Question 1

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. D

Question 2

Table 29-2
 $$\begin{array} { | c | c | c | } 
\hline \text { Country } & \begin{array} { c } 
\text { Units of Foreign Currency } \
\text { per U.S. Dollar }
\end{array} & \begin{array} { c } 
\text { U.S. Dollars per Unit of } \
\text { Foreign Currency }
\end{array} \
\hline \text { Mexican peso } & 10.00 & \
\hline \text { British pound } & 0.50 & \
\hline
\end{array}$$
-Refer to Table 29-2.Given the following exchange rates in the above table,what are the exchange rates stated as U.S.dollars per Mexican peso and U.S.dollars per British pound respectively?

Accepted Answer

A) 0.10 dollars per peso and 2.00 dollars per pound 
B) 1.00 dollars per peso and 20.00 dollars per pound 
C) 0.01 dollars per peso and 0.20 dollars per pound 
D) 0.10 dollars per peso and 5.00 dollars per pound 
E) 0.01 dollars per peso and 0.50 dollars per pound 
A) 0.10 dollars per peso and 2.00 dollars per pound 
B) 1.00 dollars per peso and 20.00 dollars per pound 
C) 0.01 dollars per peso and 0.20 dollars per pound 
D) 0.10 dollars per peso and 5.00 dollars per pound 
E) 0.01 dollars per peso and 0.50 dollars per pound A

Question 3

Figure 29-1  
-Refer to Figure 29-1.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. A

Question 4

The balance of trade includes trade in

Accepted Answer

A) goods only. 
B) services only. 
C) both goods and services. 
D) neither goods nor services. 
A) goods only. 
B) services only. 
C) both goods and services. 
D) neither goods nor services.

Question 5

Assume the United States is the "domestic" country and China is the "foreign" country.Which of the following might increase the real exchange rate between the United States and China?

Accepted Answer

A) an appreciation of the yuan 
B) a depreciation of the dollar 
C) an increase in the price level in the United States. 
D) an increase in the price level of China 
A) an appreciation of the yuan 
B) a depreciation of the dollar 
C) an increase in the price level in the United States. 
D) an increase in the price level of China

Question 6

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country. )

Accepted Answer

A) The real exchange rate will rise. 
B) The real exchange rate will fall. 
C) The real exchange rate will be unaffected. 
D) The impact on the real exchange rate cannot be predicted. 
A) The real exchange rate will rise. 
B) The real exchange rate will fall. 
C) The real exchange rate will be unaffected. 
D) The impact on the real exchange rate cannot be predicted.

Question 7

If the exchange rate between the Mexican peso and the U.S.dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar,what is the exchange rate when expresses in terms of dollars per peso?

Accepted Answer

If 13.5 pesos = 1 do

Question 8

When a U.S.investor buys a bond issued in a foreign country

Accepted Answer

A) the balance on the capital account decreases. 
B) the balance on the current account decreases. 
C) the balance on the financial account decreases. 
D) the balance of trade decreases. 
A) the balance on the capital account decreases. 
B) the balance on the current account decreases. 
C) the balance on the financial account decreases. 
D) the balance of trade decreases.

Question 9

When net capital flows are negative

Accepted Answer

A) capital inflows are less than capital outflows. 
B) net foreign investment is negative. 
C) capital outflows are less than capital inflows. 
D) A and B are both correct. 
A) capital inflows are less than capital outflows. 
B) net foreign investment is negative. 
C) capital outflows are less than capital inflows. 
D) A and B are both correct.

Question 10

A decrease in the demand for American-made goods will

Accepted Answer

A) increase the supply of dollars in the foreign exchange market. 
B) decrease the supply of dollars in the foreign exchange market. 
C) increase the demand for dollars in the foreign exchange market. 
D) decrease the demand for dollars in the foreign exchange market. 
A) increase the supply of dollars in the foreign exchange market. 
B) decrease the supply of dollars in the foreign exchange market. 
C) increase the demand for dollars in the foreign exchange market. 
D) decrease the demand for dollars in the foreign exchange market.

Question 11

Based on the following information,calculate public saving,net foreign investment,and national income.Assume that the capital account is zero and net transfers are zero.
private saving = $145 billion
exports = $285 billion
imports = $240 billion
consumption = $600 billion
private investment = $125 billion
government purchases = $75 billion

Accepted Answer

Based on the macroeconomic equation for

Question 12

Suppose the majority of the shares of Ford stock were sold to a Japanese firm.Assuming all else remains constant,this will

Accepted Answer

A) increase the balance of the U.S.financial account. 
B) increase foreign direct investment in the United States. 
C) increase the balance of the U.S.current account. 
D) decrease net portfolio investment in the United States. 
E) create a capital outflow in the United States. 
A) increase the balance of the U.S.financial account. 
B) increase foreign direct investment in the United States. 
C) increase the balance of the U.S.current account. 
D) decrease net portfolio investment in the United States. 
E) create a capital outflow in the United States.

Question 13

Which of the following would increase the current account balance of the United States?

Accepted Answer

A) an increase in imports 
B) an increase in the amount of money the U.S.government sends in foreign aid to other countries 
C) an increase in the balance of trade 
D) an increase in the amount of income U.S.companies pay out to foreigners who own investments in the United States. 
A) an increase in imports 
B) an increase in the amount of money the U.S.government sends in foreign aid to other countries 
C) an increase in the balance of trade 
D) an increase in the amount of income U.S.companies pay out to foreigners who own investments in the United States.

Question 14

Currency traders expect the dollar to appreciate.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 appreciate,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 appreciate,and the change in the equilibrium quantity of dollars exchanged cannot be determined.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

The balance of trade is defined as

Accepted Answer

A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account. 
A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account.

Question 18

If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion,what is the balance on the capital account,assuming no statistical discrepancy?

Accepted Answer

A) $1,445 billion 
B) $239 billion 
C) $0 
D) -$239 billion 
A) $1,445 billion 
B) $239 billion 
C) $0 
D) -$239 billion

Question 19

If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion,what is the balance on the capital account,assuming no statistical discrepancy?

Accepted Answer

A) $550 billion 
B) $142 billion 
C) $0 
D) -$142 billion 
A) $550 billion 
B) $142 billion 
C) $0 
D) -$142 billion

Question 20

If the United States has a current account deficit and the capital account is zero,which of the following must be true?

Accepted Answer

A) The balance on the financial account must equal the balance on the current account. 
B) Net foreign investment must be negative as well. 
C) Domestic private saving must be less than net foreign investment. 
D) Domestic public saving must be less than net foreign investment. 
A) The balance on the financial account must equal the balance on the current account. 
B) Net foreign investment must be negative as well. 
C) Domestic private saving must be less than net foreign investment. 
D) Domestic public saving must be less than net foreign investment.

Exam 29: Macroeconomics in an Open Economy

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

Figure 29-1 -Refer to Figure 29-1.The appreciation of the euro is represented as a movement from

The balance of trade includes trade in

Assume the United States is the "domestic" country and China is the "foreign" country.Which of the following might increase the real exchange rate between the United States and China?

Assuming no change in the nominal exchange rate,how will a higher rate of inflation in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country. )

If the exchange rate between the Mexican peso and the U.S.dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar,what is the exchange rate when expresses in terms of dollars per peso?

When a U.S.investor buys a bond issued in a foreign country

When net capital flows are negative

A decrease in the demand for American-made goods will

Suppose the majority of the shares of Ford stock were sold to a Japanese firm.Assuming all else remains constant,this will

Which of the following would increase the current account balance of the United States?

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

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?

The balance of trade is defined as

If the balance on the current account is $842 billion and the balance on the financial account is -$603 billion,what is the balance on the capital account,assuming no statistical discrepancy?

If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion,what is the balance on the capital account,assuming no statistical discrepancy?

If the United States has a current account deficit and the capital account is zero,which of the following must be true?

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

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