Question 1

A deficit on the current account:

Accepted Answer

A)   normally causes a surplus on the capital account.
B)   normally causes a deficit on the capital account.
C)   has no relationship to the capital account.
D)   means that a nation is not making any international transfers.E) A) and B)
F) A) and C)

Question 2

The expectations of speculators in Canada 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.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following will directly affect Canada's balance on goods and services,but not affect its balance of trade?

Accepted Answer

A)   an increase in merchandise exports
B)   a decrease in exports of services
C)   an increase in official reserves
D)   an increase in net transfersE) None of the above
F) A) and C)

Question 4

The Canadian demand for pounds is:

Accepted Answer

A)   downward sloping because a higher dollar price of pounds means British goods are cheaper to Canadians.
B)   downward sloping because a lower dollar price of pounds means British goods are more expensive to Canadians.
C)   upsloping because a lower dollar price of pounds means British goods are cheaper to Canadians.
D)   downward sloping because a lower dollar price of pounds means British goods are cheaper to Canadians.E) All of the above
F) A) and C)

Question 5

Which of the following lists of exchange rates is arranged in proper historical order?

Accepted Answer

A)   Bretton Woods system,gold standard,managed float
B)   gold standard,managed float,Bretton Woods system
C)   managed float,Bretton Woods system,gold standard
D)   gold standard,Bretton Woods system,managed floatE) All of the above
F) A) and D)

Question 6

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars.
 
-A nation's balance on the current account is equal to its exports less its imports of:

Accepted Answer

A)   goods and services.
B)   goods and services,minus Canadian purchases of assets abroad.
C)   goods and services,plus net investment income and net transfers.
D)   goods and services,plus foreign purchases of assets in Canada.E) A) and B)
F) A) and C)

Question 7

Which of the following countries is a G-8 nation?

Accepted Answer

A)   China
B)   Brazil
C)   Italy
D)   KoreaE) A) and D)
F) None of the above

Question 8

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella.All figures are in billions of dollars.
Current Account:
 
-Refer to the above data.Zabella's balance on goods and services shows a:

Accepted Answer

A)   $5 billion deficit.
B)   $5 billion surplus.
C)   $10 billion surplus.
D)   $15 billion deficit.E) None of the above
F) B) and D)

Question 9

The Canadian demand for Swiss francs is:

Accepted Answer

A)   downward sloping because,at lower dollar prices for francs,Canadians will want to buy more Swiss goods and services.
B)   downward sloping because,at higher dollar prices for francs,Canadians will want to buy more Swiss goods and services.
C)   downward sloping because the dollar price of francs and the franc price of dollars are directly related.
D)   upward sloping because a higher dollar price of Swiss francs makes Swiss goods and services more attractive to Canadians.E) A) and D)
F) A) and B)

Question 10

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was
$1 = 220 yen,and in 2012 it was $1 = 100 yen.
-Refer to the above information.Which one of the following might be a plausible explanation for the change in the dollar-yen exchange rate cited in the previous question?

Accepted Answer

A)   Japan exported far more to Canada during this period than it imported from Canada.
B)   Japan greatly increased its purchases from Canada during this period.
C)   Japan's economy grew far faster than the Canadian economy during this period.
D)   Japan's government devalued the yen during this period.E) A) and B)
F) None of the above

Question 11

Critics of the managed floating exchange rate system argue that it:

Accepted Answer

A)   is dominated by G-8 nations.
B)   is a "non-system" with unclear rules.
C)   increased the growth in world trade at too fast a rate.
D)   puts too much reliance on the adjustable-peg mechanism for stabilizing exchange rates.E) A) and D)
F) None of the above

Question 12

In considering pounds and dollars,when the dollar rate of exchange for the British pound rises:

Accepted Answer

A)   the pound rate of exchange for the dollar will fall.
B)   the pound rate of exchange for the dollar will also rise.
C)   the pound rate of exchange for the dollar may either fall or rise.
D)   Canadian net exports to Britain will tend to fall.E) A) and B)
F) A) and C)

Question 13

The sum of a nation's current account balance and its capital account balance in any year is always equal to zero.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was
$1 = 220 yen,and in 2012 it was $1 = 100 yen.
-Refer to the above information.Between 2002 and 2012 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) A) and D)
F) A) and C)

Question 15

Which one of the following,other things equal,will directly alter Canada's balance of trade?

Accepted Answer

A)   an increase in official international reserves
B)   a decrease in merchandise exports
C)   an increase in net transfers
D)   a decrease in capital outflowsE) B) and C)
F) B) and D)

Question 16

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars.
 
-Which one of the following will not directly affect Canada's balance on current account?

Accepted Answer

A)   an increase in merchandise imports
B)   an increase in capital outflows from Canada
C)   a decrease in net investment income
D)   an increase in imports of servicesE) B) and C)
F) C) and D)

Question 17

Under freely flexible (floating)exchange rates,if the dollar price of pounds rises,the pound price of dollars will fall.

Accepted Answer

A) True 
 B)False

Question 18

The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars.
 
-Refer to the above data.In 2008 Transylvania was a net recipient of transfers from the rest of the world.

Accepted Answer

A) True 
 B)False

Question 19

The idea that flexible exchange rates equate the purchasing power of national currencies is called the:

Accepted Answer

A)   equation of exchange.
B)   balance of payments.
C)   gold standard.
D)   purchasing power parity theory.E) A) and B)
F) A) and C)

Question 20

The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars.
 
-Refer to the above data.In 2008 foreigners made a smaller volume of investments in Transylvania than Transylvanians invested abroad.

Accepted Answer

A) True 
 B)False

Exam 18: Exchange Rates and the Balance of Payments

The sum of a nation's current account balance and its capital account balance in any year is always equal to zero.

Correct Answer
verified

Critics of the managed floating exchange rate system argue that it:

Correct Answer
verified

The expectations of speculators in Canada 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.

Correct Answer
verified

Which of the following lists of exchange rates is arranged in proper historical order?

Correct Answer
verified

The idea that flexible exchange rates equate the purchasing power of national currencies is called the:

Correct Answer
verified

In considering pounds and dollars,when the dollar rate of exchange for the British pound rises:

Correct Answer
verified

Which one of the following,other things equal,will directly alter Canada's balance of trade?

Correct Answer
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Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was $1 = 220 yen,and in 2012 it was $1 = 100 yen. -Refer to the above information.Between 2002 and 2012 the:

Correct Answer
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The Canadian demand for pounds is:

Correct Answer
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The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. -Refer to the above data.In 2008 foreigners made a smaller volume of investments in Transylvania than Transylvanians invested abroad.

Correct Answer
verified

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella.All figures are in billions of dollars. Current Account: -Refer to the above data.Zabella's balance on goods and services shows a:

Correct Answer
verified

Which one of the following will directly affect Canada's balance on goods and services,but not affect its balance of trade?

Correct Answer
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Correct Answer
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Which of the following countries is a G-8 nation?

Correct Answer
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Under freely flexible (floating)exchange rates,if the dollar price of pounds rises,the pound price of dollars will fall.

Correct Answer
verified

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. -A nation's balance on the current account is equal to its exports less its imports of:

Correct Answer
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A deficit on the current account:

Correct Answer
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The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. -Refer to the above data.In 2008 Transylvania was a net recipient of transfers from the rest of the world.

Correct Answer
verified

The Canadian demand for Swiss francs is:

Correct Answer
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The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. -Which one of the following will not directly affect Canada's balance on current account?

Correct Answer
verified

Exam 18: Exchange Rates and the Balance of Payments

The sum of a nation's current account balance and its capital account balance in any year is always equal to zero.

Correct AnswerverifiedShow Answer

Critics of the managed floating exchange rate system argue that it:

Correct AnswerverifiedShow Answer

The expectations of speculators in Canada 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.

Correct AnswerverifiedShow Answer

Which of the following lists of exchange rates is arranged in proper historical order?

Correct AnswerverifiedShow Answer

The idea that flexible exchange rates equate the purchasing power of national currencies is called the:

Correct AnswerverifiedShow Answer

In considering pounds and dollars,when the dollar rate of exchange for the British pound rises:

Correct AnswerverifiedShow Answer

Which one of the following,other things equal,will directly alter Canada's balance of trade?

Correct AnswerverifiedShow Answer

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was $1 = 220 yen,and in 2012 it was $1 = 100 yen. -Refer to the above information.Between 2002 and 2012 the:

Correct AnswerverifiedShow Answer

The Canadian demand for pounds is:

Correct AnswerverifiedShow Answer

The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. -Refer to the above data.In 2008 foreigners made a smaller volume of investments in Transylvania than Transylvanians invested abroad.

Correct AnswerverifiedShow Answer

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella.All figures are in billions of dollars. Current Account: -Refer to the above data.Zabella's balance on goods and services shows a:

Correct AnswerverifiedShow Answer

Which one of the following will directly affect Canada's balance on goods and services,but not affect its balance of trade?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following countries is a G-8 nation?

Correct AnswerverifiedShow Answer

Under freely flexible (floating)exchange rates,if the dollar price of pounds rises,the pound price of dollars will fall.

Correct AnswerverifiedShow Answer

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. -A nation's balance on the current account is equal to its exports less its imports of:

Correct AnswerverifiedShow Answer

A deficit on the current account:

Correct AnswerverifiedShow Answer

The following table shows the 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. -Refer to the above data.In 2008 Transylvania was a net recipient of transfers from the rest of the world.

Correct AnswerverifiedShow Answer

The Canadian demand for Swiss francs is:

Correct AnswerverifiedShow Answer

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. -Which one of the following will not directly affect Canada's balance on current account?

Correct AnswerverifiedShow Answer

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