Question 1

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Accepted Answer

A)   the peso has appreciated in value.
B)   Americans will buy more Mexican goods and services.
C)   more U.S. goods and services will be demanded by the Mexicans.
D)   the dollar has depreciated in value.E) None of the above
F) B) and C)

Question 2

As the economy recovers from a recession, economists expect its

Accepted Answer

A)   imports to grow, and therefore its trade deficit would also grow.
B)   exports to grow, and therefore its trade deficit would shrink.
C)   imports and exports to grow at roughly the same rate, so its trade deficit will stay constant.
D)   imports and exports to start declining. Therefore, its trade deficit will also decline a little bit.E) A) and B)
F) None of the above

Question 3

Under an international gold standard,

Accepted Answer

A)   a nation's exchange rate is virtually fixed.
B)   domestic output and the price level will fall in those nations receiving international gold flows.
C)   a nation's balance of payments surplus will be corrected by an outflow of gold.
D)   a nation's balance of payments deficit will be corrected by an inflow of gold.E) C) and D)
F) None of the above

Question 4

A currency depreciation in the foreign exchange market will

Accepted Answer

A)   encourage imports into the country whose currency has depreciated.
B)   discourage imports into the country whose currency has depreciated.
C)   discourage exports from the country whose currency has depreciated.
D)   encourage foreign travel by the citizens of the country whose currency has depreciated.E) A) and B)
F) A) and C)

Question 5

Which of the following transactions represents a credit on the financial account of the U.S. balance of payments?

Accepted Answer

A)   Oil is imported from Venezuela.
B)   United States firms pay dividends to foreigners.
C)   United States citizens purchase foreign securities.
D)   A Canadian firm increases its direct investment in its U.S. branch.E) All of the above
F) C) and D)

Question 6

Suppose interest rates fall sharply in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates, we can expect the demand for pounds in the United States to

Accepted Answer

A)   decrease, the supply of pounds to increase, and the dollar to appreciate relative to the pound.
B)   increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate relative to the pound.
C)   increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound.
D)   decrease, the supply of pounds to increase, and the dollar to depreciate relative to the pound.E) C) and D)
F) All of the above

Question 7

U.S. imports

Accepted Answer

A)   increase the foreign demand for foreign currencies.
B)   increase the domestic demand for foreign currencies.
C)   decrease the foreign supply of foreign currencies.
D)   increase the domestic supply of foreign currencies.E) B) and D)
F) All of the above

Question 8

Which one of the following is part of the financial account on the U.S. balance of payments?

Accepted Answer

A)   net transfers
B)   net investment income
C)   U.S. goods exports
D)   U.S. purchases of assets abroadE) A) and D)
F) All of the above

Question 9

The current monetary system for conducting international trade is usually described as a system of

Accepted Answer

A)   fixed exchange rates.
B)   freely floating exchange rates.
C)   a managed gold standard.
D)   managed floating exchange rates.E) B) and C)
F) C) and D)

Question 10

Official reserves used to achieve a balance of payments between nations engaging in international trade are held by

Accepted Answer

A)   private businesses engaging in trade.
B)   central banks of the nations engaged in trade.
C)   commercial banks, which make loans to businesses engaging in trade.
D)   commercial banks, which make loans to governments that engage in trade.E) A) and B)
F) A) and C)

Question 11

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) A) and B)
F) None of the above

Question 12

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Accepted Answer

A)   foreign currency outflow.
B)   foreign currency inflow.
C)   current account item.
D)   debit, or outpayment.E) A) and B)
F) B) and C)

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

Official reserves used to achieve a balance of payments between nations engaging in international trade are held by

Correct Answer
verified

U.S. imports

Correct Answer
verified

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

Correct Answer
verified

Which one of the following is part of the financial account on the U.S. balance of payments?

Correct Answer
verified

As the economy recovers from a recession, economists expect its

Correct Answer
verified

Which of the following transactions represents a credit on the financial account of the U.S. balance of payments?

Correct Answer
verified

A currency depreciation in the foreign exchange market will

Correct Answer
verified

Under an international gold standard,

Correct Answer
verified

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Correct Answer
verified

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Correct Answer
verified

The current monetary system for conducting international trade is usually described as a system of

Correct Answer
verified

Suppose interest rates fall sharply in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates, we can expect the demand for pounds in the United States to

Correct Answer
verified

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

Official reserves used to achieve a balance of payments between nations engaging in international trade are held by

Correct AnswerverifiedShow Answer

U.S. imports

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following is part of the financial account on the U.S. balance of payments?

Correct AnswerverifiedShow Answer

As the economy recovers from a recession, economists expect its

Correct AnswerverifiedShow Answer

Which of the following transactions represents a credit on the financial account of the U.S. balance of payments?

Correct AnswerverifiedShow Answer

A currency depreciation in the foreign exchange market will

Correct AnswerverifiedShow Answer

Under an international gold standard,

Correct AnswerverifiedShow Answer

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then

Correct AnswerverifiedShow Answer

In the U.S. balance of payments, foreign purchases of assets in the United States are a

Correct AnswerverifiedShow Answer

The current monetary system for conducting international trade is usually described as a system of

Correct AnswerverifiedShow Answer

Suppose interest rates fall sharply in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates, we can expect the demand for pounds in the United States to

Correct AnswerverifiedShow Answer

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