Question 1

The leaders of the G-8 nations which meet regularly to discuss economic issues and try to coordinate economic policies are:

Accepted Answer

A)   Canada, U.S., France, Britain, Mexico, Germany, Russia, and Brazil.
B)   Canada, U.S., France, Japan, Italy, Germany, Russia, and the United Kingdom
C)   Canada, U.S., Mexico, Brazil, Argentina, Uruguay, and Chile.
D)   Italy, France, Britain, Germany, Netherlands, Norway, China, and Sweden.E) None of the above
F) All of the above

Question 2

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania realized a balance of payments deficit.

Accepted Answer

A) True 
 B)False

Question 3

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   Canada makes a unilateral tariff reduction on imported goods
B)   Canadian Pacific pays a dividend to a Swiss stockholder
C)   Canada cuts back on Canadian military personnel stationed in Germany
D)   Russian vodka becomes increasingly popular in CanadaE) A) and C)
F) A) and B)

Question 5

Depreciation of the Canadian dollar will tend to:

Accepted Answer

A)   decrease the prices of both imports and exports.
B)   increase the prices of both imports and exports.
C)   decrease the prices of the goods Canadians import, but increase the prices to foreigners of the goods Canadians export.
D)   increase the prices of the goods Canadians import, but decrease the prices to foreigners of the goods Canadians export.E) A) and D)
F) C) and D)

Question 6

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 7

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was
$1 = 220 yen, and in 2012 it was $1 = 100 yen.
-Refer to the above information. Between 2002 and 2012 the:

Accepted Answer

A)   dollar appreciated in value relative to the yen.
B)   yen appreciated in value relative to the dollar.
C)   dollar price of yen fell.
D)   yen price of dollars rose.E) A) and C)
F) B) and C)

Question 8

If the dollar price of yen rises, then:

Accepted Answer

A)   the yen price of dollars also rises.
B)   the dollar depreciates relative to the yen.
C)   the yen depreciates relative to the dollar.
D)   all of the above will occur.E) A) and B)
F) All of the above

Question 9

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania had a $2 billion balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 10

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) All of the above
F) A) and B)

Question 11

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 D)
F) None of the above

Question 12

Under a system of flexible exchange rates, an increase in the international value of a nation's currency will:

Accepted Answer

A)   cause an international surplus of its currency.
B)   contribute to disequilibrium in its balance of payments.
C)   cause gold to flow into that country.
D)   cause its imports to rise.E) A) and D)
F) B) and C)

Question 13

If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

Accepted Answer

A)   the Swiss franc has appreciated in value.
B)   Canadians will buy more Swiss goods and services.
C)   more Canadian goods and services will be demanded by the Swiss.
D)   the dollar has depreciated in value.E) A) and D)
F) B) and C)

Question 14

Under flexible exchange rates a Canadian trade deficit with Britain will cause the dollar price of pounds to rise.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following countries is a G-8 nation?

Accepted Answer

A)   China
B)   Brazil
C)   Italy
D)   KoreaE) A) and D)
F) B) and C)

Question 16

The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania imported more products than it exported.

Accepted Answer

A) True 
 B)False

Question 19

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella. All figures are in billions of dollars.
Current Account:
 
-Refer to the above data. Zabella's balance on goods and services shows a:

Accepted Answer

A)   $5 billion deficit.
B)   $5 billion surplus.
C)   $10 billion surplus.
D)   $15 billion deficit.E) A) and D)
F) C) and D)

Question 20

The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of flexible exchange rates is in place.
 
-Refer to the above table. The exchange rate is:

Accepted Answer

A)   4 libras for one dollar.
B)   .30 libras for one dollar.
C)   .40 libras for one dollar.
D)   none of the above.E) B) and C)
F) A) and C)

Exam 17: Exchange Rates and the Balance of Payments

The leaders of the G-8 nations which meet regularly to discuss economic issues and try to coordinate economic policies are:

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Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was $1 = 220 yen, and in 2012 it was $1 = 100 yen. -Refer to the above information. Between 2002 and 2012 the:

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The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella. All figures are in billions of dollars. Current Account: -Refer to the above data. Zabella's balance on goods and services shows a:

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The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania imported more products than it exported.

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If the dollar price of yen rises, then:

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The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania had a $2 billion balance of trade surplus.

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A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

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

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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:

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Depreciation of the Canadian dollar will tend to:

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The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of flexible exchange rates is in place. -Refer to the above table. The exchange rate is:

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Under a system of flexible exchange rates, an increase in the international value of a nation's currency will:

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The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

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Under flexible exchange rates a Canadian trade deficit with Britain will cause the dollar price of pounds to rise.

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If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

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The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania realized a balance of payments deficit.

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

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

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Which of the following countries is a G-8 nation?

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

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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:

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