Question 1

The demand for foreign currency in the United States is a

Accepted Answer

A)  direct demand.
B)  derived demand based on the demand for U.S.products.
C)  derived demand based on the demand for foreign products.
D)  direct demand based on the demand for U.S.dollars.

Question 2

Which of the following is a deficit item on the U.S.balance of payments accounts?

Accepted Answer

A)  A U.S.firm sells a product to a Mexican firm.
B)  An Italian tourist in Miami purchases a beach ball.
C)  A Spaniard buys 100 shares of Ford stock.
D)  A U.S.resident buys gold from the Japanese central bank.

Question 3

The foreign exchange rate describes the

Accepted Answer

A)  balance of trade.
B)  balance of payments.
C)  law of comparative advantage.
D)  price of foreign currency in terms of domestic currency.

Question 4

-Refer to the above figure.Suppose E is the original equilibrium.An increase in the demand for dollars will be reflected in this figure by

Accepted Answer

A)  an increase in the demand for yen as both imports and exports increase.
B)  a decrease in the demand for yen as the U.S.balance of payments improves.
C)  an increase in the supply of yen as Japan tries to buy more U.S.goods.
D)  a decrease in the supply of yen as Japan is able to pay less for U.S.goods.

Question 5

One source of the supply of dollars in the foreign exchange market is

Accepted Answer

A)  U.S.companies importing foreign goods.
B)  foreign citizens buying U.S.goods.
C)  SDRs being converted into dollars.
D)  the U.S.Mint buying dollars from the Bank of England.

Question 6

An appreciation of the U.S.dollar relative to the Japanese yen causes

Accepted Answer

A)  A lower dollar-price of Japanese goods which induces the U.S.to increase their purchasing of Japanese goods.
B)  the quantity demanded of U.S.dollars to increase because the Japanese want to buy more U.S.goods.
C)  the Japanese to buy more U.S.goods,causing the dollars to appreciate further.
D)  the U.S.to buy less Japanese goods,causing the U.S.to depreciate.

Question 7

A market in which national currencies are traded by households,firms and governments,is referred to as a(n)

Accepted Answer

A)  foreign exchange market.
B)  fed funds market.
C)  international reserves market.
D)  gold certificate market.

Question 8

A country's balance of payments shows a

Accepted Answer

A)  detailed record of the import and export of services for the country.
B)  detailed record of the country's imports.
C)  summary record of international financial assistance received by the country.
D)  summary record of a country's economic transactions with foreign residents and governments over a year.

Question 9

When there is a negative entry for unilateral transfers in the balance of payments,it means that

Accepted Answer

A)  there must be an offsetting positive sign in the capital account.
B)  U.S.residents gave more to foreign residents than foreign residents gave to U.S.residents.
C)  U.S.residents purchased less services from foreign countries than foreign countries purchased from U.S.residents.
D)  U.S.residents purchased more services from foreign countries than foreign countries purchased from U.S.residents.

Question 10

The price of one nation's currency in terms of the currency of another nation is called the

Accepted Answer

A)  IMF rate.
B)  fed funds ratio.
C)  exchange rate.
D)  discount rate.

Question 11

A problem with the operation of the gold standard in the world economy was that

Accepted Answer

A)  it involved too much government intervention in the economy.
B)  the world economy was subject to too much inflation.
C)  a country did not have control of its domestic monetary policy.
D)  it caused the Great Depression.

Question 12

Current account transactions are payments and gifts that are related to the purchase or sale of

Accepted Answer

A)  financial instruments only.
B)  both goods and services.
C)  goods only.
D)  services only.

Question 13

-Refer to the above table.The capital account balance is

Accepted Answer

A)  0.
B)  -$260.
C)  -$200.
D)  -$155.

Question 14

Country X-2013 Transactions (billions of dollars)  
-In the above table,the fact that there is a minus sign before the number for unilateral transfers means that

Accepted Answer

A)  Country X has significant inflation.
B)  Country X imported more goods than it exported.
C)  Country X received more in foreign aid than it gave in foreign aid.
D)  Country X gave more to foreign residents than foreign residents gave to Country X.

Question 15

Currency reserves on account with the International Monetary Fund used to settle accounts between countries are known as

Accepted Answer

A)  federal reserves.
B)  official reserve account transactions.
C)  unilateral transfer.
D)  special drawing rights.

Question 16

An example of a unilateral transfer is

Accepted Answer

A)  a gift to a relative who lives abroad.
B)  a check received in payment for an import.
C)  gold payments to foreign companies.
D)  SDR payments to world creditors.

Question 17

If the foreign exchange rate for 1 Hungarian forint is 0.5 cent,then

Accepted Answer

A)  a dinner priced at 400 forints will cost $20.
B)  a wine that sells for 600 forints will cost $3,000.
C)  a Big Mac hamburger priced at 50 forints will cost $1.
D)  a hotel room renting for 40,000 forints will cost $200.

Question 18

If the exchange rate measured in euros per dollar increases,then

Accepted Answer

A)  the dollar depreciates relative to the euro.
B)  the euro appreciates relative to the dollar.
C)  the euro depreciates relative to the dollar.
D)  neither currency appreciates or depreciates.

Question 19

Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as

Accepted Answer

A)  fixed exchange rates.
B)  gold exchange rates.
C)  flexible exchange rates.
D)  IMF exchange rates.

Question 20

At the Bretton Woods conference,all currencies were given

Accepted Answer

A)  a fixed value.
B)  a variable value.
C)  a par value.
D)  a floating value.

Exam 33: Exchange Rates and the Balance of Payments

An example of a unilateral transfer is

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A country's balance of payments shows a

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If the foreign exchange rate for 1 Hungarian forint is 0.5 cent,then

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Current account transactions are payments and gifts that are related to the purchase or sale of

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Which of the following is a deficit item on the U.S.balance of payments accounts?

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An appreciation of the U.S.dollar relative to the Japanese yen causes

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Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand are known as

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A problem with the operation of the gold standard in the world economy was that

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The demand for foreign currency in the United States is a

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At the Bretton Woods conference,all currencies were given

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The foreign exchange rate describes the

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One source of the supply of dollars in the foreign exchange market is

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A market in which national currencies are traded by households,firms and governments,is referred to as a(n)

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Currency reserves on account with the International Monetary Fund used to settle accounts between countries are known as

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If the exchange rate measured in euros per dollar increases,then

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The price of one nation's currency in terms of the currency of another nation is called the

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-Refer to the above figure.Suppose E is the original equilibrium.An increase in the demand for dollars will be reflected in this figure by

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Country X-2013 Transactions (billions of dollars) -In the above table,the fact that there is a minus sign before the number for unilateral transfers means that

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-Refer to the above table.The capital account balance is

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When there is a negative entry for unilateral transfers in the balance of payments,it means that

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