Question 1

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Accepted Answer

A)  is $1 = 2 pounds in Canada.
B)  is $2 = 1 pound in Canada.
C)  is $1 = 2 pounds in Great Britain.
D)  is $.5 = 1 pound in Great Britain.E) B) and C)
F) A) and D)

Question 2

In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:

Accepted Answer

A)  limiting its imports to the dollar value of its exports.
B)  decreasing the nation's domestic price level.
C)  limiting its exports to the dollar value of its imports.
D)  appreciating the value of its currency.E) A) and C)
F) None of the above

Question 3

Under the international gold standard, exchange rates fluctuate without restraint to correct any international disequilibrium by affecting the relative attractiveness of domestic and foreign goods.

Accepted Answer

A) True 
 B)False

Question 4

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

Accepted Answer

A)  gold bullion will flow into Switzerland.
B)  the Swiss franc will depreciate.
C)  the British pound will depreciate.
D)  the Swiss franc will appreciate.E) A) and B)
F) C) and D)

Question 5

It may be misleading to label a trade deficit as "unfavourable" or "adverse" because:

Accepted Answer

A)  the multiplier does not apply to a trade deficit.
B)  it increases our aggregate output and employment.
C)  Canadian consumers benefit from a trade deficit during the period it occurs.
D)  all of the above reasons.E) All of the above
F) B) and C)

Question 6

The following table shows the trade between Canada and Transylvania for the year 2014.All the figures are in billions of dollars.  Refer to the above information.In 2014, Canada had a current account:

Accepted Answer

A)  surplus of $3 billion.
B)  deficit of $11 billion.
C)  surplus of $10 billion.
D)  surplus of $15 billion.E) All of the above
F) B) and C)

Question 7

1 and S1.The exchange rate will be: A) M dollars for one peso. B) 1/B pesos for one dollar. C) A dollars for one peso. D) C dollars for one peso." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.The exchange rate will be:

Accepted Answer

A)  M dollars for one peso.
B)  1/B pesos for one dollar.
C)  A dollars for one peso.
D)  C dollars for one peso.E) A) and B)
F) A) and C)

Question 8

The current account on a nation's balance of payments statement includes net investment income.

Accepted Answer

A) True 
 B)False

Question 9

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Accepted Answer

A)  $.005
B)  $.05.
C)  $.50.
D)  5.E) B) and C)
F) None of the above

Question 10

The Canadian demand for pounds is:

Accepted Answer

A)  downward sloping because a higher dollar price of pounds means British goods are cheaper to Canadians.
B)  downward sloping because a lower dollar price of pounds means British goods are more expensive to Canadians.
C)  upsloping because a lower dollar price of pounds means British goods are cheaper to Canadians.
D)  downward sloping because a lower dollar price of pounds means British goods are cheaper to Canadians.E) B) and C)
F) None of the above

Question 11

An increase in Canadian interest rates can be expected to:

Accepted Answer

A)  adversely affect Canadian exporters.
B)  encourage investment spending by Canadian firms.
C)  lower the foreign exchange value of the dollar.
D)  cause a net outflow of foreign capital from Canada.E) A) and D)
F) C) and D)

Question 12

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Accepted Answer

A)  both our imports and our exports to rise.
B)  both our imports and our exports to fall.
C)  our exports to fall and our imports to increase.
D)  inflation to occur.E) A) and B)
F) B) and C)

Question 13

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10.We conclude that:

Accepted Answer

A)  1 yen = 280 Swiss francs.
B)  1 yen = 14 Swiss francs.
C)  1 Swiss franc = 28 yen.
D)  1 Swiss franc = 14 yen.E) A) and B)
F) A) and C)

Question 14

Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D1 and S1.The exchange rate will be: 1 and S1.The exchange rate will be:   A) $1 equals 5 British pounds. B) $4 equals 1 British pound. C) $5 equals 1 British pound. D) JQ3 British pounds per dollar." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  $1 equals 5 British pounds.
B)  $4 equals 1 British pound.
C)  $5 equals 1 British pound.
D)  JQ3 British pounds per dollar.E) B) and D)
F) All of the above

Question 15

Critics of the managed floating exchange rate system argue that it:

Accepted Answer

A)  is dominated by G-8 nations.
B)  is a "non-system" with unclear rules.
C)  increased the growth in world trade at too fast a rate.
D)  puts too much reliance on the adjustable-peg mechanism for stabilizing exchange rates.E) A) and C)
F) A) and B)

Question 16

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Accepted Answer

A)  an increase in merchandise exports
B)  a decrease in exports of services
C)  an increase in official reserves
D)  an increase in net transfersE) A) and B)
F) A) and C)

Question 17

Which of the following would contribute to a Canadian balance of payments deficit?

Accepted Answer

A)  Kawasaki builds a motorcycle manufacturing plant in Vancouver
B)  Canadian tourists travel in large numbers to Europe
C)  a wealthy Iranian builds a mansion in Montreal
D)  Zaire pays interest on its debt to CanadaE) B) and C)
F) A) and D)

Question 18

Imports cause:

Accepted Answer

A)  an outflow of money and an inflow of goods and services.
B)  an inflow of money and an inflow of goods and services.
C)  an outflow of money and an outflow of goods and services.
D)  an inflow of money and an outflow of goods and services.E) B) and C)
F) A) and D)

Question 19

Under freely flexible (floating)exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Accepted Answer

A) True 
 B)False

Question 20

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars.  Refer to the above data.In a flexible exchange-rate system, the balance of payments position of Transylvania would cause the international value of its currency to depreciate.

Accepted Answer

A) True 
 B)False

Exam 18: Part A: The Balance of Payments and Exchange Rates

The Canadian demand for pounds is:

Correct Answer
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It may be misleading to label a trade deficit as "unfavourable" or "adverse" because:

Correct Answer
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Correct Answer
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Imports cause:

Correct Answer
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If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Correct Answer
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Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D₁ and S₁.The exchange rate will be:

Correct Answer
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Under the international gold standard, exchange rates fluctuate without restraint to correct any international disequilibrium by affecting the relative attractiveness of domestic and foreign goods.

Correct Answer
verified

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Correct Answer
verified

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Correct Answer
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An increase in Canadian interest rates can be expected to:

Correct Answer
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Which of the following would contribute to a Canadian balance of payments deficit?

Correct Answer
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The current account on a nation's balance of payments statement includes net investment income.

Correct Answer
verified

Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.The exchange rate will be:

Correct Answer
verified

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10.We conclude that:

Correct Answer
verified

Under freely flexible (floating)exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Correct Answer
verified

The following table shows the trade between Canada and Transylvania for the year 2014.All the figures are in billions of dollars. Refer to the above information.In 2014, Canada had a current account:

Correct Answer
verified

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

Correct Answer
verified

Critics of the managed floating exchange rate system argue that it:

Correct Answer
verified

In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:

Correct Answer
verified

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Correct Answer
verified

Exam 18: Part A: The Balance of Payments and Exchange Rates

The Canadian demand for pounds is:

Correct AnswerverifiedShow Answer

It may be misleading to label a trade deficit as "unfavourable" or "adverse" because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Imports cause:

Correct AnswerverifiedShow Answer

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Correct AnswerverifiedShow Answer

Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D1 and S1.The exchange rate will be:

Correct AnswerverifiedShow Answer

Under the international gold standard, exchange rates fluctuate without restraint to correct any international disequilibrium by affecting the relative attractiveness of domestic and foreign goods.

Correct AnswerverifiedShow Answer

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Correct AnswerverifiedShow Answer

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Correct AnswerverifiedShow Answer

An increase in Canadian interest rates can be expected to:

Correct AnswerverifiedShow Answer

Which of the following would contribute to a Canadian balance of payments deficit?

Correct AnswerverifiedShow Answer

The current account on a nation's balance of payments statement includes net investment income.

Correct AnswerverifiedShow Answer

Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.The exchange rate will be:

Correct AnswerverifiedShow Answer

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10.We conclude that:

Correct AnswerverifiedShow Answer

Under freely flexible (floating)exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Correct AnswerverifiedShow Answer

The following table shows the trade between Canada and Transylvania for the year 2014.All the figures are in billions of dollars. Refer to the above information.In 2014, Canada had a current account:

Correct AnswerverifiedShow Answer

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

Correct AnswerverifiedShow Answer

Critics of the managed floating exchange rate system argue that it:

Correct AnswerverifiedShow Answer

In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:

Correct AnswerverifiedShow Answer

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Correct AnswerverifiedShow Answer

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Refer to the diagram below.Assume the initial demand for and supply of dollars are shown by D₁ and S₁.The exchange rate will be:

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Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.The exchange rate will be:

Correct Answer
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