Question 1

In considering yen and dollars, when the dollar rate of exchange for the yen rises

Accepted Answer

A)   the yen rate of exchange for the dollar will fall.
B)   the yen rate of exchange for the dollar will also rise.
C)   the yen rate of exchange for the dollar may either fall or rise.
D)   U.S. net exports to Japan will fall.

Question 2

If the United States wants to regain ownership of domestic assets sold to foreigners, it will have to

Accepted Answer

A)   increase domestic consumption.
B)   increase its national debt.
C)   export more than it imports.
D)   import more than it exports.

Question 3

In the balance of payments of the United States, inflows of foreign currencies to the United States are recorded as

Accepted Answer

A)   a positive entry.
B)   a current account entry.
C)   a negative entry.
D)   net investment income.

Question 4

Which of the following would call for outpayments from the United States?

Accepted Answer

A)   The United States exports computer software.
B)   The United States purchases assets abroad.
C)   Foreigners purchase assets in the United States.
D)   Foreign tourists spend money in the United States.

Question 5

In 2015, the capital account in the U.S. balance of payments was in

Accepted Answer

A)   deficit, and larger than the current account deficit.
B)   surplus, and larger than the current account surplus.
C)   deficit, and smaller than the current account deficit.
D)   balance, with no deficit or surplus.

Question 6

If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of U.S. dollars, measured in terms of British pounds, is also rising.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following combinations is plausible, as it relates to a nation's balance of payments?

Accepted Answer

A)   Current account = +$40 billion; capital account = −$10 billion; financial account = −$50 billion.
B)   Current account = +$50 billion; capital account = −$20 billion; financial account = +$30 billion.
C)   Current account = +$10 billion; capital account = +$40 billion; financial account = +$50 billion.
D)   Current account = +$30 billion; capital account = −$20 billion; financial account = −$10 billion.

Question 8

Which of the following was not something that several European nations did or experienced when they became members of the eurozone?

Accepted Answer

A)   They eliminated their own local currencies and adopted a single common currency.
B)   They in essence fixed their exchange rates with one another, at a 1-to-1 peg.
C)   Cross-border trade among members suffered a huge decline.
D)   They gave up control of their own individual monetary policy.

Question 9

Which of the following will generate a demand for country X's currency in the foreign exchange market?

Accepted Answer

A)   travel by citizens of country X in other countries
B)   the desire of foreigners to buy stocks and bonds of firms in country X
C)   the imports of country X
D)   charitable contributions by country X's citizens to citizens of developing nations

Question 10

Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if

Accepted Answer

A)   U.S. citizens reduce spending on imports.
B)   the U.S. Federal Reserve raises real interest rates.
C)   the number of foreign tourists in the United States increases.
D)   foreigners withdraw funds from U.S. money markets.

Question 11

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the supply-of-pounds curve is upsloping because

Accepted Answer

A)   fewer British pounds can be purchased per dollar if U.S. dollars become more expensive.
B)   fewer U.S. dollars can be purchased per pound if the British pounds become less expensive.
C)   the British will purchase more U.S. goods or services when the dollar price of pounds rises.
D)   the British will purchase more U.S. goods or services when the dollar price of pounds falls.

Question 12

In the balance of payments statement, a current account deficit is always matched by a capital and financial accounts surplus.

Accepted Answer

A) True 
 B)False

Question 13

A nation's annual balance of payments statement must always balance because

Accepted Answer

A)   a nation's imports are limited to the value of its exports.
B)   a nation's exports and imports are always paid with dollars.
C)   all international transactions must be settled in one way or another.
D)   a trade deficit must be matched by an equal surplus of investment income.

Question 14

"International trade" refers to

Accepted Answer

A)   purchasing or selling currently produced goods or services across an international border.
B)   any transaction across an international border.
C)   any financial transaction across an international border.
D)   buying or selling of preexisting assets across an international border.

Question 15

(Last Word)  Which of the following is a disadvantage of belonging to a common currency?

Accepted Answer

A)   exchange-rate risk
B)   difficulty in comparing costs between trading partners
C)   deadweight loss from currency conversions
D)   the loss of monetary policy independence

Question 16

Suppose that the United States decides to fix the dollar-euro exchange rate. If the U.S. central bank observes that the quantity supplied of euros exceeds the quantity demanded of euros at the fixed exchange rate, to maintain the exchange rate, the U.S. central bank will

Accepted Answer

A)   need to reduce the domestic supply of dollars.
B)   need to appreciate the dollar.
C)   realize an increase in its reserves of euros.
D)   realize a decrease in its reserves of euros.

Question 17

One of the consequences of the U.S. trade deficit is that

Accepted Answer

A)   domestic inflation has resulted.
B)   the accumulation of American dollars in foreign hands has enabled foreign firms to build factories in America.
C)   the distribution of income in the United States has become less unequal.
D)   the system of flexible exchange rates has been abandoned in favor of a new gold standard.

Question 18

If a nation has a balance of payments deficit and exchange rates are flexible, the price or value of that nation's currency in the foreign exchange markets will rise.

Accepted Answer

A) True 
 B)False

Question 19

The U.S. demand for euros is

Accepted Answer

A)   downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services.
B)   downsloping because, at higher dollar prices for euros, Americans will want to buy more European goods and services.
C)   downsloping because the dollar price of euros and the euro price of dollars are directly related.
D)   upsloping because a higher dollar price of euros makes European goods and services more attractive to Americans.

Question 20

Assume that, under a system of floating exchange rates, Mexicans decide to increase their investments in the United States. As a result,

Accepted Answer

A)   the peso and the dollar will both depreciate.
B)   the peso and the dollar will both appreciate.
C)   the peso will depreciate and the dollar will appreciate.
D)   the peso will appreciate and the dollar will depreciate.

Exam 27: The Balance of Payments, Exchange Rates, and Trade Deficits

Which of the following will generate a demand for country X's currency in the foreign exchange market?

Correct AnswerverifiedShow Answer

In the balance of payments of the United States, inflows of foreign currencies to the United States are recorded as

Correct AnswerverifiedShow Answer

If a nation has a balance of payments deficit and exchange rates are flexible, the price or value of that nation's currency in the foreign exchange markets will rise.

Correct AnswerverifiedShow Answer

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the supply-of-pounds curve is upsloping because

Correct AnswerverifiedShow Answer

In 2015, the capital account in the U.S. balance of payments was in

Correct AnswerverifiedShow Answer

The U.S. demand for euros is

Correct AnswerverifiedShow Answer

Which of the following would call for outpayments from the United States?

Correct AnswerverifiedShow Answer

Assume that, under a system of floating exchange rates, Mexicans decide to increase their investments in the United States. As a result,

Correct AnswerverifiedShow Answer

"International trade" refers to

Correct AnswerverifiedShow Answer

If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of U.S. dollars, measured in terms of British pounds, is also rising.

Correct AnswerverifiedShow Answer

In the balance of payments statement, a current account deficit is always matched by a capital and financial accounts surplus.

Correct AnswerverifiedShow Answer

Which of the following combinations is plausible, as it relates to a nation's balance of payments?

Correct AnswerverifiedShow Answer

If the United States wants to regain ownership of domestic assets sold to foreigners, it will have to

Correct AnswerverifiedShow Answer

One of the consequences of the U.S. trade deficit is that

Correct AnswerverifiedShow Answer

Suppose that the United States decides to fix the dollar-euro exchange rate. If the U.S. central bank observes that the quantity supplied of euros exceeds the quantity demanded of euros at the fixed exchange rate, to maintain the exchange rate, the U.S. central bank will

Correct AnswerverifiedShow Answer

Which of the following was not something that several European nations did or experienced when they became members of the eurozone?

Correct AnswerverifiedShow Answer

In considering yen and dollars, when the dollar rate of exchange for the yen rises

Correct AnswerverifiedShow Answer

A nation's annual balance of payments statement must always balance because

Correct AnswerverifiedShow Answer

Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if

Correct AnswerverifiedShow Answer

(Last Word) Which of the following is a disadvantage of belonging to a common currency?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified