Question 1

The balance of payments is an accounting statement known as a:

Accepted Answer

A) trial balance. 
B) depreciation account. 
C) balance sheet. 
D) single-entry bookkeeping system. 
E) reconciliation statement. 
A) trial balance. 
B) depreciation account. 
C) balance sheet. 
D) single-entry bookkeeping system. 
E) reconciliation statement.

Question 2

Which of the following statements about the U.S.balance of payments in 2008 is true?

Accepted Answer

A) In the third quarter of 2008, the services account recorded a deficit of $25 million. 
B) In the third quarter of 2008, the current account showed a surplus of $174, 091 million. 
C) In the third quarter of 2008, the merchandise account in the U.S.balance of payments showed a surplus of $171, 157 million. 
D) In the third quarter of 2008, the merchandise account in the U.S.balance of payments showed a deficit of $171, 157 million. 
E) In the third quarter of 2008, the services account recorded a deficit of $38, 175 million. 
A) In the third quarter of 2008, the services account recorded a deficit of $25 million. 
B) In the third quarter of 2008, the current account showed a surplus of $174, 091 million. 
C) In the third quarter of 2008, the merchandise account in the U.S.balance of payments showed a surplus of $171, 157 million. 
D) In the third quarter of 2008, the merchandise account in the U.S.balance of payments showed a deficit of $171, 157 million. 
E) In the third quarter of 2008, the services account recorded a deficit of $38, 175 million.

Question 3

Foreign aid, royalties earned abroad, and long-term capital flows are part of the current account.

Accepted Answer

A) True 
 B)False

Question 4

An increase in the foreign price of the U.S.dollar is called:

Accepted Answer

A) depreciation of the U.S.dollar. 
B) appreciation of the U.S.dollar. 
C) appreciation of the foreign currency. 
D) readjustment of the U.S.dollar. 
E) readjustment of the foreign currency. 
A) depreciation of the U.S.dollar. 
B) appreciation of the U.S.dollar. 
C) appreciation of the foreign currency. 
D) readjustment of the U.S.dollar. 
E) readjustment of the foreign currency.

Question 5

The traders in the foreign exchange market need to interact personally while exchanging currencies.

Accepted Answer

A) True 
 B)False

Question 6

If the current dollars/peso exchange rate is $0.10 per peso, so that 10 pesos buy you a dollar, then how many dollars do you need to buy something that costs 50 pesos?

Accepted Answer

A) $50 
B) $5 
C) $15 
D) $0.50 
E) $1.50 
A) $50 
B) $5 
C) $15 
D) $0.50 
E) $1.50

Question 7

If the price in U.S.dollars for one Singapore dollar is 0.625 U.S.dollars, then the price in Singapore dollars for one U.S.dollar is:

Accepted Answer

A) 1.0 Singapore dollars. 
B) 0.625 Singapore dollar. 
C) 1.6 Singapore dollars. 
D) 0.375 Singapore dollar. 
E) 2.66 Singapore dollars. 
A) 1.0 Singapore dollars. 
B) 0.625 Singapore dollar. 
C) 1.6 Singapore dollars. 
D) 0.375 Singapore dollar. 
E) 2.66 Singapore dollars.

Question 8

Suppose you are a U.S.importer purchasing coffee from Guatemala at a dollar price of $10, 000.If the bank charges $0.12 per quetzal, you would have to buy 120, 000 quetzals to settle the account with the Guatemalan exporter.

Accepted Answer

A) True 
 B)False

Question 9

Suppose an economics professor receives a $10, 000 royalty check from a foreign publishing company and deposits the amount in a local bank.This transaction would be recorded as:

Accepted Answer

A) a $10, 000 credit entry in the domestic services account. 
B) a $5, 000 debit entry in the domestic capital account. 
C) a $20, 000 debit entry in the domestic capital account. 
D) a $10, 000 credit entry in the domestic capital account. 
E) a $10, 000 debit entry in the domestic services account. 
A) a $10, 000 credit entry in the domestic services account. 
B) a $5, 000 debit entry in the domestic capital account. 
C) a $20, 000 debit entry in the domestic capital account. 
D) a $10, 000 credit entry in the domestic capital account. 
E) a $10, 000 debit entry in the domestic services account.

Question 10

The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714.What does this mean?

Accepted Answer

A) The Canadian dollar price of one U.S.dollar is $0.714. 
B) The Canadian dollar price of one U.S.dollar is C$0.714. 
C) The U.S.dollar price of one Canadian dollar is C$1.40. 
D) The U.S.dollar price of one Canadian dollar is $1.40 
E) The U.S.dollar price of one Canadian dollar is $0.714. 
A) The Canadian dollar price of one U.S.dollar is $0.714. 
B) The Canadian dollar price of one U.S.dollar is C$0.714. 
C) The U.S.dollar price of one Canadian dollar is C$1.40. 
D) The U.S.dollar price of one Canadian dollar is $1.40 
E) The U.S.dollar price of one Canadian dollar is $0.714.

Question 11

If the price of a digital SLR camera in Japan is ¥55, 000, and the exchange rate is 93¥/$, calculate the dollar price of the digital SLR camera in Japan.

Accepted Answer

A) $603.29 
B) $397.48 
C) $886.82 
D) $591.40 
E) $101 
A) $603.29 
B) $397.48 
C) $886.82 
D) $591.40 
E) $101

Question 12

If the U.S.dollar price of the New Zealand dollar (NZD)is $0.5709, then the NZD price of one U.S.dollar will be:

Accepted Answer

A) NZD 1.5709. 
B) NZD 1.75. 
C) $1.6711. 
D) 0.5709. 
E) $1.75. 
A) NZD 1.5709. 
B) NZD 1.75. 
C) $1.6711. 
D) 0.5709. 
E) $1.75.

Question 13

Which of the following statements is incorrect with respect to the balance of payments?

Accepted Answer

A) It constitutes a record of transactions between residents within one country. 
B) It consists of a current account, a capital account, and an account to record omissions and errors. 
C) Transactions that result in a demand for domestic currency are always entered as a credit. 
D) It must balance in the aggregate, but separate accounts can show deficits or surpluses. 
E) It constitutes a record of a country's trade in goods and services and financial assets. 
A) It constitutes a record of transactions between residents within one country. 
B) It consists of a current account, a capital account, and an account to record omissions and errors. 
C) Transactions that result in a demand for domestic currency are always entered as a credit. 
D) It must balance in the aggregate, but separate accounts can show deficits or surpluses. 
E) It constitutes a record of a country's trade in goods and services and financial assets.

Question 14

Currency and bank deposits that are denominated in foreign money are called:

Accepted Answer

A) traveler's checks. 
B) international fund. 
C) foreign exchange. 
D) real income. 
E) hard money. 
A) traveler's checks. 
B) international fund. 
C) foreign exchange. 
D) real income. 
E) hard money.

Question 15

All of the following components add up to the current account, except:

Accepted Answer

A) unilateral transfers. 
B) statistical discrepancy. 
C) services. 
D) merchandise. 
E) investment income. 
A) unilateral transfers. 
B) statistical discrepancy. 
C) services. 
D) merchandise. 
E) investment income.

Question 16

A country that is running a current account deficit will have:

Accepted Answer

A) zero net exports. 
B) zero investments. 
C) negative net investments. 
D) positive net exports. 
E) negative net exports. 
A) zero net exports. 
B) zero investments. 
C) negative net investments. 
D) positive net exports. 
E) negative net exports.

Question 17

Tourism requires the actual movement of currency notes while investment in international bank deposits does not.

Accepted Answer

A) True 
 B)False

Question 18

A trade deficit experienced by a country during a year generally signals the poor health of the economy.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true of the net debtor nation?

Accepted Answer

A) It experiences a trade surplus for five consecutive years. 
B) It experiences a trade deficit for five consecutive years. 
C) It owes more to the rest of the world than it is owed. 
D) It owes less to the rest of the world than it is owed. 
E) It experiences persistent current account surplus. 
A) It experiences a trade surplus for five consecutive years. 
B) It experiences a trade deficit for five consecutive years. 
C) It owes more to the rest of the world than it is owed. 
D) It owes less to the rest of the world than it is owed. 
E) It experiences persistent current account surplus.

Question 20

Identify the correct statement.

Accepted Answer

A) The United States was an international net debtor from the end of World War I until the mid-1980s. 
B) The United States was an international net creditor from the end of World War I until the mid-1980s. 
C) In 1945, the United States became an international net debtor for the first time in almost 70 years. 
D) In 1985, the United States became an international net creditor for the first time in almost 70 years. 
E) The net creditor status of the United States has grown steadily since 1985. 
A) The United States was an international net debtor from the end of World War I until the mid-1980s. 
B) The United States was an international net creditor from the end of World War I until the mid-1980s. 
C) In 1945, the United States became an international net debtor for the first time in almost 70 years. 
D) In 1985, the United States became an international net creditor for the first time in almost 70 years. 
E) The net creditor status of the United States has grown steadily since 1985.

Exam 7: an Introduction to the Foreign Exchange Market and the Balance of Payments

The balance of payments is an accounting statement known as a:

Which of the following statements about the U.S.balance of payments in 2008 is true?

Foreign aid, royalties earned abroad, and long-term capital flows are part of the current account.

An increase in the foreign price of the U.S.dollar is called:

The traders in the foreign exchange market need to interact personally while exchanging currencies.

If the current dollars/peso exchange rate is $0.10 per peso, so that 10 pesos buy you a dollar, then how many dollars do you need to buy something that costs 50 pesos?

If the price in U.S.dollars for one Singapore dollar is 0.625 U.S.dollars, then the price in Singapore dollars for one U.S.dollar is:

Suppose you are a U.S.importer purchasing coffee from Guatemala at a dollar price of $10, 000.If the bank charges $0.12 per quetzal, you would have to buy 120, 000 quetzals to settle the account with the Guatemalan exporter.

Suppose an economics professor receives a $10, 000 royalty check from a foreign publishing company and deposits the amount in a local bank.This transaction would be recorded as:

The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714.What does this mean?

If the price of a digital SLR camera in Japan is ¥55, 000, and the exchange rate is 93¥/$, calculate the dollar price of the digital SLR camera in Japan.

If the U.S.dollar price of the New Zealand dollar (NZD)is $0.5709, then the NZD price of one U.S.dollar will be:

Which of the following statements is incorrect with respect to the balance of payments?

Currency and bank deposits that are denominated in foreign money are called:

All of the following components add up to the current account, except:

A country that is running a current account deficit will have:

Tourism requires the actual movement of currency notes while investment in international bank deposits does not.

A trade deficit experienced by a country during a year generally signals the poor health of the economy.

Which of the following is true of the net debtor nation?

Identify the correct statement.

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