Question 1

Managed float means

Accepted Answer

A)  a fixed exchange rate system with regularly scheduled periodic devaluations 
B)  a freely floating exchange rate system 
C)  a hybrid of freely floating exchange rates with occasional intervention by central banks 
D)  a fixed exchange rate system managed by the European Community 
E)  a flexible exchange rate system managed entirely by the IMF 
A)  a fixed exchange rate system with regularly scheduled periodic devaluations 
B)  a freely floating exchange rate system 
C)  a hybrid of freely floating exchange rates with occasional intervention by central banks 
D)  a fixed exchange rate system managed by the European Community 
E)  a flexible exchange rate system managed entirely by the IMF C

Question 2

A leftward shift of the European demand curve for foreign exchange will

Accepted Answer

A)  decrease the price of foreign exchange in Europe 
B)  increase the price of foreign exchange in Europe 
C)  decrease the value of the euro 
D)  make foreign goods more expensive in terms of euros 
E)  make European goods less expensive in terms of foreign exchange 
A)  decrease the price of foreign exchange in Europe 
B)  increase the price of foreign exchange in Europe 
C)  decrease the value of the euro 
D)  make foreign goods more expensive in terms of euros 
E)  make European goods less expensive in terms of foreign exchange A

Question 3

If the exchange rate changes from 1500 lire per U.S. dollar to 1000 lire per U.S. dollar, the U.S. dollar has

Accepted Answer

A)  appreciated, since its value has increased 
B)  appreciated, since the price of foreign exchange has increased 
C)  appreciated, making Italian goods cheaper in U.S. dollars 
D)  depreciated, since its value has declined 
E)  depreciated, since its value has increased 
A)  appreciated, since its value has increased 
B)  appreciated, since the price of foreign exchange has increased 
C)  appreciated, making Italian goods cheaper in U.S. dollars 
D)  depreciated, since its value has declined 
E)  depreciated, since its value has increased D

Question 4

Net unilateral transfers in the United States in 2009 averaged about ______ per US resident.

Accepted Answer

A)  $1250 
B)  $850 
C)  $520 
D)  $430 
E)  $210 
A)  $1250 
B)  $850 
C)  $520 
D)  $430 
E)  $210

Question 5

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

Accepted Answer

A)  U.S. demand for foreign exchange, in general, and British pounds, in particular, will increase. 
B)  U.S. demand for foreign exchange, in general, and British pounds, in particular, will decrease. 
C)  U.S. demand for British pounds will increase, but the demand for foreign exchange will probably decrease. 
D)  U.S. demand for British pounds will decrease, but the demand for foreign exchange will probably increase. 
E)  There is no effect on foreign exchange. 
A)  U.S. demand for foreign exchange, in general, and British pounds, in particular, will increase. 
B)  U.S. demand for foreign exchange, in general, and British pounds, in particular, will decrease. 
C)  U.S. demand for British pounds will increase, but the demand for foreign exchange will probably decrease. 
D)  U.S. demand for British pounds will decrease, but the demand for foreign exchange will probably increase. 
E)  There is no effect on foreign exchange.

Question 6

NARRBEGIN: Exhibit 33-5
Exhibit 20-6
  
-In Exhibit 20-6 the free market exchange rate would be

Accepted Answer

A)  equal to $.50 
B)  equal to $.53 
C)  less than $.50 
D)  greater than $.53 
E)  indeterminate 
A)  equal to $.50 
B)  equal to $.53 
C)  less than $.50 
D)  greater than $.53 
E)  indeterminate

Question 7

Which of the following would contribute, directly or indirectly, to a deficit in the capital account of the U.S. balance of payments?

Accepted Answer

A)  A British citizen buys stock in Ford. 
B)  A British citizen buys a bond from Ford. 
C)  Interest rates fall in the United States relative to their level in the rest of the world. 
D)  Australian publisher Rupert Murdoch buys The New York Times. 
E)  Developing countries become more stable and so borrow less from U.S. banks. 
A)  A British citizen buys stock in Ford. 
B)  A British citizen buys a bond from Ford. 
C)  Interest rates fall in the United States relative to their level in the rest of the world. 
D)  Australian publisher Rupert Murdoch buys The New York Times. 
E)  Developing countries become more stable and so borrow less from U.S. banks.

Question 8

The debit side of the current account includes the imports of

Accepted Answer

A)  goods only 
B)  goods and services 
C)  services only 
D)  services and resources only 
E)  financial assets 
A)  goods only 
B)  goods and services 
C)  services only 
D)  services and resources only 
E)  financial assets

Question 9

Since 1983, the US has typically run a financial account surplus.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not classified as a service in the current account?

Accepted Answer

A)  transportation 
B)  insurance 
C)  tourist expenditures 
D)  income earned from foreign investments 
E)  unilateral transfers 
A)  transportation 
B)  insurance 
C)  tourist expenditures 
D)  income earned from foreign investments 
E)  unilateral transfers

Question 11

If the U.S. dollar appreciates relative to the Brazilian cruzeiro, then

Accepted Answer

A)  the U.S. dollar-cruzeiro exchange rate will increase 
B)  U.S. goods become less expensive in Brazil 
C)  Brazilian goods become more expensive in the U.S. 
D)  Brazilian investors will pay fewer cruzeiros to buy each U.S. dollar 
E)  the U.S. will import more from Brazil 
A)  the U.S. dollar-cruzeiro exchange rate will increase 
B)  U.S. goods become less expensive in Brazil 
C)  Brazilian goods become more expensive in the U.S. 
D)  Brazilian investors will pay fewer cruzeiros to buy each U.S. dollar 
E)  the U.S. will import more from Brazil

Question 12

As the price of foreign exchange decreases relative to the U.S. dollar,

Accepted Answer

A)  U.S. products become cheaper for foreigners 
B)  foreign goods become cheaper for Americans 
C)  more foreign currency is required to purchase a U.S. dollar 
D)  the U.S. demand curve for foreign exchange shifts to the right 
E)  the supply curve of foreign exchange to U.S. markets decreases 
A)  U.S. products become cheaper for foreigners 
B)  foreign goods become cheaper for Americans 
C)  more foreign currency is required to purchase a U.S. dollar 
D)  the U.S. demand curve for foreign exchange shifts to the right 
E)  the supply curve of foreign exchange to U.S. markets decreases

Question 13

A German who exchanges euros for dollars in a U.S. airport is

Accepted Answer

A)  contributing to U.S. exports 
B)  lending dollars to Germans 
C)  participating in the foreign exchange market 
D)  engaging in speculative activities 
E)  engaging in illegal activities 
A)  contributing to U.S. exports 
B)  lending dollars to Germans 
C)  participating in the foreign exchange market 
D)  engaging in speculative activities 
E)  engaging in illegal activities

Question 14

NARRBEGIN: Exhibit 33-3
Exhibit 20-4
  
-Suppose the Swiss government wants to set the exchange rate at A in Exhibit 20-4. The appropriate action for the government to take after the demand shift shown is

Accepted Answer

A)  to reduce its demand for dollars from Canada 
B)  to reduce its supply of francs to Canada 
C)  to increase its supply of francs to Canada 
D)  to raise the price of foreign exchange in Canada 
E)  to increase the U.S. demand for goods and services from Switzerland 
A)  to reduce its demand for dollars from Canada 
B)  to reduce its supply of francs to Canada 
C)  to increase its supply of francs to Canada 
D)  to raise the price of foreign exchange in Canada 
E)  to increase the U.S. demand for goods and services from Switzerland

Question 15

Under the gold standard, gold discoveries in Alaska and South America led to

Accepted Answer

A)  both c and d 
B)  a decrease in the domestic money supply 
C)  inflation 
D)  an increase in the domestic money supply 
E)  deflation 
A)  both c and d 
B)  a decrease in the domestic money supply 
C)  inflation 
D)  an increase in the domestic money supply 
E)  deflation

Question 16

Which of the following would not increase French exports to the United States?

Accepted Answer

A)  an appreciation of the U.S. dollar 
B)  an appreciation of the euro 
C)  a depreciation of the euro 
D)  an increase in French preferences for American goods 
E)  an increase in real income in France 
A)  an appreciation of the U.S. dollar 
B)  an appreciation of the euro 
C)  a depreciation of the euro 
D)  an increase in French preferences for American goods 
E)  an increase in real income in France

Question 17

All of the following are true concerning the flexible exchange rate system except one. Which is the exception?

Accepted Answer

A)  It is the same as a floating exchange rate system. 
B)  It is a system in which supply and demand determine the exchange rate. 
C)  Government officials have little direct role in the foreign exchange market. 
D)  Exchange rates may fluctuate considerably from time to time. 
E)  Exchange rates are fixed by the central banks of the various countries. 
A)  It is the same as a floating exchange rate system. 
B)  It is a system in which supply and demand determine the exchange rate. 
C)  Government officials have little direct role in the foreign exchange market. 
D)  Exchange rates may fluctuate considerably from time to time. 
E)  Exchange rates are fixed by the central banks of the various countries.

Question 18

Which of the following is not considered a resident when calculating the balance of payments?

Accepted Answer

A)  governments 
B)  capital equipment 
C)  organizations 
D)  firms 
E)  people 
A)  governments 
B)  capital equipment 
C)  organizations 
D)  firms 
E)  people

Question 19

The demand curve for euros shows

Accepted Answer

A)  a direct relationship between the dollar price of a euro and the quantity of euros demanded 
B)  an inverse relation between the dollar price of a euro and the quantity of euros demanded 
C)  that the higher the dollar price of a euro, the greater the quantity demanded 
D)  that the more expensive it is to buy euros, the larger the quantity of European goods demanded by Americans 
E)  that the dollar price of the euro is being held fixed by the European Union 
A)  a direct relationship between the dollar price of a euro and the quantity of euros demanded 
B)  an inverse relation between the dollar price of a euro and the quantity of euros demanded 
C)  that the higher the dollar price of a euro, the greater the quantity demanded 
D)  that the more expensive it is to buy euros, the larger the quantity of European goods demanded by Americans 
E)  that the dollar price of the euro is being held fixed by the European Union

Question 20

Americans spend more on goods produced in China than Chinese citizens spend on goods produced in the United States.

Accepted Answer

A) True 
 B)False

Exam 20: International Finance

Managed float means

A leftward shift of the European demand curve for foreign exchange will

If the exchange rate changes from 1500 lire per U.S. dollar to 1000 lire per U.S. dollar, the U.S. dollar has

Net unilateral transfers in the United States in 2009 averaged about ______ per US resident.

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

NARRBEGIN: Exhibit 33-5 Exhibit 20-6 -In Exhibit 20-6 the free market exchange rate would be

Which of the following would contribute, directly or indirectly, to a deficit in the capital account of the U.S. balance of payments?

The debit side of the current account includes the imports of

Since 1983, the US has typically run a financial account surplus.

Which of the following is not classified as a service in the current account?

If the U.S. dollar appreciates relative to the Brazilian cruzeiro, then

As the price of foreign exchange decreases relative to the U.S. dollar,

A German who exchanges euros for dollars in a U.S. airport is

NARRBEGIN: Exhibit 33-3 Exhibit 20-4 -Suppose the Swiss government wants to set the exchange rate at A in Exhibit 20-4. The appropriate action for the government to take after the demand shift shown is

Under the gold standard, gold discoveries in Alaska and South America led to

Which of the following would not increase French exports to the United States?

All of the following are true concerning the flexible exchange rate system except one. Which is the exception?

Which of the following is not considered a resident when calculating the balance of payments?

The demand curve for euros shows

Americans spend more on goods produced in China than Chinese citizens spend on goods produced in the United States.

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

Economic Development

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