Question 1

The supply curve of U.S. dollars is drawn assuming other things constant, such as

Accepted Answer

A)  income in the rest of the world
B)  expectations about the rate of inflation in the United States relative to the rest of the world
C)  U.S. tastes and preferences for foreign goods
D)  the interest rate in the United States relative to the rest of the world
E)  tastes and preferences of the rest of the world for U.S. goods and servicesF) A) and B)
G) None of the above

Question 2

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the

Accepted Answer

A)  U.S. demand curve for Mexican pesos will shift rightward
B)  U.S. demand curve for Mexican pesos will shift leftward
C)  U.S. supply curve of Mexican pesos will shift leftward
D)  U.S. supply curve of Mexican pesos will shift rightward
E)  U.S. supply curve of Mexican pesos will shift upwardF) A) and B)
G) A) and C)

Question 3

If you are planning to visit wildlife preserves in Kenya, you hope the U.S. dollar appreciates against Kenya's currency.

Accepted Answer

A) True 
 B)False

Question 4

If the exchange rate changes from 1 euro per U.S. dollar to 1.2 euros per U.S. dollar, the Euro has

Accepted Answer

A)  appreciated, since its value has increased
B)  appreciated, since the price of U.S. dollars has increased
C)  appreciated, making U.S. goods cheaper in Euros
D)  depreciated, since its value has declined
E)  depreciated, since its value has increasedF) A) and B)
G) B) and D)

Question 5

Foreign exchange means

Accepted Answer

A)  changing dollars into foreign currency
B)  domestic currency held to finance international trade
C)  foreign currency
D)  trade between governments
E)  trade between individuals in different countriesF) C) and D)
G) B) and E)

Question 6

The balance of payments always balances, because each of the specific accounts must, by definition, be in balance.

Accepted Answer

A) True 
 B)False

Question 7

When net unilateral transfers are added to the net exports of goods and services, the result is called the

Accepted Answer

A)  merchandise trade balance
B)  official reserve transactions account
C)  balance of payments
D)  balance on capital account
E)  balance on current accountF) All of the above
G) A) and E)

Question 8

Since 1983, the US has typically run a financial account surplus.

Accepted Answer

A) True 
 B)False

Question 9

In determining the exchange rate between the Canadian dollar and British pound, if Canadian income increases, then

Accepted Answer

A)  the Canadian demand for pounds increases
B)  the price of pounds decreases
C)  the Canadian demand for pounds decreases
D)  the Canadian supply of pounds increases
E)  the supply of Canadian dollars decreasesF) C) and E)
G) A) and E)

Question 10

Under the Bretton Woods agreement,

Accepted Answer

A)  nations could not adjust their exchange rates relative to the dollar for any reason
B)  currency values were based on a market basket of European currencies plus the dollar
C)  the world monetary system operated exactly like the gold standard of pre-World War II years
D)  the dollar was selected as the key reserve currency
E)  gold played no roleF) None of the above
G) C) and E)

Question 11

Which of the following is not considered as a unilateral transfer?

Accepted Answer

A)  income earned from foreign investments
B)  foreign aid
C)  personal gifts to friends or family abroad
D)  institutional charitable donations
E)  government transfers to foreign residentsF) A) and E)
G) C) and D)

Question 12

If the current account is in deficit, imports of goods and services exceed exports of goods and services (plus net unilateral transfers).

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 20-4
 
-Suppose the Swiss government wants to set the exchange rate at A in Exhibit 20-4. The appropriate action for the government to take after the demand shift shown is

Accepted Answer

A)  to reduce its demand for dollars from Canada
B)  to reduce its supply of francs to Canada
C)  to increase its supply of francs to Canada
D)  to raise the price of foreign exchange in Canada
E)  to increase the U.S. demand for goods and services from SwitzerlandF) A) and C)
G) B) and D)

Question 14

If the exchange rate changes from 1500 lire per U.S. dollar to 1000 lire per U.S. dollar, the U.S. dollar has

Accepted Answer

A)  appreciated, since its value has increased
B)  appreciated, since the price of foreign exchange has increased
C)  appreciated, making Italian goods cheaper in U.S. dollars
D)  depreciated, since its value has declined
E)  depreciated, since its value has increasedF) B) and E)
G) A) and C)

Question 15

Between 1917 and 1982, the US ran a financial account deficit.

Accepted Answer

A) True 
 B)False

Question 16

The merchandise trade balance

Accepted Answer

A)  reflects trade in intangibles like insurance and tourism
B)  includes personal gifts to friends abroad
C)  records the flow of financial assets like stocks and bonds
D)  equals the value of imports minus the value of exports
E)  equals the value of tangible products exported minus the value of tangible products importedF) A) and D)
G) C) and D)

Question 17

If a foreign currency becomes more expensive in United States dollars, we would expect

Accepted Answer

A)  U.S. exports to increase
B)  U.S. imports to increase
C)  U.S. exports to remain constant
D)  U.S. exports to decrease
E)  the quantity of foreign currency demanded in the United States to riseF) C) and D)
G) C) and E)

Question 18

A leftward shift of the European demand curve for foreign exchange will

Accepted Answer

A)  decrease the price of foreign exchange in Europe
B)  increase the price of foreign exchange in Europe
C)  decrease the value of the euro
D)  make foreign goods more expensive in terms of euros
E)  make European goods less expensive in terms of foreign exchangeF) B) and E)
G) B) and C)

Question 19

Which of the following is not a credit item (+)  in the U.S. balance of payments?

Accepted Answer

A)  imports of cars from Japan
B)  any transaction that results in an inflow of dollars
C)  a capital outflow
D)  a U.S. firm's purchase of steel from a European steel mill
E)  an increase in American vacations abroadF) D) and E)
G) C) and D)

Question 20

The United States is a net importer of capital. This means

Accepted Answer

A)  that U.S. citizens own more foreign assets than foreigners own U.S. assets
B)  that citizens of other countries are buying more U.S. assets than U.S. citizens are buying foreign assets
C)  only that U.S. citizens own foreign assets
D)  only that foreign citizens own U.S. assets
E)  either that U.S. citizens own foreign assets or that foreign citizens own U.S. assetsF) B) and C)
G) B) and D)

Exam 20: International Finance

If the current account is in deficit, imports of goods and services exceed exports of goods and services (plus net unilateral transfers).

Correct AnswerverifiedShow Answer

The merchandise trade balance

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Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the

Correct AnswerverifiedShow Answer

Exhibit 20-4 -Suppose the Swiss government wants to set the exchange rate at A in Exhibit 20-4. The appropriate action for the government to take after the demand shift shown is

Correct AnswerverifiedShow Answer

If the exchange rate changes from 1500 lire per U.S. dollar to 1000 lire per U.S. dollar, the U.S. dollar has

Correct AnswerverifiedShow Answer

Since 1983, the US has typically run a financial account surplus.

Correct AnswerverifiedShow Answer

If you are planning to visit wildlife preserves in Kenya, you hope the U.S. dollar appreciates against Kenya's currency.

Correct AnswerverifiedShow Answer

Which of the following is not considered as a unilateral transfer?

Correct AnswerverifiedShow Answer

If the exchange rate changes from 1 euro per U.S. dollar to 1.2 euros per U.S. dollar, the Euro has

Correct AnswerverifiedShow Answer

The balance of payments always balances, because each of the specific accounts must, by definition, be in balance.

Correct AnswerverifiedShow Answer

If a foreign currency becomes more expensive in United States dollars, we would expect

Correct AnswerverifiedShow Answer

Which of the following is not a credit item (+) in the U.S. balance of payments?

Correct AnswerverifiedShow Answer

When net unilateral transfers are added to the net exports of goods and services, the result is called the

Correct AnswerverifiedShow Answer

A leftward shift of the European demand curve for foreign exchange will

Correct AnswerverifiedShow Answer

Between 1917 and 1982, the US ran a financial account deficit.

Correct AnswerverifiedShow Answer

Foreign exchange means

Correct AnswerverifiedShow Answer

In determining the exchange rate between the Canadian dollar and British pound, if Canadian income increases, then

Correct AnswerverifiedShow Answer

The supply curve of U.S. dollars is drawn assuming other things constant, such as

Correct AnswerverifiedShow Answer

The United States is a net importer of capital. This means

Correct AnswerverifiedShow Answer

Under the Bretton Woods agreement,

Correct AnswerverifiedShow Answer

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