Question 1

When a country makes a loan in its own currency and its currency depreciates, it experiences:

Accepted Answer

A)  a capital gain. 
B)  a capital loss. 
C)  a capital depreciation. 
D)  neither a capital gain nor a capital loss. 
A)  a capital gain. 
B)  a capital loss. 
C)  a capital depreciation. 
D)  neither a capital gain nor a capital loss.

Question 2

The International Monetary Fund is an example of a(n):

Accepted Answer

A)  credit union. 
B)  multinational bank. 
C)  international development organization. 
D)  bond-rating firm. 
A)  credit union. 
B)  multinational bank. 
C)  international development organization. 
D)  bond-rating firm.

Question 3

When an individual's income is smaller than his or her expenditure, the individual CANNOT:

Accepted Answer

A)  borrow money. 
B)  draw down his or her savings. 
C)  print his or her own money. 
D)  take another job to increase his or her income. 
A)  borrow money. 
B)  draw down his or her savings. 
C)  print his or her own money. 
D)  take another job to increase his or her income.

Question 4

Economic institutions are important in helping to govern and determine economic outcomes. Which of the following would NOT be an example of an economic institution?

Accepted Answer

A)  the existence of various regulatory agencies, such as the Securities and Exchange Commission, that affect the integrity of the investment community 
B)  First National Bank of Chicago 
C)  the tendency of the public to deposit funds in banks and financial institutions, which are considered safe, rather than purchasing gold or jewelry 
D)  disclosure provisions in investment contracts 
A)  the existence of various regulatory agencies, such as the Securities and Exchange Commission, that affect the integrity of the investment community 
B)  First National Bank of Chicago 
C)  the tendency of the public to deposit funds in banks and financial institutions, which are considered safe, rather than purchasing gold or jewelry 
D)  disclosure provisions in investment contracts

Question 5

A nation (featured in the text) that recently experienced a severe drop in the value of its currency is:

Accepted Answer

A)  New Zealand. 
B)  Zimbabwe. 
C)  Argentina. 
D)  Canada. 
A)  New Zealand. 
B)  Zimbabwe. 
C)  Argentina. 
D)  Canada.

Question 6

In general, we currently classify nations into three categories, depending on the level of economic advancement. These are:

Accepted Answer

A)  advanced, emerging, and developing. 
B)  high-achievers, low-achievers, and infant industry nations. 
C)  First World, Second World, Third World. 
D)  fully integrated, moderately integrated, and closed. 
A)  advanced, emerging, and developing. 
B)  high-achievers, low-achievers, and infant industry nations. 
C)  First World, Second World, Third World. 
D)  fully integrated, moderately integrated, and closed.

Question 7

What is the relationship between income, expenditure, current account and external wealth?

Accepted Answer

The relationship between income, expendi

Question 8

Explain why/how a fall in the exchange rate of a country can lead to default.

Accepted Answer

A fall in the exchange rate of a country

Question 9

What is country risk?

Accepted Answer

A)  the risk that the nation will suffer unemployment and inflation as a result of its economic policies 
B)  a number of economic indicators reflecting the economic health of the nation that affect the ability of its residents to repay loans 
C)  the relative risk of political instability, terrorist attacks, and military capability 
D)  the total of the government's national debt plus private debt owed to international creditors 
A)  the risk that the nation will suffer unemployment and inflation as a result of its economic policies 
B)  a number of economic indicators reflecting the economic health of the nation that affect the ability of its residents to repay loans 
C)  the relative risk of political instability, terrorist attacks, and military capability 
D)  the total of the government's national debt plus private debt owed to international creditors

Question 10

What remedy does an international lender have against a foreign borrower who defaults?

Accepted Answer

A)  It can foreclose on the collateral and sell it. 
B)  It can sue the borrower in the international credit court. 
C)  The national government will always pay up and make the loan good. 
D)  Usually, there is no remedy. 
A)  It can foreclose on the collateral and sell it. 
B)  It can sue the borrower in the international credit court. 
C)  The national government will always pay up and make the loan good. 
D)  Usually, there is no remedy.

Question 11

Nations are free to choose and use their own currency and control its value. Normally, they must choose between a ______ regime.

Accepted Answer

A)  fixed or floating exchange rate 
B)  variable or stable exchange rate 
C)  controlled or laissez-faire 
D)  centrally planned or market-based 
A)  fixed or floating exchange rate 
B)  variable or stable exchange rate 
C)  controlled or laissez-faire 
D)  centrally planned or market-based

Question 12

The definition of total external net wealth is:

Accepted Answer

A)  the value of buildings, bank deposits, and monetary gold. 
B)  the value of a nation's foreign assets minus the value of a nation's foreign liabilities. 
C)  the value of stocks sold daily on international exchanges. 
D)  minerals and oil reserves owned by a nation but located in another nation. 
A)  the value of buildings, bank deposits, and monetary gold. 
B)  the value of a nation's foreign assets minus the value of a nation's foreign liabilities. 
C)  the value of stocks sold daily on international exchanges. 
D)  minerals and oil reserves owned by a nation but located in another nation.

Question 13

A nation's external wealth can be affected by which of the following? I. the difference between international spending and income from the rest of the world
II) changes in currency values
III) capital gains and losses on equities and real estate

Accepted Answer

A)  I 
B)  II and III 
C)  I and III 
D)  I, II, and III 
A)  I 
B)  II and III 
C)  I and III 
D)  I, II, and III

Question 14

Which of the following would be an exchange rate?

Accepted Answer

A)  One car trades for 1,000 books. 
B)  One dollar trades for two candy bars. 
C)  One dollar trades for four quarters. 
D)  One dollar trades for three pesos. 
A)  One car trades for 1,000 books. 
B)  One dollar trades for two candy bars. 
C)  One dollar trades for four quarters. 
D)  One dollar trades for three pesos.

Question 15

The fallout from an international currency crisis episode:

Accepted Answer

A)  has major and lasting effects on trading partners, financial relationships, and financial and political institutions. 
B)  usually has a pattern of brief turmoil followed by periods of relative stability. 
C)  is instrumental in getting needed debt relief for poor nations. 
D)  is seen in permanent changes in the ways nations handle their international transactions. 
A)  has major and lasting effects on trading partners, financial relationships, and financial and political institutions. 
B)  usually has a pattern of brief turmoil followed by periods of relative stability. 
C)  is instrumental in getting needed debt relief for poor nations. 
D)  is seen in permanent changes in the ways nations handle their international transactions.

Question 16

Nations undergoing currency and financial crises often experience:

Accepted Answer

A)  rising currency values. 
B)  falling population. 
C)  government financial problems. 
D)  increasing GDP. 
A)  rising currency values. 
B)  falling population. 
C)  government financial problems. 
D)  increasing GDP.

Question 17

If a nation is a net creditor internationally, it means that:

Accepted Answer

A)  residents of the nation have more foreign assets than foreign liabilities. 
B)  the nation is running low on international assets. 
C)  residents of the nation have more foreign liabilities than foreign assets. 
D)  the nation's government has extended credit to other nations' governments. 
A)  residents of the nation have more foreign assets than foreign liabilities. 
B)  the nation is running low on international assets. 
C)  residents of the nation have more foreign liabilities than foreign assets. 
D)  the nation's government has extended credit to other nations' governments.

Question 18

In general, economists divide the world into two types of exchange rate systems:

Accepted Answer

A)  long run and short run. 
B)  fixed and floating. 
C)  liberal and conservative. 
D)  speculative and risk averse. 
A)  long run and short run. 
B)  fixed and floating. 
C)  liberal and conservative. 
D)  speculative and risk averse.

Question 19

Explain what is meant by the globalization of finance, and describe the trends in this area since 1970. Be sure to distinguish between the trends in advanced, emerging, and developing countries.

Accepted Answer

The globalization of finance refers to t

Question 20

Explain why the current account balance of the world is zero.

Accepted Answer

The current account balance of the world

Exam 12: The Global Macroeconomy

When a country makes a loan in its own currency and its currency depreciates, it experiences:

The International Monetary Fund is an example of a(n):

When an individual's income is smaller than his or her expenditure, the individual CANNOT:

Economic institutions are important in helping to govern and determine economic outcomes. Which of the following would NOT be an example of an economic institution?

A nation (featured in the text) that recently experienced a severe drop in the value of its currency is:

In general, we currently classify nations into three categories, depending on the level of economic advancement. These are:

What is the relationship between income, expenditure, current account and external wealth?

Explain why/how a fall in the exchange rate of a country can lead to default.

What is country risk?

What remedy does an international lender have against a foreign borrower who defaults?

Nations are free to choose and use their own currency and control its value. Normally, they must choose between a ______ regime.

The definition of total external net wealth is:

A nation's external wealth can be affected by which of the following? I. the difference between international spending and income from the rest of the world II) changes in currency values III) capital gains and losses on equities and real estate

Which of the following would be an exchange rate?

The fallout from an international currency crisis episode:

Nations undergoing currency and financial crises often experience:

If a nation is a net creditor internationally, it means that:

In general, economists divide the world into two types of exchange rate systems:

Explain what is meant by the globalization of finance, and describe the trends in this area since 1970. Be sure to distinguish between the trends in advanced, emerging, and developing countries.

Explain why the current account balance of the world is zero.

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

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