Question 1

In 2012,the capital account in the U.S.balance of payments was in:

Accepted Answer

A)   deficit,and larger than the current account deficit.
B)   surplus,and larger than the current account surplus.
C)   balance,with no deficit or surplus.
D)   deficit,and smaller than the current account deficit.E) A) and C)
F) A) and B)

Question 2

Under the managed floating system of exchange rates:

Accepted Answer

A)   all exchange rates vary with changes in the free-market prices of gold.
B)   industrialized nations meet once each year to negotiate readjustments in their exchange rates.
C)   exchange rates are essentially flexible,but governments intervene to offset disorderly fluctuations in rates.
D)   exchange rates are adjusted at the discretion of the IMF.E) B) and C)
F) A) and D)

Question 3

Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}
\begin{array}{lll}
\text { 1) Goods Exports}\
\text { 2) Goods Imports}\
\text { 3) Service Exports}\
\text { 4) Service Imports}\
\text { 5) Net Investment Income}\
\text { 6) Net Transfers}\
\text { 7) Foreign Purchases of Assets}\
\text { 8) Purchases of Foreign Assets}\
\text { 9) Balance on Capital Account}
\end{array}
\begin{array}{r}
+\$ 15 \
-17 \
+5 \
-2 \
-5 \
+4 \
+5 \
-11 \
+1
\end{array}
\end{array}$

Refer to the given data.Foreigners made a larger volume of asset purchases in Transylvania in 2008 than Transylvanians made asset purchases abroad.

Accepted Answer

A) True 
 B)False

Question 4

Appreciation of the Canadian dollar will:

Accepted Answer

A)   intensify an existing disequilibrium in Canada's balance of payments.
B)   make Canada's exports less expensive and its imports more expensive.
C)   make Canada's exports more expensive and its imports less expensive.
D)   make Canada's exports and imports both more expensive.E) B) and C)
F) C) and D)

Question 5

Firms engaged in international trade can reduce exchange-rate risk by:

Accepted Answer

A)   paying for foreign goods only when they are delivered.
B)   buying on credit.
C)   hedging in the futures market.
D)   dealing only with highly reputable firms.E) None of the above
F) All of the above

Question 6

Which one of the following will not directly affect the U.S.balance on current account?

Accepted Answer

A)   An increase in U.S.goods imports.
B)   A decrease in U.S.net investment income.
C)   An increase in U.S.purchases of assets abroad.
D)   An increase in U.S.imports of services.E) None of the above
F) B) and D)

Question 7

Depreciation of the dollar will:

Accepted Answer

A)   decrease the prices of both U.S.imports and exports.
B)   increase the prices of both U.S.imports and exports.
C)   decrease the prices of U.S.imports but increase the prices to foreigners of U.S.exports.
D)   increase the prices of U.S.imports but decrease the prices to foreigners of U.S.exports.E) B) and D)
F) A) and C)

Question 8

Under a system of freely flexible (floating) exchange rates,a U.S.trade deficit with Mexico will tend to cause:

Accepted Answer

A)   the U.S.government to ration pesos to U.S.importers.
B)   a flow of gold from the United States to Mexico.
C)   an increase in the peso price of dollars.
D)   an increase in the dollar price of pesos.E) A) and D)
F) All of the above

Question 9

In considering euros and dollars,the rates of exchange for the euro and the dollar:

Accepted Answer

A)   are directly related.
B)   are inversely related.
C)   are unrelated.
D)   move in the same direction.E) B) and D)
F) A) and C)

Question 10

In the balance of payments of the United States,inflows of foreign currencies to the United States are recorded as:

Accepted Answer

A)   a positive entry.
B)   a current account entry.
C)   a negative entry.
D)   net investment income.E) All of the above
F) A) and D)

Question 11

The following table contains hypothetical data for the 2012 U.S.balance of payments.Answer the question on the basis of this information.All figures are in billions of dollars.   1)  US Goods Exports +$1002)  US Goods Imports −803)  US Service Exports +404)  US Service Imports −90 5)  Net Investment Income +20 6)  Net Transfers −157)  Foreign Purchases of Assets in the United States +308)  US Purchases of Foreign Assets Abroad −10 9)  Balance on Capital Account +5\begin{array}{lrrr}  	ext { 1)  US Goods Exports } &  +\$100\ 	ext {2)  US Goods Imports  } &-80\ 	ext {3)  US Service Exports  } &+40\ 	ext {4)  US Service Imports  } &-90\ 	ext { 5)  Net Investment Income } &+20\ 	ext { 6)  Net Transfers } &-15\ 	ext {7)  Foreign Purchases of Assets in the United States  } &+30\ 	ext {8)  US Purchases of Foreign Assets Abroad  } &-10\ 	ext { 9)  Balance on Capital Account } &+5\\end{array} 1)  US Goods Exports 2)  US Goods Imports 3)  US Service Exports 4)  US Service Imports  5)  Net Investment Income  6)  Net Transfers 7)  Foreign Purchases of Assets in the United States 8)  US Purchases of Foreign Assets Abroad  9)  Balance on Capital Account ​+$100−80+40−90+20−15+30−10+5​ 
 Refer to the given data.The United States' balance on financial account is a:

Accepted Answer

A)   $20 billion surplus.
B)   $15 billion surplus.
C)   $30 billion deficit.
D)   $20 billion deficit. E) A) and D)
F) A) and C)

Question 12

With which of the following countries does the United States have its largest goods and services deficit?

Accepted Answer

A)   Canada.
B)   Germany.
C)   Japan.
D)   China.E) None of the above
F) A) and B)

Question 13

Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Accepted Answer

A)   Exchange rate appreciation and a decrease in the domestic supply of money.
B)   Exchange rate appreciation and domestic deflation.
C)   Exchange rate depreciation and domestic deflation.
D)   Exchange rate depreciation and domestic inflation.E) All of the above
F) B) and C)

Question 14

In 2012,the capital and financial account in the U.S.balance of payments was in:

Accepted Answer

A)   deficit,and smaller than the current account deficit.
B)   surplus,and equal to the current account deficit.
C)   balance,with no deficit or surplus.
D)   surplus,and smaller than the current account deficit.E) B) and C)
F) None of the above

Question 15

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is:

Accepted Answer

A)   $.005.
B)   $.05.
C)   $.50.
D)   $5.E) A) and C)
F) None of the above

Question 16

Answer the question on the basis of the following information.In 1985,the exchange rate between the U.S.dollar and the Japanese yen was $1 = 262 yen;in 2003,the rate was $1 = 110 yen. Refer to the given information.Between 1985 and 2003,the:

Accepted Answer

A)   dollar appreciated in value relative to the yen.
B)   yen appreciated in value relative to the dollar.
C)   dollar price of yen fell.
D)   yen price of dollars rose.E) B) and D)
F) C) and D)

Question 17

If a U.S.importer can purchase 10,000 British pounds for $20,000,the rate of exchange is:

Accepted Answer

A)   $1 = 2 British pounds in the United States.
B)   $2 = 1 British pound in the United States.
C)   $1 = 2 British pounds in Great Britain.
D)   $.5 = 1 British pound in Great Britain.E) None of the above
F) A) and B)

Question 18

Under a system of freely floating exchange rates,an increase in the international value of a nation's currency will:

Accepted Answer

A)   cause an international surplus of its currency.
B)   contribute to disequilibrium in its balance of payments.
C)   cause gold to flow into that country.
D)   cause its imports to rise.E) A) and B)
F) B) and D)

Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

Answer the question on the basis of the following information.In 1985,the exchange rate between the U.S.dollar and the Japanese yen was $1 = 262 yen;in 2003,the rate was $1 = 110 yen. Refer to the given information.Between 1985 and 2003,the:

Correct Answer
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Which one of the following will not directly affect the U.S.balance on current account?

Correct Answer
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Depreciation of the dollar will:

Correct Answer
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Under the managed floating system of exchange rates:

Correct Answer
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Under a system of freely flexible (floating) exchange rates,a U.S.trade deficit with Mexico will tend to cause:

Correct Answer
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In 2012,the capital account in the U.S.balance of payments was in:

Correct Answer
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In the balance of payments of the United States,inflows of foreign currencies to the United States are recorded as:

Correct Answer
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Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Correct Answer
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If a U.S.importer can purchase 10,000 British pounds for $20,000,the rate of exchange is:

Correct Answer
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Appreciation of the Canadian dollar will:

Correct Answer
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In 2012,the capital and financial account in the U.S.balance of payments was in:

Correct Answer
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Under a system of freely floating exchange rates,an increase in the international value of a nation's currency will:

Correct Answer
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Correct Answer
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In considering euros and dollars,the rates of exchange for the euro and the dollar:

Correct Answer
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Firms engaged in international trade can reduce exchange-rate risk by:

Correct Answer
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If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is:

Correct Answer
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With which of the following countries does the United States have its largest goods and services deficit?

Correct Answer
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Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

Answer the question on the basis of the following information.In 1985,the exchange rate between the U.S.dollar and the Japanese yen was $1 = 262 yen;in 2003,the rate was $1 = 110 yen. Refer to the given information.Between 1985 and 2003,the:

Correct AnswerverifiedShow Answer

Which one of the following will not directly affect the U.S.balance on current account?

Correct AnswerverifiedShow Answer

Depreciation of the dollar will:

Correct AnswerverifiedShow Answer

Under the managed floating system of exchange rates:

Correct AnswerverifiedShow Answer

Under a system of freely flexible (floating) exchange rates,a U.S.trade deficit with Mexico will tend to cause:

Correct AnswerverifiedShow Answer

In 2012,the capital account in the U.S.balance of payments was in:

Correct AnswerverifiedShow Answer

In the balance of payments of the United States,inflows of foreign currencies to the United States are recorded as:

Correct AnswerverifiedShow Answer

Which of the following have substantially equivalent effects on a nation's volume of exports and imports?

Correct AnswerverifiedShow Answer

If a U.S.importer can purchase 10,000 British pounds for $20,000,the rate of exchange is:

Correct AnswerverifiedShow Answer

Appreciation of the Canadian dollar will:

Correct AnswerverifiedShow Answer

In 2012,the capital and financial account in the U.S.balance of payments was in:

Correct AnswerverifiedShow Answer

Under a system of freely floating exchange rates,an increase in the international value of a nation's currency will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In considering euros and dollars,the rates of exchange for the euro and the dollar:

Correct AnswerverifiedShow Answer

Firms engaged in international trade can reduce exchange-rate risk by:

Correct AnswerverifiedShow Answer

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

With which of the following countries does the United States have its largest goods and services deficit?

Correct AnswerverifiedShow Answer

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