Question 1

Other things equal, the currency price of U.S.dollars in terms of foreign currency is negatively related to foreign demand for U.S.goods and services.

Accepted Answer

A) True 
 B)False

Question 2

The exchange rates quoted in the Wall Street Journal apply to transactions of $1 million or less and remain fixed for a 24-hour time period.

Accepted Answer

A) True 
 B)False

Question 3

If a U.S.resident buys a $25, 000 car from a Japanese car maker, this transaction will:

Accepted Answer

A)  have a negative effect on Japan's balance of trade in merchandise.
B)  have a negative effect on the U.S.balance of trade in merchandise.
C)  have a positive effect on the U.S.balance of trade in merchandise.
D)  bring money into the United States.
E)  have no effect on Japan's balance of trade in merchandise.

Question 4

On December 29, the cost of a skiing trip to Finse, Norway, was 6, 500 krone.Two weeks later, the American dollar appreciated against the Norwegian krone.If the price of the trip in Norway remains the same:

Accepted Answer

A)  an American skier living in Florida will now view this trip as cheaper.
B)  an American skier living in Florida will now view this trip as highly expensive.
C)  an American skier living in Florida will now view this trip as of the same value as before.
D)  an American skier living in Florida will now value this trip less.
E)  an American skier living in Florida will no longer take this trip.

Question 5

Which of the following would be included in the financial account of the U.S.balance of payments?

Accepted Answer

A)  The U.S.government foreign aid
B)  The purchase of stock in a U.S.corporation by a foreigner
C)  The purchase of a Japanese computer by a U.S.corporation
D)  The purchase of a plane ticket from Australian Airlines by an American
E)  The purchase of a German car by an American

Question 6

Double-entry bookkeeping requires that the debit and credit entries for any transaction must balance.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the dollar price of foreign currency constitutes an appreciation of the U.S.currency.

Accepted Answer

A) True 
 B)False

Question 8

When economists talk about a "balance of payments" deficit, they refer to a condition in which total debits exceed total credits in the balance of payments account.

Accepted Answer

A) True 
 B)False

Question 9

The balance of trade account reflects only transactions associated with international trade of goods.

Accepted Answer

A) True 
 B)False

Question 10

Double-entry bookkeeping is a system of accounting in which:

Accepted Answer

A)  it is ideal for credits to be greater than debits.
B)  it is ideal for debits to be greater than credits.
C)  each transaction is recorded in the same account twice.
D)  only foreign and domestic accounts are used.
E)  the debit total must equal the credit total for the transactions as a whole.

Question 11

An exchange rate can be described as:

Accepted Answer

A)  the price of a foreign currency as determined by the World Bank.
B)  the price of one country's currency in terms of another country's currency.
C)  the dollar value of imports and exports undertaken in the world economy during a year.
D)  the price of foreign currency as established by the relative amount of tourism.
E)  the dollar value of U.S.international trade.

Question 12

Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?

Accepted Answer

A)  A U.S.car manufacturer selling a car to an India
B)  A pub owner in Liverpool importing vodka from a U.S.manufacturer
C)  A U.S.textile manufacturer buying raw cotton from a farmer in Indonesia
D)  A Chinese car manufacturer importing car engines and other spare parts from a U.S.manufacturer
E)  A fashion designer from Michigan exporting readymade garments to a dealer in Copenhagen

Question 13

Double-entry bookkeeping for the balance of payments requires that:

Accepted Answer

A)  the current account always equal the balance of payments.
B)  every transaction be recorded as a credit and a debit at the same time.
C)  total credits always exceed total debits.
D)  every transaction be recorded as either a credit or a debit.
E)  total debits always exceed total credits.

Question 14

An appreciation of the dollar on the foreign exchange market would result in all of the following, except:

Accepted Answer

A)  a decrease in the dollar prices paid by U.S.importers.
B)  an increase in the cost of vacations in Hawaii for Japanese tourists.
C)  foreign holidays for U.S.residents to be less expensive.
D)  an increase in the foreign currency prices paid for U.S.exports.
E)  a decrease in the demand for U.S.exports.

Question 15

If the exchange rate between Canadian dollar [C$] and U.S.dollar [$] on January 6, 2010 is C$/$ = 1.03, then the exchange rate $/C$ will be:

Accepted Answer

A)  0.67.
B)  0.79.
C)  0.97.
D)  1.97.
E)  1.33.

Question 16

On a given day, the exchange rate for one U.S.dollar is 1.2 Canadian dollars and 0.5 British pounds.Exactly six months later, the exchange rate for one U.S.dollar is 1.1 Canadian dollars and 0.7 British pound.From the information given, we can say:

Accepted Answer

A)  the dollar has appreciated relative to Canadian dollars and depreciated relative to British pounds.
B)  the dollar has appreciated relative to British pounds and depreciated relative to Canadian dollars.
C)  the dollar has appreciated relative to both British pounds and Canadian dollars.
D)  the dollar has depreciated relative to both British pounds and Canadian dollars.
E)  nothing about the relative value of the U.S.dollar.

Question 17

In the 1980s, the U.S.current account deficit was financed by:

Accepted Answer

A)  large outflows of domestic capital to other countries.
B)  large inflows of capital from private foreign investment in the United States.
C)  loans made by U.S.residents to the government.
D)  large inflows of foreign government capital.
E)  the Tax Reform Act of 1986, which increased income taxes for the wealthy.

Question 18

If the dollar price of one South African rand (ZAR) increases from $0.076 in 1999 to $0.083 in 2003, we can say that the reciprocal exchange rate moved from:

Accepted Answer

A)  $1 = ZAR 13.2 in 1999 to $1 = ZAR 12.0 in 2003.
B)  $1 = ZAR 12.0 in 1999 to $1 = ZAR 13.2 in 2003.
C)  $1 = ZAR 0.076 in 1999 to $1 = ZAR 0.083 in 2003.
D)  ZAR 1 = $0.083 in 1999 to ZAR 1 = $0.076 in 2003.
E)  $1 = ZAR 176 in 1999 to $1 = ZAR 183 in 2003.

Question 19

The table given below reports the value of various international transactions in Germany for the year 2011.The negative sign denotes the outflow of euros from Germany. Table 6.1
 Refer to Table 6.1.Calculate the current account balance for Germany for the year 2011.

Accepted Answer

A)  -€1, 720
B)  €500
C)  -€870
D)  €784
E)  -€650

Question 20

A rise in the value of a currency in relation to another currency in the international market is called:

Accepted Answer

A)  appreciation.
B)  depreciation.
C)  devaluation.
D)  conservation.
E)  redenomination.

Exam 7: an Introduction to the Foreign Exchange Market and the Balance of Payments

Which of the following would be included in the financial account of the U.S.balance of payments?

Correct AnswerverifiedShow Answer

On December 29, the cost of a skiing trip to Finse, Norway, was 6, 500 krone.Two weeks later, the American dollar appreciated against the Norwegian krone.If the price of the trip in Norway remains the same:

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On a given day, the exchange rate for one U.S.dollar is 1.2 Canadian dollars and 0.5 British pounds.Exactly six months later, the exchange rate for one U.S.dollar is 1.1 Canadian dollars and 0.7 British pound.From the information given, we can say:

Correct AnswerverifiedShow Answer

If the exchange rate between Canadian dollar [C$] and U.S.dollar [$] on January 6, 2010 is C$/$ = 1.03, then the exchange rate $/C$ will be:

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Double-entry bookkeeping is a system of accounting in which:

Correct AnswerverifiedShow Answer

An increase in the dollar price of foreign currency constitutes an appreciation of the U.S.currency.

Correct AnswerverifiedShow Answer

The exchange rates quoted in the Wall Street Journal apply to transactions of $1 million or less and remain fixed for a 24-hour time period.

Correct AnswerverifiedShow Answer

Other things equal, the currency price of U.S.dollars in terms of foreign currency is negatively related to foreign demand for U.S.goods and services.

Correct AnswerverifiedShow Answer

Double-entry bookkeeping requires that the debit and credit entries for any transaction must balance.

Correct AnswerverifiedShow Answer

When economists talk about a "balance of payments" deficit, they refer to a condition in which total debits exceed total credits in the balance of payments account.

Correct AnswerverifiedShow Answer

Double-entry bookkeeping for the balance of payments requires that:

Correct AnswerverifiedShow Answer

The table given below reports the value of various international transactions in Germany for the year 2011.The negative sign denotes the outflow of euros from Germany. Table 6.1 Refer to Table 6.1.Calculate the current account balance for Germany for the year 2011.

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An appreciation of the dollar on the foreign exchange market would result in all of the following, except:

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If a U.S.resident buys a $25, 000 car from a Japanese car maker, this transaction will:

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The balance of trade account reflects only transactions associated with international trade of goods.

Correct AnswerverifiedShow Answer

A rise in the value of a currency in relation to another currency in the international market is called:

Correct AnswerverifiedShow Answer

If the dollar price of one South African rand (ZAR) increases from $0.076 in 1999 to $0.083 in 2003, we can say that the reciprocal exchange rate moved from:

Correct AnswerverifiedShow Answer

In the 1980s, the U.S.current account deficit was financed by:

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An exchange rate can be described as:

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Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?

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