Question 1

In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003?

Accepted Answer

A)  Japan exported much more to the United States during this period than it imported from the United States.
B)  Japan greatly increased its purchases of military equipment from the United States during this period.
C)  Japan's economy grew far faster than the U.S. economy during this period.
D)  Japan's government devalued the yen during this period.E) A) and B)
F) B) and C)

Question 2

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a rightward shift of the supply curve would

Accepted Answer

A)  appreciate the euro.
B)  cause a surplus of euros.
C)  decrease the equilibrium quantity of euros.
D)  appreciate the dollar.E) A) and B)
F) A) and D)

Question 3

Which of the following has contributed to large U.S. trade deficits in recent years?

Accepted Answer

A)  China fixing its exchange rate
B)  rapid decreases in the price of oil that have triggered dramatic increases in oil imports
C)  a rising U.S. saving rate
D)  All of these have contributed.E) None of the above
F) All of the above

Question 4

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation,

Accepted Answer

A)  gold bullion will flow into Brazil.
B)  the Brazilian real will depreciate.
C)  the Mexican peso will depreciate.
D)  the Brazilian real will appreciate.E) None of the above
F) B) and D)

Question 5

In the balance of payments of the United States, inflows of money 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.E) None of the above
F) B) and D)

Question 6

Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph. One U.S. dollar will purchase how many Japanese yen?

Accepted Answer

A)  80
B)  120
C)  125
D)  140E) A) and C)
F) B) and C)

Question 7

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The figure for net transfers indicates that the United States

Accepted Answer

A)  received a net public and private transfer of $22 billion from the rest of the world.
B)  sent a net public and private transfer of $22 billion in remittances to the rest of the world.
C)  sent a net private transfer of $22 billion to the rest of the world.
D)  received a net private transfer of $22 billion from the rest of the world.E) A) and D)
F) B) and C)

Question 8

The table contains balance of payments data (+ and −) for the hypothetical nation of Zabella. All figures are in billions of dollars. Zabella has a balance of trade (goods)

Accepted Answer

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

Question 9

Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. One U.S. dollar will purchase how many euros?

Accepted Answer

A)  0.90 euro
B)  1.00 euro
C)  1.11 euro
D)  1.90 euroE) C) and D)
F) B) and D)

Question 10

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Accepted Answer

A)  the U.S. government sending aid to natural-disaster victims in Asia
B)  American tourists spending money in the other countries
C)  the purchase of U.S. Treasury bonds by a foreign bank
D)  the payment of stock dividends by U.S. firms to foreign shareholdersE) All of the above
F) A) and B)

Question 11

Proponents of the managed floating exchange rate system argue that it has

Accepted Answer

A)  added the volatility needed by the exchange rate market.
B)  been effective because it is a "nonsystem" without fixed rules.
C)  been sufficiently flexible to weather major economic turbulence.
D)  resolved major problems in balance of payments surpluses and deficits.E) A) and D)
F) All of the above

Question 12

Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Accepted Answer

A)  exchange rate appreciation and a decrease in the domestic supply of money
B)  exchange rate appreciation and domestic deflation
C)  exchange rate depreciation and domestic deflation
D)  exchange rate depreciation and domestic inflationE) B) and D)
F) None of the above

Question 13

How does speculation in currencies affect the value of a nation's currency?

Accepted Answer

Currency speculators buy and sell curren...

Question 14

At the time when a trade deficit is occurring, U.S. consumers benefit from having more goods and services available.

Accepted Answer

A) True 
 B)False

Question 15

A nation that imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Accepted Answer

A) True 
 B)False

Question 16

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Accepted Answer

A)  goods imports
B)  balance on capital account
C)  U.S. purchases of assets abroad
D)  exports of servicesE) None of the above
F) B) and D)

Question 17

If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is

Accepted Answer

A)  $0.44.
B)  $0.23.
C)  $2.25.
D)  $2.00.E) B) and C)
F) All of the above

Question 18

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)  improve its terms of trade.E) A) and D)
F) A) and C)

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

Proponents of the managed floating exchange rate system argue that it has

Correct Answer
verified

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

Correct Answer
verified

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a rightward shift of the supply curve would

Correct Answer
verified

A nation that imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Correct Answer
verified

How does speculation in currencies affect the value of a nation's currency?

Correct Answer
verified
Currency speculators buy and sell curren...
View Answer

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

Correct Answer
verified

The table contains balance of payments data (+ and −) for the hypothetical nation of Zabella. All figures are in billions of dollars. Zabella has a balance of trade (goods)

Correct Answer
verified

Which of the following has contributed to large U.S. trade deficits in recent years?

Correct Answer
verified

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation,

Correct Answer
verified

Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Correct Answer
verified

Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. One U.S. dollar will purchase how many euros?

Correct Answer
verified

Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph. One U.S. dollar will purchase how many Japanese yen?

Correct Answer
verified

In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003?

Correct Answer
verified

If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is

Correct Answer
verified

At the time when a trade deficit is occurring, U.S. consumers benefit from having more goods and services available.

Correct Answer
verified

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Correct Answer
verified

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Correct Answer
verified

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The figure for net transfers indicates that the United States

Correct Answer
verified

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

Proponents of the managed floating exchange rate system argue that it has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a rightward shift of the supply curve would

Correct AnswerverifiedShow Answer

A nation that imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Correct AnswerverifiedShow Answer

How does speculation in currencies affect the value of a nation's currency?

Correct AnswerverifiedCurrency speculators buy and sell curren...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The table contains balance of payments data (+ and −) for the hypothetical nation of Zabella. All figures are in billions of dollars. Zabella has a balance of trade (goods)

Correct AnswerverifiedShow Answer

Which of the following has contributed to large U.S. trade deficits in recent years?

Correct AnswerverifiedShow Answer

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation,

Correct AnswerverifiedShow Answer

Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Correct AnswerverifiedShow Answer

Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. One U.S. dollar will purchase how many euros?

Correct AnswerverifiedShow Answer

Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph. One U.S. dollar will purchase how many Japanese yen?

Correct AnswerverifiedShow Answer

In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate from 1985 to 2003?

Correct AnswerverifiedShow Answer

If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is

Correct AnswerverifiedShow Answer

At the time when a trade deficit is occurring, U.S. consumers benefit from having more goods and services available.

Correct AnswerverifiedShow Answer

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Correct AnswerverifiedShow Answer

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Correct AnswerverifiedShow Answer

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The figure for net transfers indicates that the United States

Correct AnswerverifiedShow Answer

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Currency speculators buy and sell curren...
View Answer

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