Question 1

All exports of U.S. goods are considered credit items in the U.S. balance of payments.

Accepted Answer

A) True 
 B)False

Question 2

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate, a ____ exists at the current exchange rate that will put ____ pressure on the exchange value of a dollar.

Accepted Answer

A)  ​surplus of dollars; downward
B)  ​surplus of dollars; upward
C)  ​shortage of dollars; downward
D)  ​shortage of dollars; upwardE) A) and D)
F) B) and D)

Question 3

If the exchange rate between euros and dollars were 2 euros per dollar, when a French tourist buys a good valued at $80, its cost in euros would be:

Accepted Answer

A)  ​160 euros.
B)  ​80 euros.
C)  ​78 euros.
D)  ​40 euros.E) A) and D)
F) A) and C)

Question 4

A foreigner buying U.S. goods must buy dollars to purchase them.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the demand for British pounds might result from:

Accepted Answer

A)  ​a reduction in the price level in the U.S.relative to Britain.
B)  ​a recession in the U.S.which reduces real output.
C)  ​a decline in interest rates in Britain.
D)  ​a decline in interest rates in the U.S.E) C) and D)
F) B) and C)

Question 6

Which of the following would most likely cause a nation's currency to depreciate?

Accepted Answer

A)  ​an increase in domestic real interest rates
B)  ​an increase in exports coupled with a decline in imports
C)  ​an increase in the nation's inflation rate
D)  ​a balance of trade surplusE) A) and D)
F) All of the above

Question 7

Economists sometimes say that the current exchange rate system is a dirty float system. What does this mean?

Accepted Answer

The dirty float system means that fluctu...

Question 8

Which of the following would cause an increase in the exchange value of the U.S. dollar?

Accepted Answer

A)  ​A decrease in the amount of foreign debt purchased by U.S.citizens
B)  ​An increase in U.S.exports
C)  ​Increased demand by foreigners to buy U.S.government securities
D)  ​all of the aboveE) All of the above
F) A) and D)

Question 9

What are the main arguments presented against flexible exchange rates?

Accepted Answer

Arguments against flexible exchange rate...

Question 10

If incomes decrease in the United States, Americans will buy more goods, including foreign goods. This increase in demand for foreign goods will cause an increase in the demand for euros.

Accepted Answer

A) True 
 B)False

Question 11

The tendency of the prices of identical baskets of goods across countries to converge:

Accepted Answer

A)  ​Is stronger to the extent the countries compared have substantial tariffs on imported goods.
B)  ​Is weaker, the higher the cost of transporting the goods between countries.
C)  ​Is stronger for goods and services not traded internationally.
D)  ​Would tend to become weaker when countries eliminated quotas on imports of the goods in the baskets.E) All of the above
F) B) and C)

Question 12

If the dollar price of euros is lower than the equilibrium price, there will be an excess quantity of euros ____ at that price, and competition among euro ____ will push the price of Euros toward equilibrium.

Accepted Answer

A)  ​supplied, sellers.
B)  ​supplied; buyers.
C)  ​demanded; sellers.
D)  ​demanded; buyers.E) A) and D)
F) B) and D)

Question 13

If a country has a net capital inflow, it is almost certainly experiences both capital inflows and capital outflows.

Accepted Answer

A) True 
 B)False

Question 14

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will:

Accepted Answer

A)  ​cause the nation's currency to appreciate.
B)  ​make it more expensive for the nation to import goods.
C)  ​cause the nation's balance on current account to shift toward a deficit.
D)  ​make it less expensive for foreigners to buy the nation's goods.E) A) and C)
F) B) and C)

Question 15

If the exchange rate between yen and dollars were 120 yen per dollar, when a Japanese tourist buys a good valued at $600, its cost in yen would be:

Accepted Answer

A)  ​5 yen.
B)  ​600 yen.
C)  ​72,000 yen.
D)  ​120 yen.E) C) and D)
F) None of the above

Question 16

The current international monetary system is best described as a:

Accepted Answer

A)  ​fixed exchange rate system.
B)  ​gold standard.
C)  ​dirty float system.
D)  ​free float system.E) None of the above
F) A) and B)

Question 17

In foreign exchange markets, the demand for dollars is determined:

Accepted Answer

A)  ​solely by the level of U.S.merchandise exports.
B)  ​solely by the level of U.S.merchandise imports.
C)  ​by the level of U.S.imports and the demand for foreign assets by U.S.citizens and the U.S.government.
D)  ​by the level of U.S.exports and the demand for U.S.assets by foreigners.E) A) and B)
F) A) and C)

Question 18

It is possible for the dollar to appreciate against the Japanese yen while depreciating against the British pound.

Accepted Answer

A) True 
 B)False

Question 19

Because central banks intervene in currency markets, the term ____ has been used to describe the system.

Accepted Answer

A)  ​organized
B)  ​planned
C)  ​dirty float
D)  ​flexibleE) A) and B)
F) All of the above

Question 20

As the number of British pounds that exchange for a dollar rises on foreign currency markets:

Accepted Answer

A)  ​the British will have an incentive to import fewer U.S.goods.
B)  ​the British will find it easier to export goods to the United States.
C)  ​the British will find U.S.goods to be more expensive in their stores.
D)  ​all of the above will be true.E) None of the above
F) B) and C)

Exam 21: Financial Markets, Saving, and Investment

The tendency of the prices of identical baskets of goods across countries to converge:

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As the number of British pounds that exchange for a dollar rises on foreign currency markets:

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An increase in the demand for British pounds might result from:

Correct AnswerverifiedShow Answer

If the exchange rate between yen and dollars were 120 yen per dollar, when a Japanese tourist buys a good valued at $600, its cost in yen would be:

Correct AnswerverifiedShow Answer

Which of the following would most likely cause a nation's currency to depreciate?

Correct AnswerverifiedShow Answer

Economists sometimes say that the current exchange rate system is a dirty float system. What does this mean?

Correct AnswerverifiedThe dirty float system means that fluctu...View AnswerShow Answer

If the dollar price of euros is lower than the equilibrium price, there will be an excess quantity of euros ____ at that price, and competition among euro ____ will push the price of Euros toward equilibrium.

Correct AnswerverifiedShow Answer

If a country has a net capital inflow, it is almost certainly experiences both capital inflows and capital outflows.

Correct AnswerverifiedShow Answer

The current international monetary system is best described as a:

Correct AnswerverifiedShow Answer

In foreign exchange markets, the demand for dollars is determined:

Correct AnswerverifiedShow Answer

Under a system of flexible exchange rates, an increase in demand for a nation's currency in the foreign exchange market will:

Correct AnswerverifiedShow Answer

What are the main arguments presented against flexible exchange rates?

Correct AnswerverifiedArguments against flexible exchange rate...View AnswerShow Answer

If incomes decrease in the United States, Americans will buy more goods, including foreign goods. This increase in demand for foreign goods will cause an increase in the demand for euros.

Correct AnswerverifiedShow Answer

Which of the following would cause an increase in the exchange value of the U.S. dollar?

Correct AnswerverifiedShow Answer

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate, a ____ exists at the current exchange rate that will put ____ pressure on the exchange value of a dollar.

Correct AnswerverifiedShow Answer

Because central banks intervene in currency markets, the term ____ has been used to describe the system.

Correct AnswerverifiedShow Answer

It is possible for the dollar to appreciate against the Japanese yen while depreciating against the British pound.

Correct AnswerverifiedShow Answer

All exports of U.S. goods are considered credit items in the U.S. balance of payments.

Correct AnswerverifiedShow Answer

If the exchange rate between euros and dollars were 2 euros per dollar, when a French tourist buys a good valued at $80, its cost in euros would be:

Correct AnswerverifiedShow Answer

A foreigner buying U.S. goods must buy dollars to purchase them.

Correct AnswerverifiedShow Answer

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The dirty float system means that fluctu...
View Answer

If the dollar price of euros is lower than the equilibrium price, there will be an excess quantity of euros at that price, and competition among euro will push the price of Euros toward equilibrium.

Correct Answer
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Arguments against flexible exchange rate...
View Answer

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If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate, a exists at the current exchange rate that will put pressure on the exchange value of a dollar.

Correct Answer
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