Question 1

Which of the following is a credit item in the U.S.balance of payments?

Accepted Answer

A)  imports of cars from Japan
B)  a purchase of an American car by a Japanese citizen
C)  a purchase of Chinese assets by an American citizen
D)  an American firm's purchase of steel from a European steel mill
E)  an increase in American tourists abroadF) A) and B)
G) None of the above

Question 2

When the international financial system operated under the gold standard,_____

Accepted Answer

A)  the currencies of most countries were convertible into gold.
B)  all international transactions were financed with gold.
C)  the price of gold was determined by the supply and demand for foreign exchange.
D)  the quantity of money demanded was always the same.
E)  there was very little inflation.F) A) and B)
G) C) and E)

Question 3

The debit side of the current account includes the imports of _____

Accepted Answer

A)  goods only.
B)  goods and services.
C)  services only.
D)  services and resources only.
E)  financial assets.F) B) and D)
G) A) and C)

Question 4

Exhibit 20.1
 
-Refer to Exhibit 20.1.A shift of the demand curve from D to D' will _____

Accepted Answer

A)  increase the exchange rate from E' to E.
B)  decrease the exchange rate from E to E'.
C)  cause the foreign currency to depreciate.
D)  cause the domestic currency to depreciate.
E)  cause the supply curve to shift.F) A) and B)
G) B) and D)

Question 5

The Bretton Woods system _____

Accepted Answer

A)  established a worldwide gold standard.
B)  established a worldwide system of fixed exchange rates.
C)  established a worldwide system of flexible exchange rates.
D)  harmonized tariff systems.
E)  was restricted to industrialized nations.F) A) and E)
G) B) and D)

Question 6

Which account equals the value of merchandise exports minus the value of merchandise imports?

Accepted Answer

A)  the balance of payments
B)  the merchandise trade balance
C)  the financial account
D)  the trade deficit
E)  the current accountF) C) and D)
G) A) and D)

Question 7

A fixed exchange rate is enforced by _____

Accepted Answer

A)  state governments, who establish appropriate trade barriers for each country they trade with.
B)  state governments, who manipulate gold reserves appropriately.
C)  central banks, who buy and sell appropriate currencies.
D)  the International Monetary Fund, which offers loans to its member countries.
E)  local governments, who manipulate capital reserves appropriately.F) A) and B)
G) None of the above

Question 8

The exchange rate is the _____

Accepted Answer

A)  opportunity cost of producing exportable goods in a country.
B)  total monetary value of exports minus imports.
C)  amount of a country's currency that can be exchanged for one ounce of gold.
D)  sum of net unilateral transfers.
E)  price of one country's currency in terms of another country's currency.F) All of the above
G) None of the above

Question 9

When supply and demand analysis is used to study the exchange rate,foreign exchange is treated just like _____

Accepted Answer

A)  a normal good.
B)  a debt.
C)  fiat money.
D)  commodity money.
E)  an investment.F) A) and B)
G) B) and E)

Question 10

In order for the balance of payments to balance,the _____

Accepted Answer

A)  current account balance must equal the capital account balance.
B)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a negative value.
C)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a positive value.
D)  sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must equal zero.
E)  the sum of the current account balance, the capital account balance, and the net flow of international reserves must be greater than the statistical discrepancy.F) None of the above
G) A) and B)

Question 11

One difference between arbitrageurs and speculators is that _____

Accepted Answer

A)  arbitrageurs buy and sell foreign exchange, while speculators do not.
B)  speculators buy foreign exchange but do not sell it.
C)  arbitrageurs take more risks than do speculators.
D)  speculators take more risks than do arbitrageurs.
E)  arbitrageurs buy foreign exchange in the hope that its value will increase.F) A) and D)
G) A) and C)

Question 12

Any increase in the supply for foreign exchange,other things constant,will _____

Accepted Answer

A)  reduce the number of foreign exchange units required to purchase dollars.
B)  reduce the number of dollars required to purchase one unit of foreign exchange.
C)  cause the dollar to depreciate.
D)  cause the foreign currency to appreciate.
E)  have no effect.F) All of the above
G) B) and D)

Question 13

Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?

Accepted Answer

A)  Purchasing the basket of goods from the United States and selling it in Britain will lead to a profit.
B)  An increase in the demand for pounds will lead to an increase in the price of pounds.
C)  An increase in the demand for dollars will lead to an increase in the price of dollars.
D)  An increase in the demand for dollars will lead to a decrease in the price of dollars.
E)  An increase in the demand for pounds will lead to a decrease in the price of pounds.F) D) and E)
G) C) and D)

Question 14

Under the Bretton Woods agreement,_____

Accepted Answer

A)  nations could not adjust their exchange rates relative to the dollar for any reason.
B)  exchange rates were based on a market basket of European currencies plus the dollar.
C)  the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce.
D)  the international monetary system operated exactly like the gold standard of the pre-World War II era.
E)  gold played no role in the international monetary system.F) B) and D)
G) A) and B)

Question 15

The reason the current exchange rate system is called a "managed float" is that _____

Accepted Answer

A)  it is managed by the IMF.
B)  it is basically a misnomer.
C)  it recognizes that there will be some intervention by central banks.
D)  only the forces of supply and demand determine the exchange rates.
E)  Congress passed a law declaring that the exchange rate system be legally termed "managed float."F) A) and E)
G) B) and D)

Question 16

A revaluation _____

Accepted Answer

A)  is a decrease in the pegged exchange rate.
B)  refers to an increase in a floating exchange rate.
C)  refers to a decrease in a floating exchange rate.
D)  refers to an increase in a fixed exchange rate.
E)  refers to a decrease in a fixed exchange rate.F) B) and C)
G) B) and E)

Question 17

In the U.S balance-of-payments accounts,debit entries in the current or financial accounts _____

Accepted Answer

A)  increase the demand for foreign exchange.
B)  decrease the demand for foreign exchange
C)  increase the supply for foreign exchange.
D)  decrease the supply for foreign exchange.
E)  result in an appreciation of the dollar.F) C) and D)
G) B) and E)

Question 18

In 2016,the U.S.merchandise trade deficit with China was _____

Accepted Answer

A)  $11 billion.
B)  $347 billion.
C)  $80 billion.
D)  $100 billion.
E)  $230 billion.F) B) and E)
G) A) and B)

Question 19

If the U.S.dollar appreciates in the foreign exchange market,then _____

Accepted Answer

A)  American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans.
B)  American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans.
C)  more U.S. dollars will be required to buy a foreign currency.
D)  U.S. exports will increase.
E)  neither the price of U.S. exports nor the price of U.S. imports will change.F) B) and E)
G) C) and D)

Question 20

Which of the following is not considered 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 B)
G) A) and C)

Exam 20: International Finance

If the U.S.dollar appreciates in the foreign exchange market,then _____

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Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?

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Under the Bretton Woods agreement,_____

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Which of the following is not considered a unilateral transfer?

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The exchange rate is the _____

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Exhibit 20.1 -Refer to Exhibit 20.1.A shift of the demand curve from D to D' will _____

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The Bretton Woods system _____

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The debit side of the current account includes the imports of _____

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Which account equals the value of merchandise exports minus the value of merchandise imports?

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A revaluation _____

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Any increase in the supply for foreign exchange,other things constant,will _____

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When supply and demand analysis is used to study the exchange rate,foreign exchange is treated just like _____

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A fixed exchange rate is enforced by _____

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In 2016,the U.S.merchandise trade deficit with China was _____

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When the international financial system operated under the gold standard,_____

Correct AnswerverifiedShow Answer

In the U.S balance-of-payments accounts,debit entries in the current or financial accounts _____

Correct AnswerverifiedShow Answer

One difference between arbitrageurs and speculators is that _____

Correct AnswerverifiedShow Answer

The reason the current exchange rate system is called a "managed float" is that _____

Correct AnswerverifiedShow Answer

Which of the following is a credit item in the U.S.balance of payments?

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In order for the balance of payments to balance,the _____

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