Question 1

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. The private sector has a

Accepted Answer

A)   deficit of 125 fish.
B)   surplus of 125 fish.
C)   deficit of 225 fish.
D)   surplus of 225 fish.E) A) and D)
F) C) and D)

Question 2

The sum of the current account, capital and financial account, and official settlements account is

Accepted Answer

A)   a positive number if the country has a trade surplus.
B)   a negative number if the country has a trade deficit.
C)   positive or negative depending on whether the domestic exchange rate is appreciating or depreciating.
D)   always equal to zero.E) B) and D)
F) A) and C)

Question 3

Why do people and firms in the United States supply dollars to the foreign exchange market?

Accepted Answer

People and firms supply dollar...

Question 4

If imports are $1,200 billion and exports are $1,300 billion, while net interest income and net transfers are zero, what is the current account balance?

Accepted Answer

The current account balance eq...

Question 5

Adjusted for risk, interest rate parity

Accepted Answer

A)   holds only for larger countries.
B)   holds only between the U.S. and Canada.
C)   holds only when purchasing parity holds.
D)   always holds.E) B) and C)
F) B) and D)

Question 6

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar ________ against the Euro and ________ against the Japanese yen.

Accepted Answer

A)   depreciated; depreciated
B)   appreciated; appreciated
C)   appreciated; depreciated
D)   depreciated; appreciatedE) A) and D)
F) B) and C)

Question 7

-Using the table above, if the current market value of the dollar is 125 francs per dollar

Accepted Answer

A)   investor A expects dollar appreciation, but B and C expect depreciation.
B)   investor A expects dollar depreciation, but B and C expect appreciation.
C)   all three investors expect the dollar to appreciate.
D)   all three investors expect the dollar to depreciate.E) A) and C)
F) A) and B)

Question 8

The European Commission believes that in 2020 exports of goods and services from Spain will be 22 times larger than in 2010. Irish exports are expected to have grown by 15 percent over the same period. If imports remain constant

Accepted Answer

A)   the current account balance in both countries will become more positive.
B)   the current account balance in both countries will become more negative.
C)   there will be no change in the current account balance of both countries.
D)   in both countries the capital and financial account balance will become more positive.E) B) and C)
F) B) and D)

Question 9

As the exchange rate ________, the quantity of dollars ________ in the foreign exchange market ________.

Accepted Answer

A)   rises; supplied; increases
B)   falls; supplied; increases
C)   rises; demanded; increases
D)   falls; demanded; decreasesE) A) and B)
F) None of the above

Question 10

Which of the following is included in a nation's current account?
I. the import of services
II. a change of foreign currency holdings
III. net transfers, such as foreign aid payments

Accepted Answer

A)   I and III
B)   I and II
C)   II and III
D)   III onlyE) C) and D)
F) A) and C)

Question 11

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts ________ and the supply curve of U.S. dollars shifts ________.

Accepted Answer

A)   rightward; rightward
B)   rightward; leftward
C)   leftward; rightward
D)   leftward; leftwardE) A) and D)
F) B) and D)

Question 12

In June 2008, the dollar bought 1.6 Brazilian reals and in October, the dollar bought 2.4 reals. This resulted in a

Accepted Answer

A)   a movement upward along the supply curve for dollars.
B)   a movement downward along the supply curve for dollars.
C)   rightward shift in the supply curve for dollars.
D)   leftward shift in the supply curve for dollars.E) A) and B)
F) A) and C)

Question 13

Over the past decade, the United States has had a current account deficit and capital account deficit.

Accepted Answer

A) True 
 B)False

Question 14

If there is an increase in the expected future U.S. exchange rate, there is

Accepted Answer

A)   an upward movement along the demand curve for dollars.
B)   a downward movement along the demand curve for dollars.
C)   a leftward shift of the demand curve for dollars.
D)   a rightward shift of the demand curve for dollars.E) A) and B)
F) A) and C)

Question 15

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a ________ of dollars, and the exchange rate will ________.

Accepted Answer

A)   surplus; fall to the equilibrium level
B)   shortage; change only when the supply curve shifts leftward
C)   shortage; rise to the equilibrium level
D)   surplus; rise to the equilibrium levelE) None of the above
F) B) and C)

Question 16

If the Fed wants to depreciate the dollar against the yen, the Fed will

Accepted Answer

A)   increase the supply of dollars by selling yen.
B)   increase the demand for dollars by selling yen.
C)   decrease the supply of dollars by selling yen.
D)   increase the supply of dollars by buying yen.E) A) and D)
F) B) and C)

Question 17

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________.

Accepted Answer

A)   a decrease; $20
B)   an increase; $20
C)   an increase; $180
D)   a decrease; $180E) All of the above
F) A) and B)

Question 18

-In the table above, what does the private sector surplus equal?

Accepted Answer

A)   $500 billion
B)   $350 billion
C)   $150 billion
D)   $0E) B) and D)
F) A) and D)

Question 19

Which of the following is included in a nation's capital and financial account?
I. the purchase of foreign stocks and bonds
II. the sale of foreign stocks and bonds
III. importing a piece of capital equipment

Accepted Answer

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

Question 20

If the exchange rate falls from 120 yen per dollar to 100 yen per dollar, the dollar has ________ and the yen has ________.

Accepted Answer

A)   depreciated; appreciated
B)   appreciated; depreciated
C)   depreciated; depreciated
D)   appreciated; appreciatedE) A) and D)
F) All of the above

Exam 9: The Exchange Rate and the Balance of Payments

Over the past decade, the United States has had a current account deficit and capital account deficit.

Correct AnswerverifiedShow Answer

As the exchange rate ________, the quantity of dollars ________ in the foreign exchange market ________.

Correct AnswerverifiedShow Answer

If the Fed wants to depreciate the dollar against the yen, the Fed will

Correct AnswerverifiedShow Answer

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. The private sector has a

Correct AnswerverifiedShow Answer

-In the table above, what does the private sector surplus equal?

Correct AnswerverifiedShow Answer

-Using the table above, if the current market value of the dollar is 125 francs per dollar

Correct AnswerverifiedShow Answer

The European Commission believes that in 2020 exports of goods and services from Spain will be 22 times larger than in 2010. Irish exports are expected to have grown by 15 percent over the same period. If imports remain constant

Correct AnswerverifiedShow Answer

Which of the following is included in a nation's current account? I. the import of services II. a change of foreign currency holdings III. net transfers, such as foreign aid payments

Correct AnswerverifiedShow Answer

If there is an increase in the expected future U.S. exchange rate, there is

Correct AnswerverifiedShow Answer

Which of the following is included in a nation's capital and financial account? I. the purchase of foreign stocks and bonds II. the sale of foreign stocks and bonds III. importing a piece of capital equipment

Correct AnswerverifiedShow Answer

If imports are $1,200 billion and exports are $1,300 billion, while net interest income and net transfers are zero, what is the current account balance?

Correct AnswerverifiedThe current account balance eq...View AnswerShow Answer

In June 2008, the dollar bought 1.6 Brazilian reals and in October, the dollar bought 2.4 reals. This resulted in a

Correct AnswerverifiedShow Answer

If the exchange rate falls from 120 yen per dollar to 100 yen per dollar, the dollar has ________ and the yen has ________.

Correct AnswerverifiedShow Answer

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________.

Correct AnswerverifiedShow Answer

Why do people and firms in the United States supply dollars to the foreign exchange market?

Correct AnswerverifiedPeople and firms supply dollar...View AnswerShow Answer

The sum of the current account, capital and financial account, and official settlements account is

Correct AnswerverifiedShow Answer

Adjusted for risk, interest rate parity

Correct AnswerverifiedShow Answer

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar ________ against the Euro and ________ against the Japanese yen.

Correct AnswerverifiedShow Answer

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a ________ of dollars, and the exchange rate will ________.

Correct AnswerverifiedShow Answer

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts ________ and the supply curve of U.S. dollars shifts ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

As the exchange rate , the quantity of dollars in the foreign exchange market .

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
The current account balance eq...
View Answer

Correct Answer
verified

If the exchange rate falls from 120 yen per dollar to 100 yen per dollar, the dollar has and the yen has .

Correct Answer
verified

If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be in official reserves of .

Correct Answer
verified

Correct Answer
verified
People and firms supply dollar...
View Answer

Correct Answer
verified

Correct Answer
verified

-The table above shows the exchange rates between various currencies and the U.S. dollar. Between 2015 and 2016, the U.S. dollar against the Euro and against the Japanese yen.

Correct Answer
verified

If the exchange rate between the dollar and Japanese yen is below the equilibrium exchange rate, there will be a of dollars, and the exchange rate will .

Correct Answer
verified

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve for U.S. dollars shifts and the supply curve of U.S. dollars shifts .

Correct Answer
verified