Question 1

If the U.S. interest rate, adjusted for people's expectation of inflation, increases sharply relative to the rest of the world, then

Accepted Answer

A)   there will be a decrease in the demand for dollars in foreign exchange markets.
B)   there will be no change in the demand for dollars in foreign exchange markets but there will be an increase in demand for foreign currency.
C)   the dollar will appreciate.
D)   the dollar will depreciate.E) All of the above
F) None of the above

Question 2

Suppose that there is a current account deficit of $250 billion and a financial account surplus of $260 billion. It may be concluded that the

Accepted Answer

A)   overall balance of payments is +10.
B)   overall balance of payments is -10.
C)   official reserve transaction account balance is +10.
D)   official reserve transaction account balance is -10.E) All of the above
F) A) and B)

Question 3

Which of the following is NOT a category in the U.S. balance of payments account?

Accepted Answer

A)   current account
B)   past-due account
C)   financial account
D)   official reserve transactions accountE) None of the above
F) All of the above

Question 4

If there is an unrest in Turkey, and Turkish investors purchase U.S. securities, the

Accepted Answer

A)   demand for the Turkish currency will fall.
B)   demand for the Turkish currency will rise.
C)   supply of the Turkish currency will fall.
D)   supply of the Turkish currency will rise.E) C) and D)
F) B) and C)

Question 5

One source of the supply of dollars in the world is

Accepted Answer

A)   the purchase of U.S. exports by foreign residents.
B)   the sale of U.S. domestic assets to foreigner residents.
C)   U.S. imports of foreign merchandise.
D)   U.S. sales of gold to foreigner residents.E) A) and B)
F) A) and C)

Question 6

An increase in the value of a domestic currency in terms of other currencies is known as

Accepted Answer

A)   an appreciation.
B)   a depreciation.
C)   a flexible exchange rate.
D)   a discount rate.E) A) and B)
F) B) and C)

Question 7

In international trade, all payments and gifts that are related to the purchase or sale of both goods and services are referred to as the

Accepted Answer

A)   current account.
B)   financial account.
C)   labor account.
D)   official reserve transactions account.E) None of the above
F) A) and D)

Question 8

With the Bretton Woods system of international exchange rates

Accepted Answer

A)   the value of a country's currency was determined strictly by the laws of supply and demand.
B)   the value of a country's currency was determined by its stock of gold.
C)   there were fixed exchange rates, and most countries were obligated to intervene to maintain the values of their currencies within 1 percent of par value.
D)   a nation's balance of payments was eliminated.E) A) and B)
F) None of the above

Question 9

An example of a deficit item on the U.S. balance of payments is

Accepted Answer

A)   the sale of a spark plug made by a U.S. firm in Michigan to a Nissan plant in Tennessee.
B)   the purchase of Japanese yen by a U.S. firm.
C)   a deposit in a bank in Chicago by the government of Saudi Arabia.
D)   the payment of a dividend by a British firm to a U.S. family.E) None of the above
F) C) and D)

Question 10

Ahmed is working and is spending more than he is earning by using his savings to make up the difference. Which of the following statements is TRUE?

Accepted Answer

A)   Ahmed is in equilibrium since he pays all of his bills.
B)   Ahmed is in disequilibrium.
C)   By using savings Ahmed is using special drawing rights.
D)   By using savings Ahmed has caused the balance of payments to go into a deficit situation.E) B) and D)
F) A) and B)

Question 11

Every transaction concerning the importation of goods into the United States constitutes a

Accepted Answer

A)   supply of foreign currency with no effect on the market for the dollar.
B)   demand for dollars with no effect on markets for foreign currencies.
C)   supply of foreign currencies and a demand for dollars.
D)   demand for foreign currencies and a supply of dollars.E) A) and D)
F) B) and D)

Question 12

The price of one currency in terms off another currency is called

Accepted Answer

A)   foreign reserves.
B)   the foreign exchange rate.
C)   the foreign trade deficit.
D)   the balance of payments.E) None of the above
F) A) and D)

Question 13

When all currencies are tied directly to gold, then

Accepted Answer

A)   currency exchange rates throughout the world are flexible.
B)   currency exchange rates throughout the world are fixed.
C)   the world's stock of gold cannot change.
D)   the price of each nation's currency in terms of gold is flexible.E) B) and C)
F) None of the above

Question 14

The term "flexible exchange rates" refers to

Accepted Answer

A)   a situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand.
B)   the increase in the exchange value of one nation's currency in terms of an other nation.
C)   a nation in which households, firms, and governments buy and sell national currencies.
D)   the decrease in the exchange value of one nation's currency in terms of another nation.E) B) and D)
F) B) and C)

Question 15

The difference between exports and imports of goods is the

Accepted Answer

A)   balance of trade.
B)   balance of payments.
C)   balance of accounts.
D)   balance of paying.E) A) and B)
F) A) and C)

Question 16

If the United States exports $250 billion worth of goods and imports $420 billion worth of goods

Accepted Answer

A)   the balance of payments will be -$170 billion.
B)   the balance of trade will be -$170 billion.
C)   the balance of trade will be $670 billion.
D)   the official reserve transaction will be $170 billion.E) All of the above
F) A) and B)

Question 17

A decrease in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Accepted Answer

A)   appreciation.
B)   revaluation.
C)   depreciation.
D)   devaluation.E) C) and D)
F) B) and D)

Question 18

In the balance of payments, all of the following are deficit items EXCEPT

Accepted Answer

A)   imports of merchandise.
B)   funds placed in foreign depository institutions.
C)   sales of dollars to foreigners.
D)   tourism expenditures abroad.E) C) and D)
F) None of the above

Question 19

All of the following are surplus items on the balance of payments accounts EXCEPT

Accepted Answer

A)   U.S. residents purchases of gold from foreign residents.
B)   foreign tourists spending funds in the United States.
C)   exports of merchandise.
D)   sales of U.S. dollars to foreign residents.E) A) and D)
F) A) and B)

Question 20

Which of the following is NOT a deficit item on a country's balance of payments?

Accepted Answer

A)   gold sales to foreigners
B)   imports
C)   a personal gift to a foreign individual
D)   none of the aboveE) None of the above
F) B) and D)

Exam 33: Exchange Rates and the Balance of Payments

All of the following are surplus items on the balance of payments accounts EXCEPT

Correct AnswerverifiedShow Answer

If the United States exports $250 billion worth of goods and imports $420 billion worth of goods

Correct AnswerverifiedShow Answer

With the Bretton Woods system of international exchange rates

Correct AnswerverifiedShow Answer

Which of the following is NOT a category in the U.S. balance of payments account?

Correct AnswerverifiedShow Answer

In the balance of payments, all of the following are deficit items EXCEPT

Correct AnswerverifiedShow Answer

When all currencies are tied directly to gold, then

Correct AnswerverifiedShow Answer

Ahmed is working and is spending more than he is earning by using his savings to make up the difference. Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

In international trade, all payments and gifts that are related to the purchase or sale of both goods and services are referred to as the

Correct AnswerverifiedShow Answer

Suppose that there is a current account deficit of $250 billion and a financial account surplus of $260 billion. It may be concluded that the

Correct AnswerverifiedShow Answer

An example of a deficit item on the U.S. balance of payments is

Correct AnswerverifiedShow Answer

One source of the supply of dollars in the world is

Correct AnswerverifiedShow Answer

Every transaction concerning the importation of goods into the United States constitutes a

Correct AnswerverifiedShow Answer

A decrease in the market clearing exchange value of the home nation's currency in terms of the currency of another nation is a home currency

Correct AnswerverifiedShow Answer

The difference between exports and imports of goods is the

Correct AnswerverifiedShow Answer

If the U.S. interest rate, adjusted for people's expectation of inflation, increases sharply relative to the rest of the world, then

Correct AnswerverifiedShow Answer

The price of one currency in terms off another currency is called

Correct AnswerverifiedShow Answer

An increase in the value of a domestic currency in terms of other currencies is known as

Correct AnswerverifiedShow Answer

Which of the following is NOT a deficit item on a country's balance of payments?

Correct AnswerverifiedShow Answer

The term "flexible exchange rates" refers to

Correct AnswerverifiedShow Answer

If there is an unrest in Turkey, and Turkish investors purchase U.S. securities, the

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