be used to settle international payments. 
B) loans granted by the International Monetary Fund to countries that experience balance of payments problems. 
C) the term given for official reserves taken as a whole. 
D) financial assets held by the U.S.Treasury Department. 
A) a reserve asset created by the International Monetary Fund that can be used to settle international payments. 
B) loans granted by the International Monetary Fund to countries that experience balance of payments problems. 
C) the term given for official reserves taken as a whole. 
D) financial assets held by the U.S.Treasury Department.

Question 15

A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas.This transaction is

Accepted Answer

A) counted in the U.S.balance of payments as a current account item. 
B) counted in the U.S.balance of payments as a surplus item. 
C) counted in the U.S.balance of payments as an export item. 
D) none of the above 
A) counted in the U.S.balance of payments as a current account item. 
B) counted in the U.S.balance of payments as a surplus item. 
C) counted in the U.S.balance of payments as an export item. 
D) none of the above

Question 16

-In the diagram above,which of the following could cause a movement from point E to point   ?

Accepted Answer

A) Japanese residents' incomes rise,so they increase their purchases of U.S.goods. 
B) the dollar depreciates,including Japanese residents to buy more U.S.goods. 
C) U.S.residents' incomes rise,so they increase their purchases of Japanese goods. 
D) the dollar depreciates,inducing U.S.residents to buy more Japanese goods. 
A) Japanese residents' incomes rise,so they increase their purchases of U.S.goods. 
B) the dollar depreciates,including Japanese residents to buy more U.S.goods. 
C) U.S.residents' incomes rise,so they increase their purchases of Japanese goods. 
D) the dollar depreciates,inducing U.S.residents to buy more Japanese goods.

Question 17

When all currencies are tied directly to gold,then

Accepted Answer

A) currency exchange rates throughout the world are flexible. 
B) currency exchange rates throughout the world are fixed. 
C) the world's stock of gold cannot change. 
D) the price of each nation's currency in terms of gold is flexible. 
A) currency exchange rates throughout the world are flexible. 
B) currency exchange rates throughout the world are fixed. 
C) the world's stock of gold cannot change. 
D) the price of each nation's currency in terms of gold is flexible.

Question 18

Assume the U.S.government wants to hold the value of the dollar at $1.00 U.S.equals 100 Japanese yen,but it finds that the value of yen is appreciating against the U.S.dollar.What would be an appropriate policy to reverse this trend?

Accepted Answer

A) Buy more Japanese goods. 
B) Buy U.S.dollars. 
C) Sell U.S.dollars. 
D) Encourage U.S.investments abroad. 
A) Buy more Japanese goods. 
B) Buy U.S.dollars. 
C) Sell U.S.dollars. 
D) Encourage U.S.investments abroad.

Question 19

A decrease in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Accepted Answer

A) appreciation. 
B) revaluation. 
C) depreciation. 
D) devaluation. 
A) appreciation. 
B) revaluation. 
C) depreciation. 
D) devaluation.

Question 20

The foreign exchange market is

Accepted Answer

A) a market in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand. 
B) the increase in the exchange value of one nation's currency in terms of an other nation. 
C) a market in which households,firms,and governments buy and sell national currencies. 
D) the decrease in the exchange value of one nation's currency in terms of another nation. 
A) a market in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand. 
B) the increase in the exchange value of one nation's currency in terms of an other nation. 
C) a market in which households,firms,and governments buy and sell national currencies. 
D) the decrease in the exchange value of one nation's currency in terms of another nation.

Which of the following items is NOT a deficit item in the balance of payments?

A hedge is

Under the Bretton Woods system,a country could alter its exchange rate

An increase in the value of a domestic currency in terms of other currencies is known as

The effect that a gift given to a U.S.citizen from a foreign resident will have on the balance of payments is to

If the Japanese yen depreciates against the U.S.dollar

If there is an outward shift in U.S.demand for French goods,the result will be

If the exchange rate is such that $1 equals 5 Indian rupees,then the price of a rupee is

The balance of payments consists of the

-Using the above figure.A rightward shift of the supply curve,ceteris paribus,would result in

An increase in the U.S.demand for Japanese yen causes

Assume there is an increased demand in the United States for Australian wines.If all other factors are held constant,this will result in

In the balance of payments,if there are no statistical errors or discrepancies,which of the following is true of the sum of the capital account balance,the current account balance,and the official reserve transactions account balance?

Special Drawing Rights are

A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas.This transaction is

-In the diagram above,which of the following could cause a movement from point E to point ?

When all currencies are tied directly to gold,then

Assume the U.S.government wants to hold the value of the dollar at $1.00 U.S.equals 100 Japanese yen,but it finds that the value of yen is appreciating against the U.S.dollar.What would be an appropriate policy to reverse this trend?

A decrease in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

The foreign exchange market is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Filters

Exam 33: Exchange Rates and the Balance of Payments

Which of the following items is NOT a deficit item in the balance of payments?

A hedge is

Under the Bretton Woods system,a country could alter its exchange rate

An increase in the value of a domestic currency in terms of other currencies is known as

The effect that a gift given to a U.S.citizen from a foreign resident will have on the balance of payments is to

If the Japanese yen depreciates against the U.S.dollar

If there is an outward shift in U.S.demand for French goods,the result will be

If the exchange rate is such that $1 equals 5 Indian rupees,then the price of a rupee is

The balance of payments consists of the

-Using the above figure.A rightward shift of the supply curve,ceteris paribus,would result in

An increase in the U.S.demand for Japanese yen causes

Assume there is an increased demand in the United States for Australian wines.If all other factors are held constant,this will result in

In the balance of payments,if there are no statistical errors or discrepancies,which of the following is true of the sum of the capital account balance,the current account balance,and the official reserve transactions account balance?

Special Drawing Rights are

A citizen of Mexico who has lived in El Paso during the past three years has just sent $100 to relatives in Mexico for Christmas.This transaction is

-In the diagram above,which of the following could cause a movement from point E to point ?

When all currencies are tied directly to gold,then

Assume the U.S.government wants to hold the value of the dollar at $1.00 U.S.equals 100 Japanese yen,but it finds that the value of yen is appreciating against the U.S.dollar.What would be an appropriate policy to reverse this trend?

A decrease in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

The foreign exchange market is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Filters