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Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

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Question 21

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

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 abroad.

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Question 22

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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:

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.

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Question 23

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Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}\begin{array}{lll}\text { 1) Goods Exports}\\\text { 2) Goods Imports}\\\text { 3) Service Exports}\\\text { 4) Service Imports}\\\text { 5) Net Investment Income}\\\text { 6) Net Transfers}\\\text { 7) Foreign Purchases of Assets}\\\text { 8) Purchases of Foreign Assets}\\\text { 9) Balance on Capital Account}\end{array}\begin{array}{r}+\$ 15 \\-17 \\+5 \\-2 \\-5 \\+4 \\+5 \\-11 \\+1\end{array}\end{array}$ Refer to the given data.If Transylvania was on a system of freely floating exchange rates,its balance of payments position would cause the international value of its currency to depreciate.

Which of the following combinations is plausible,as it relates to a nation's balance of payments?

Relatively rapid U.S.growth between 2002 and 2007 contributed to large U.S.trade deficits by:

Which of the following lists of exchange-rate systems is arranged in proper historical order,from earliest to most current?

A system of fixed exchange rates is more likely to result in exchange controls than is a system of flexible (floating)exchange rates.

In the U.S.balance of payments account for a certain year,a positive number in the financial account means a:

The United States' current account deficit reached a new high in:

A nation's official reserves:

Suppose the balance on the current account is +$100 billion and the balance on the capital account is -$1 billion.The balance on the financial account is:

Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}\begin{array}{lll}\text { 1) Goods Exports}\\\text { 2) Goods Imports}\\\text { 3) Service Exports}\\\text { 4) Service Imports}\\\text { 5) Net Investment Income}\\\text { 6) Net Transfers}\\\text { 7) Foreign Purchases of Assets}\\\text { 8) Purchases of Foreign Assets}\\\text { 9) Balance on Capital Account}\end{array}\begin{array}{r}+\$ 15 \\-17 \\+5 \\-2 \\-5 \\+4 \\+5 \\-11 \\+1\end{array}\end{array}$ Refer to the given data.In 2008 Transylvania was a net recipient of transfers from the rest of the world.

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.At the equilibrium exchange rate:

If a nation's goods exports are $55 billion,while its goods imports are $50 billion,we can conclude with certainty that this nation has a:

Which of the following combinations is plausible,as it relates to a nation's balance of payments?

As a result of the 2007-2009 recession:

In 2012,the United States' balance on goods was about:

In recent years,the United States has had large:

Suppose the balance on the current account is +$50 billion and the balance on the capital account is +$1 billion.The balance on the financial account is:

Mainly because of large current account deficits,the United States: