FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 121

Essay

Review LaterAdd Note

Review Later

Explain the basic difference in a fixed (or pegged) exchange rate policy as opposed to a flexible exchange rate policy.

Correct Answer

verified

With a fixed exchange rate policy, the go...

View Answer

Show Answer

Question 122

Multiple Choice

Review LaterAdd Note

Review Later

$\begin{array} { | l | r | } \hline \text { (1) Goods Exports } & + \$ 200 \\\hline \text { (2) Balance on Capital Account } & 0 \\\hline \text { (3) Net Transfers } & 0 \\\hline \text { (4) Imports of Services } & - 100 \\\hline \text { (5) Net Investment Income } & 0 \\\hline \text { (6) US Purchases of Assets Abroad } & - 50 \\\hline \text { (7) Goods Imports } & - 250 \\\hline \text { (8) Foreign Purchases of Assets in the US } & + 150 \\\hline \text { (9) Exports of Services } & + 50 \\\hline\end{array}$ The plus items in the table are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. The ?nancial account items for Zippo Are

A) 1, 2, 3, and 4.
B) 1, 3, 4, 5, 7, and 9.
C) 6 and 8.
D) 1, 2, 4, 7, and 9.

Correct Answer

verified

Show Answer

Question 123

True/False

Review LaterAdd Note

The purchasing-power-parity theory holds that exchange rates should equalize the inflation rates among the trading nations.

A trade deficit for the United States is generally financed by

If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won, then

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is

The expectations of speculators in the United States are that the exchange rate for the euro will fall in the future, will increase the supply of euros in the foreign exchange market, and decrease the exchange rate for the euros.

The following are hypothetical exchange rates: 2 euros = 1 pound; $1 = 2 pounds. We can conclude that

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a leftward shift of the supply curve would

$\begin{array} { | l | r | } \hline \text { (1) Goods Exports } & + \$ 200 \\\hline \text { (2) Balance on Capital Account } & 0 \\\hline \text { (3) Net Transfers } & 0 \\\hline \text { (4) Imports of Services } & - 100 \\\hline \text { (5) Net Investment Income } & 0 \\\hline \text { (6) US Purchases of Assets Abroad } & - 50 \\\hline \text { (7) Goods Imports } & - 250 \\\hline \text { (8) Foreign Purchases of Assets in the US } & + 150 \\\hline \text { (9) Exports of Services } & + 50 \\\hline\end{array}$ The plus items in the table are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Zippo has a

As the economy recovers from a recession, economists expect its

$\begin{array} { | l | c | } \hline \text { (1) Goods Exports } & + \$ 15 \\\hline \text { (2) Goods Imports } & - 17 \\\hline \text { (3) Service Exports } & + 5 \\\hline \text { (4) Service Imports } & - 2 \\\hline \text { (5) Net Investment Income } & - 5 \\\hline \text { (6) Net Transfers } & + 4 \\\hline \text { (7) Foreign Purchases of Assets } & + 5 \\\hline \text { (8) Purchases of Foreign Assets } & - 11 \\\hline \text { (9) Balance on Capital Account } & + 1 \\\hline\end{array}$ The table shows a balance of payments statement for Transylvania. All ?gures are in billions of dollars. Foreigners made a larger volume of asset purchases in Transylvania during the year than Transylvanians made asset purchases abroad.

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

All else being equal, an increased demand for U.S. products in the European Union will create a

When a U.S. company purchases a factory in Singapore, this will be a

International transactions fall into what two broad categories?

In equilibrium, if $1 = 0.5 pound sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollar and franc will be

Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph. An increase in the demand for yen will result in

What are the pros and cons of the managed float system of exchange rates?