Question 1

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

Accepted Answer

A) True 
 B)False

Question 2

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in Jvalue against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports if strong income growth in the U.S. has a stronger effect than that of the Canadian dollar appreciation?

Accepted Answer

A)   Net exports will rise.
B)   Net exports will fall.
C)   Net exports will remain constant.
D)   The effect on net exports is indeterminate.

Question 3

A current account surplus exists if the balance on the

Accepted Answer

A)   capital account is zero.
B)   capital account is positive.
C)   current account is negative.
D)   current account is positive.

Question 4

Fixed exchange rates are determined by the

Accepted Answer

A)   policies of the domestic government.
B)   forces of demand and supply in the developed countries.
C)   forces of demand and supply in the foreign exchange market.
D)   forces of demand and supply in the domestic money market.

Question 5

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

Accepted Answer

A)   managed float system.
B)   free-floating exchange rate system.
C)   commodity standard system.
D)   fiat standard system.

Question 6

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Accepted Answer

In a fixed exchange rate system, the exc...

Question 7

Which of the following is possible with international trade? 
I. Countries that engage in trade can consume at a point outside their respective production possibilities curves.
II. Global production will be increased.
III. World resources will be used more efficiently.

Accepted Answer

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

Question 8

A reduction in net exports will, all other things unchanged, shift the aggregate demand
Jcurve to the left.

Accepted Answer

A) True 
 B)False

Question 9

In the long run, international trade

Accepted Answer

A)   affects the economy's natural level of employment.
B)   affects the economy's real wage.
C)   does not affect the natural level of employment or the real wage.
D)   increases real wages because it increases a country's standard of living.

Question 10

The current account is

Accepted Answer

A)   an accounting statement that includes all spending flows within a nation's borders.
B)   an accounting statement that includes all spending flows across a nation's border, except those that represent the purchases of assets.
C)   equal to value of a country's exports.
D)   equal to value of a country's imports.

Question 11

In the United States since 1960

Accepted Answer

A)   the export share of GDP has increased while the import share of GDP has not changed.
B)   the import share of GDP has increased while the export share of GDP has not changed.
C)   both the export share of GDP and the import share of GDP have increased.
D)   both the export share of GDP and the import share of GDP have decreased.

Question 12

A managed float exchange rate system is often used to reduce the uncertainty of businesses
Jengaged in importing and exporting.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Accepted Answer

A)   $40 billion
B)   Less than $20 billion
C)   More than $40 billion
D)   Cannot be determined without information on the trade policies in question

Question 14

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

Accepted Answer

A)   the domestic economy and this will lead to a decrease in the capital account surplus.
B)   foreign economies and this will lead to an increase in the capital account surplus.
C)   the domestic economy and this will lead to an increase in the capital account surplus.
D)   foreign economies and this will lead to a decrease in the capital account surplus.

Question 15

All of the following are determinants of net exports except

Accepted Answer

A)   domestic and foreign incomes.
B)   relative price levels.
C)   domestic and foreign trade policies.
D)   producers' expectations about future prices.

Question 16

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Accepted Answer

A)   World supply of gold dropped drastically in the 1930s, severely limiting a country's ability to increase its money supply.
B)   Imbalances in a country's balance of payments can be corrected only through changes in the entire economy.
C)   In order to correct imbalances in its balance of payments, a country was forced on its trading partners to intervene in currency markets.
D)   Some nations started hoarding gold in order to manipulate relative exchange rates.

Question 17

Changes in net exports caused by changes in the domestic price level

Accepted Answer

A)   shift the aggregate demand curve in the same direction as the price change.
B)   shift the aggregate demand curve in the opposite direction of the price change.
C)   do not shift the aggregate demand curve.
D)   will not affect aggregate demand.

Question 18

Under a system of free-floating exchange rates, a nation will experience

Accepted Answer

A)   persistent surpluses in its balance of payments.
B)   persistent deficits in its balance of payments.
C)   a tendency toward equilibrium in its balance of payments.
D)   persistent surpluses in its balance of trade.

Question 19

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi)  per ounce, this means

Accepted Answer

A)   that the gold market cannot reach an equilibrium because of a price control.
B)   the government of Montmarinsi was committed to exchanging 1 ounce of gold to anyone who was willing to pay 80 monts.
C)   that anyone wishing to buy foreign currency must pay in gold which can be purchased from the government at 80 monts per ounce.
D)   that the government is the sole supplier of gold and sets the price of gold.

Question 20

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Accepted Answer

A)   a free-floating exchange rate system.
B)   a managed float.
C)   a fixed exchange rate system.
D)   a variable exchange rate system.

Exam 15: Net Exports and International Finance

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

Correct Answer
verified

Correct Answer
verified

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

Correct Answer
verified

In the United States since 1960

Correct Answer
verified

Under a system of free-floating exchange rates, a nation will experience

Correct Answer
verified

Fixed exchange rates are determined by the

Correct Answer
verified

The current account is

Correct Answer
verified

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi) per ounce, this means

Correct Answer
verified

All of the following are determinants of net exports except

Correct Answer
verified

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Correct Answer
verified

Changes in net exports caused by changes in the domestic price level

Correct Answer
verified

A current account surplus exists if the balance on the

Correct Answer
verified

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

Correct Answer
verified

A managed float exchange rate system is often used to reduce the uncertainty of businesses Jengaged in importing and exporting.

Correct Answer
verified

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Correct Answer
verified

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Correct Answer
verified

A reduction in net exports will, all other things unchanged, shift the aggregate demand Jcurve to the left.

Correct Answer
verified

In the long run, international trade

Correct Answer
verified

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Correct Answer
Answered by ExamLex AI
In a fixed exchange rate system, the exc...
View Answer

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

Correct Answer
verified

Exam 15: Net Exports and International Finance

Which of the following is possible with international trade? I. Countries that engage in trade can consume at a point outside their respective production possibilities curves. II. Global production will be increased. III. World resources will be used more efficiently.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a nation fixes the exchange rate of its currency relative to a specific amount of Jgold. This system is an example of a

Correct AnswerverifiedShow Answer

In the United States since 1960

Correct AnswerverifiedShow Answer

Under a system of free-floating exchange rates, a nation will experience

Correct AnswerverifiedShow Answer

Fixed exchange rates are determined by the

Correct AnswerverifiedShow Answer

The current account is

Correct AnswerverifiedShow Answer

Suppose Montmarinsi has a gold standard exchange rate system. If the price of gold in JMontmarinsi is fixed at 80 monts (the currency of Montmarinsi) per ounce, this means

Correct AnswerverifiedShow Answer

All of the following are determinants of net exports except

Correct AnswerverifiedShow Answer

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Correct AnswerverifiedShow Answer

Changes in net exports caused by changes in the domestic price level

Correct AnswerverifiedShow Answer

A current account surplus exists if the balance on the

Correct AnswerverifiedShow Answer

If there is a decline in home bias, U.S. residents are more likely to invest their savings in

Correct AnswerverifiedShow Answer

A managed float exchange rate system is often used to reduce the uncertainty of businesses Jengaged in importing and exporting.

Correct AnswerverifiedShow Answer

Suppose that a change in trade policies leads to a $20 billion increase in net exports. If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after Jthe multiplier process works through the economy?

Correct AnswerverifiedShow Answer

Which of the following is a reason why nations began abandoning the gold standard in the 1930s?

Correct AnswerverifiedShow Answer

A reduction in net exports will, all other things unchanged, shift the aggregate demand Jcurve to the left.

Correct AnswerverifiedShow Answer

In the long run, international trade

Correct AnswerverifiedShow Answer

Explain how exchange rates are determined in a fixed exchange rate system. Discuss the advantages and disadvantages of a fixed exchange rate system.

Correct AnswerAnswered by ExamLex AIIn a fixed exchange rate system, the exc...View AnswerShow Answer

As a result of the financial crisis of 2008, the EU countries that were most at risk for not being able to pay their government debts included Portugal, Ireland, Italy, Greece, and Spain.

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
Answered by ExamLex AI
In a fixed exchange rate system, the exc...
View Answer

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