Question 1

U.S. goods exports +$390 U.S. goods imports −498 U.S. service exports +133 U.S. service imports −107 Net investment income +12 Net transfers −22 Capital account −5 Foreign purchases of U.S. assets +156 U.S. purchases of foreign assets −59\begin{array} { | l | r | } \hline 	ext { U.S. goods exports } & + \$ 390 \\hline 	ext { U.S. goods imports } & - 498 \\hline 	ext { U.S. service exports } & + 133 \\hline 	ext { U.S. service imports } & - 107 \\hline 	ext { Net investment income } & + 12 \\hline 	ext { Net transfers } & - 22 \\hline 	ext { Capital account } & - 5 \\hline 	ext { Foreign purchases of U.S. assets } & + 156 \\hline 	ext { U.S. purchases of foreign assets } & - 59 \\hline\end{array} U.S. goods exports  U.S. goods imports  U.S. service exports  U.S. service imports  Net investment income  Net transfers  Capital account  Foreign purchases of U.S. assets  U.S. purchases of foreign assets ​+$390−498+133−107+12−22−5+156−59​​  The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All ?gures are in billions of dollars. The data indicate that there was a trade

Accepted Answer

A)   de?cit in goods and also a trade de?cit in services.
B)   surplus in goods and also a trade surplus in services.
C)   de?cit in goods and a trade surplus in services.
D)   surplus in goods and a trade de?cit in services. E) A) and B)
F) C) and D)

Question 2

Assume that Japan and the United States are engaged in a system of ﬂexible exchange rates. Refer to the graph. An increase in the supply of yen will result in

Accepted Answer

A)   an appreciation of the yen.
B)   an appreciation of the U.S. dollar.
C)   a depreciation of the U.S. dollar.
D)   an increase in the dollar price of yen.E) None of the above
F) A) and B)

Question 3

A market in which the money of one nation is exchanged for the money of another nation is a

Accepted Answer

A)   resource market.
B)   bond market.
C)   stock market.
D)   foreign exchange market.E) None of the above
F) A) and C)

Question 4

Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if

Accepted Answer

A)   U.S. citizens reduce spending on imports.
B)   the U.S. Federal Reserve raises real interest rates.
C)   the number of foreign tourists in the United States increases.
D)   foreigners withdraw funds from U.S. money markets.E) A) and D)
F) C) and D)

Question 5

A government may be able to reduce the international value of its currency by

Accepted Answer

A)   selling its currency in the foreign exchange market.
B)   buying its currency in the foreign exchange market.
C)   selling foreign currencies in the foreign exchange market.
D)   increasing its domestic interest rates.E) None of the above
F) B) and C)

Question 6

Mainly because of large current account deﬁcits, the United States

Accepted Answer

A)   is the leading exporting nation in the world.
B)   has experienced increased foreign ownership of assets in the United States.
C)   has the world's highest saving rate.
D)   is experiencing an increase in its net inﬂow of investment income.E) A) and C)
F) C) and D)

Question 7

In 2018, the capital account in the U.S. balance of payments was in

Accepted Answer

A)   deﬁcit, and larger than the current account deﬁcit.
B)   surplus, and larger than the current account surplus.
C)   deﬁcit, and smaller than the current account deﬁcit.
D)   balance, with no deﬁcit or surplus.E) A) and B)
F) C) and D)

Question 8

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is

Accepted Answer

A)   1 euro = $0.80.
B)   1 euro = $0.90.
C)   1 euro = $0.95.
D)   1 euro = $1.11.E) B) and C)
F) A) and D)

Question 9

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign exchange
market.

Accepted Answer

A) True 
 B)False

Question 10

Fixed exchange rates are often maintained by using all of the following tools except

Accepted Answer

A)   open speculation by individual traders in foreign currency markets.
B)   international monetary reserves held by central banks.
C)   controls on imports and exports, such as tariffs and quotas.
D)   domestic macroeconomic adjustments using monetary and ﬁscal policies.E) None of the above
F) B) and C)

Question 11

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Accepted Answer

A)   an increase in the balance on capital account
B)   a decrease in U.S. goods exports
C)   an increase in net transfers
D)   a decrease in U.S. purchases of assets abroadE) B) and D)
F) All of the above

Question 12

The United States has had signiﬁcant trade and current account surpluses in recent years.

Accepted Answer

A) True 
 B)False

Question 13

"International trade" refers to

Accepted Answer

A)   purchasing or selling currently produced goods or services across an international border.
B)   any transaction across an international border.
C)   any ﬁnancial transaction across an international border.
D)   buying or selling of preexisting assets across an international border.E) A) and B)
F) None of the above

Question 14

Which of the following statements about the ﬁnancing of international trade is correct?

Accepted Answer

A)   International trade means the trading of ﬁnancial assets for foreign exchange.
B)   Most international transactions are made with gold.
C)   Imports are more important than exports to the economy of a nation.
D)   Exports provide the foreign currencies needed to pay for imports.E) A) and B)
F) None of the above

Question 15

If the U.S. dollar appreciates relative to the British pound, then

Accepted Answer

A)   the pound will appreciate relative to the U.S. dollar.
B)   the pound will depreciate relative to the U.S. dollar.
C)   British goods will be more expensive for Americans.
D)   American goods will be less expensive for the British.E) A) and B)
F) A) and C)

Question 16

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 C)
F) A) and B)

Question 17

When a government buys or sells foreign exchange in the foreign exchange market in order to alter the supply or demand for currency and push the exchange rate in a desired direction, this is known
As

Accepted Answer

A)   monetary policy.
B)   an inﬂationary peg.
C)   sterilization.
D)   a currency intervention.E) A) and C)
F) None of the above

Question 18

To maintain a ﬁxed exchange rate under a shortage of FX reserves, the government has the following options, except

Accepted Answer

A)   encourage foreign investment inﬂows, and restrict foreign investment outﬂows.
B)   encourage imports, and discourage exports.
C)   impose exchange controls or capital controls.
D)   use monetary or ﬁscal policies to reduce domestic spending.E) A) and D)
F) A) and B)

Question 19

The current system of exchange rates can best be described as

Accepted Answer

A)   freely ﬂuctuating exchange rates.
B)   managed ﬂoating exchange rates.
C)   rigidly ﬁxed exchange rates.
D)   an adjustable peg system.E) None of the above
F) A) and D)

Question 20

When the nation's FX reserves are rising, some would call it a "balance of payments surplus." This could happen as a result of any of the following except

Accepted Answer

A)   the nation giving up assets to other nations.
B)   the nation sending more products abroad than it brought in.
C)   the economy becoming tremendously fortunate and strong.
D)   other nations investing more in this nation than this nation is investing in others.E) B) and C)
F) B) and D)

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

Correct Answer
verified

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign exchange market.

Correct Answer
verified

The current system of exchange rates can best be described as

Correct Answer
verified

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is

Correct Answer
verified

Assume that Japan and the United States are engaged in a system of ﬂexible exchange rates. Refer to the graph. An increase in the supply of yen will result in

Correct Answer
verified

To maintain a ﬁxed exchange rate under a shortage of FX reserves, the government has the following options, except

Correct Answer
verified

When a government buys or sells foreign exchange in the foreign exchange market in order to alter the supply or demand for currency and push the exchange rate in a desired direction, this is known As

Correct Answer
verified

If the U.S. dollar appreciates relative to the British pound, then

Correct Answer
verified

In 2018, the capital account in the U.S. balance of payments was in

Correct Answer
verified

Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if

Correct Answer
verified

"International trade" refers to

Correct Answer
verified

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

Correct Answer
verified

When the nation's FX reserves are rising, some would call it a "balance of payments surplus." This could happen as a result of any of the following except

Correct Answer
verified

Mainly because of large current account deﬁcits, the United States

Correct Answer
verified

A government may be able to reduce the international value of its currency by

Correct Answer
verified

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Correct Answer
verified

Which of the following statements about the ﬁnancing of international trade is correct?

Correct Answer
verified

Fixed exchange rates are often maintained by using all of the following tools except

Correct Answer
verified

A market in which the money of one nation is exchanged for the money of another nation is a

Correct Answer
verified

The United States has had signiﬁcant trade and current account surpluses in recent years.

Correct Answer
verified

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

Correct AnswerverifiedShow Answer

U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign exchange market.

Correct AnswerverifiedShow Answer

The current system of exchange rates can best be described as

Correct AnswerverifiedShow Answer

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is

Correct AnswerverifiedShow Answer

Assume that Japan and the United States are engaged in a system of ﬂexible exchange rates. Refer to the graph. An increase in the supply of yen will result in

Correct AnswerverifiedShow Answer

To maintain a ﬁxed exchange rate under a shortage of FX reserves, the government has the following options, except

Correct AnswerverifiedShow Answer

When a government buys or sells foreign exchange in the foreign exchange market in order to alter the supply or demand for currency and push the exchange rate in a desired direction, this is known As

Correct AnswerverifiedShow Answer

If the U.S. dollar appreciates relative to the British pound, then

Correct AnswerverifiedShow Answer

In 2018, the capital account in the U.S. balance of payments was in

Correct AnswerverifiedShow Answer

Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if

Correct AnswerverifiedShow Answer

"International trade" refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the nation's FX reserves are rising, some would call it a "balance of payments surplus." This could happen as a result of any of the following except

Correct AnswerverifiedShow Answer

Mainly because of large current account deﬁcits, the United States

Correct AnswerverifiedShow Answer

A government may be able to reduce the international value of its currency by

Correct AnswerverifiedShow Answer

Which one of the following, other things equal, will directly alter the U.S. balance of trade?

Correct AnswerverifiedShow Answer

Which of the following statements about the ﬁnancing of international trade is correct?

Correct AnswerverifiedShow Answer

Fixed exchange rates are often maintained by using all of the following tools except

Correct AnswerverifiedShow Answer

A market in which the money of one nation is exchanged for the money of another nation is a

Correct AnswerverifiedShow Answer

The United States has had signiﬁcant trade and current account surpluses in recent years.

Correct AnswerverifiedShow Answer

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