Question 1

Suppose there are two countries (country A and country B) each with its own currency (Currency A and Currency B) . Suppose the exchange rate is expressed in terms of amount of Currency B needed to get Currency A. A strengthening of Currency A would show up as

Accepted Answer

A)  an increase in the exchange rate.
B)  a decrease in the exchange rate.
C)  an increase in the interest rate
D)  a decrease in the interest rate

Question 2

In 2014, the U. S. current account balance as a percentage of GDP was approximately

Accepted Answer

A)  20%.
B)  2%.
C)  0%.
D)  -3%.

Question 3

Changes in U.S. citizens' holdings of long-term financial and physical assets in another country are reported in

Accepted Answer

A)  the trade balance.
B)  the current account.
C)  total exports of goods and services.
D)  the capital account.

Question 4

Occasional government intervention in markets for foreign currency is typical of a

Accepted Answer

A)  fixed exchange rate system.
B)  floating exchange rate system.
C)  managed float exchange rate system.
D)  gold standard.

Question 5

In the market for yen, an increase in U.S. real interest rates tends to

Accepted Answer

A)  cause no change in equilibrium price.
B)  increase excess demand.
C)  increase equilibrium price.
D)  decrease demand.

Question 6

Since 1970, U.S. investment in other countries has

Accepted Answer

A)  increased by more than foreign investment in the U.S.
B)  increased by less than foreign investment in the U.S.
C)  necessarily increased by exactly the same as foreign investment in the U.S.
D)  increased more than twenty-fold. B

Question 7

In the market for yen, a decrease in U.S. real interest rates tends to

Accepted Answer

A)  cause no change in equilibrium price.
B)  increase excess supply.
C)  increase demand.
D)  decrease equilibrium price.

Question 8

If the exports are $1.5 trillion, imports are $2 trillion, short-term investment to and from the US exactly balances, and taxes and private payments to and from the US also exactly balance, the current account balance is a

Accepted Answer

A)  surplus of $3.5 trillion.
B)  deficit of $.5 trillion.
C)  surplus of $.5 trillion.
D)  deficit of $3.5 trillion.

Question 9

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to grow and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Accepted Answer

A)  rise to (perhaps) .9 euros/dollar.
B)  fall to (perhaps) .6 euros/dollar.
C)  cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense) .
D)  remain unchanged.

Question 10

Borrowing from other nations is necessary to finance

Accepted Answer

A)  more imports than exports.
B)  more exports than imports.
C)  a foreign trade surplus.
D)  a surplus in the current account. A

Question 11

"Net transfers of private money" most often represent

Accepted Answer

A)  money sent home by foreign workers in the U.S.
B)  purchases by foreigners of physical capital in the U.S.
C)  purchases by foreigners of U.S. export goods.
D)  purchases of foreign-produced goods and services by U.S. citizens.

Question 12

Which exchange rate system requires an immediate response by a government to counter all market forces on exchange rates?

Accepted Answer

A)  The fixed exchange rate system
B)  The managed float exchange rate system
C)  The floating exchange rate system
D)  The Bretton-Woods exchange rate system

Question 13

Any restriction on the ease of exchanging on currency for another tends to harm

Accepted Answer

A)  only the prospective purchaser of imported goods.
B)  only the prospective manufacturer of goods for export.
C)  both the prospective import purchaser and the prospective export manufacturer.
D)  no one.

Question 14

Between 2000 and mid-2005, the value of the U.S. dollar expressed in Chinese yuan

Accepted Answer

A)  increased sharply.
B)  decreased precipitously.
C)  remained essentially constant.
D)  was zero because it was illegal to sell yuan.

Question 15

If the exchange rate of U.S. dollars for yen is 100.yen to $1 (U.S.) then the exchange rate of yen for U.S. dollars is

Accepted Answer

A)  .01 (1/100) dollars per yen.
B)  99 (100-1) dollars per yen.
C)  -.1 (1-1.1) dollars per yen.
D)  not knowable from this data.

Question 16

Which exchange rate system requires an immediate response by a government to counter market forces on exchange rates but it need not completely negate all of those forces?

Accepted Answer

A)  The fixed exchange rate system
B)  The managed float exchange rate system
C)  The floating exchange rate system
D)  The free market exchange rate system

Question 17

If there is a trade deficit that creates a current account deficit

Accepted Answer

A)  there must be a capital account deficit too.
B)  there must be a capital account surplus.
C)  there must be greater exports than imports.
D)  a currency must ultimately decrease in value. B

Question 18

If the exchange rate of US dollars for Canadian dollars is 1.1 Canadian dollars to $1 (U.S.) then the exchange rate of Canadian dollars for U.S. dollars is

Accepted Answer

A)  .909 (1/1.1) US dollars per Canadian dollars.
B)  .1 (1.1-1) US dollars per Canadian dollars.
C)  -.1 (1-1.1) US dollars per Canadian dollars.
D)  not knowable from this data.

Question 19

The massive deficit in the U.S. current account primarily reflects the

Accepted Answer

A)  excess of foreign investment in the U.S. over domestic private investment.
B)  excess of U.S. exports over U.S. imports.
C)  excess of U.S. imports over U.S. exports.
D)  transfers of money home by U.S. citizens working in other countries.

Question 20

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to fall and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Accepted Answer

A)  rise to (perhaps) .9 euros/dollar.
B)  fall to (perhaps) .6 euros/dollar.
C)  cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense) .
D)  remain unchanged.

Exam 18: International Finance and Exchange Rates

Suppose there are two countries (country A and country B) each with its own currency (Currency A and Currency B) . Suppose the exchange rate is expressed in terms of amount of Currency B needed to get Currency A. A strengthening of Currency A would show up as

Correct AnswerverifiedShow Answer

In 2014, the U. S. current account balance as a percentage of GDP was approximately

Correct AnswerverifiedShow Answer

Changes in U.S. citizens' holdings of long-term financial and physical assets in another country are reported in

Correct AnswerverifiedShow Answer

Occasional government intervention in markets for foreign currency is typical of a

Correct AnswerverifiedShow Answer

In the market for yen, an increase in U.S. real interest rates tends to

Correct AnswerverifiedShow Answer

Since 1970, U.S. investment in other countries has

Correct AnswerverifiedB

In the market for yen, a decrease in U.S. real interest rates tends to

Correct AnswerverifiedShow Answer

If the exports are $1.5 trillion, imports are $2 trillion, short-term investment to and from the US exactly balances, and taxes and private payments to and from the US also exactly balance, the current account balance is a

Correct AnswerverifiedShow Answer

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to grow and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Correct AnswerverifiedShow Answer

Borrowing from other nations is necessary to finance

Correct AnswerverifiedA

"Net transfers of private money" most often represent

Correct AnswerverifiedShow Answer

Which exchange rate system requires an immediate response by a government to counter all market forces on exchange rates?

Correct AnswerverifiedShow Answer

Any restriction on the ease of exchanging on currency for another tends to harm

Correct AnswerverifiedShow Answer

Between 2000 and mid-2005, the value of the U.S. dollar expressed in Chinese yuan

Correct AnswerverifiedShow Answer

If the exchange rate of U.S. dollars for yen is 100.yen to $1 (U.S.) then the exchange rate of yen for U.S. dollars is

Correct AnswerverifiedShow Answer

Which exchange rate system requires an immediate response by a government to counter market forces on exchange rates but it need not completely negate all of those forces?

Correct AnswerverifiedShow Answer

If there is a trade deficit that creates a current account deficit

Correct AnswerverifiedB

If the exchange rate of US dollars for Canadian dollars is 1.1 Canadian dollars to $1 (U.S.) then the exchange rate of Canadian dollars for U.S. dollars is

Correct AnswerverifiedShow Answer

The massive deficit in the U.S. current account primarily reflects the

Correct AnswerverifiedShow Answer

Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to fall and suppose that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely

Correct AnswerverifiedShow Answer

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B

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A

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B

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