Question 1

When a U.S. importer buys 100,000 pairs of pants from a Hong Kong company, this transaction will represent a:

Accepted Answer

A)   Credit on the current account of the U.S. balance of payments
B)   Debit on the current account of the U.S. balance of payments
C)   Credit on the financial account of the U.S. balance of payments
D)   Debit on the financial account of the U.S. balance of paymentsE) None of the above
F) C) and D)

Question 2

The equilibrium exchange rate between two currencies is determined by the supply and demand in the:

Accepted Answer

A)   Traded goods markets
B)   Stock exchange markets
C)   Foreign exchange markets
D)   Money marketsE) A) and D)
F) B) and C)

Question 3

Refer to the graph above. If U.S. citizens flock to Canada for summer vacations and buy more Canadian goods and services, then the:

Accepted Answer

A)   The supply curve will shift left
B)   The demand curve will shift right
C)   The price of U.S. dollars in Canadian dollars will rise
D)   The price of U.S. dollars in Canadian dollars will fallE) C) and D)
F) A) and D)

Question 4

Speculation in foreign exchange markets could be:

Accepted Answer

A)   Negative because it reduces the fluctuations in exchange rates
B)   Positive because it reduces the fluctuations in exchange rates
C)   Negative because it relies on the supply and demand for gold
D)   Positive because it relies on the supply and demand for goldE) C) and D)
F) A) and B)

Question 5

United States exports, international tourism in the United States, and foreign capital inflow into the United States all give rise to:

Accepted Answer

A)   Depreciation of the U.S. dollar
B)   A supply of foreign currencies to the United States
C)   A demand for foreign currencies in the United States
D)   Decreased foreign exchange reserves in the United StatesE) All of the above
F) B) and D)

Question 6

In one year the United States had a current account deficit of $461 billion. The balance on the capital account was -$8 billion. What was the balance on the financial account?

Accepted Answer

A)   -$461 billion
B)   +$469 billion
C)   -$469 billion
D)   +$453 billionE) A) and D)
F) A) and C)

Question 7

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Accepted Answer

A)   U.S. imports will increase more than U.S. exports
B)   U.S. exports will increase more than U.S. imports
C)   U.S. imports will decrease, but U.S. exports will increase
D)   There will be no effect on U.S. imports and exportsE) B) and D)
F) None of the above

Question 8

1 and S1 represent the initial demand and supply curves. If there is a huge increase in the desire of U.S. buyers to consume UK products, and the British government starts buying U.S. dollars in order to fix the exchange rate at the initial level, then the new equilibrium will be at point: A)  F B)  J C)  C D)  H" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above, which shows the supply and demand for British pounds. D1 and S1 represent the initial demand and supply curves. If there is a huge increase in the desire of U.S. buyers to consume UK products, and the British government starts buying U.S. dollars in order to fix the exchange rate at the initial level, then the new equilibrium will be at point:

Accepted Answer

A)   F
B)   J
C)   C
D)   HE) None of the above
F) A) and B)

Question 9

The graph below shows the supply and demand curves for dollars in the pound/dollar market. 1 and S1 are the initial demand for and supply of dollars. Suppose that Britain's demand for dollars increases from D1 to D2. If the British government wishes to fix the exchange rate at the initial level, then it would be faced with a problem of: A)  Deteriorating terms of trade B)  Rationing LM dollars among British importers who would like to acquire LN dollars C)  A rise in the pound price of dollars D)  Rationing LN dollars among British importers who would like to acquire LM dollars" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above. Assume that D1 and S1 are the initial demand for and supply of dollars. Suppose that Britain's demand for dollars increases from D1 to D2. If the British government wishes to fix the exchange rate at the initial level, then it would be faced with a problem of:

Accepted Answer

A)   Deteriorating terms of trade
B)   Rationing LM dollars among British importers who would like to acquire LN dollars
C)   A rise in the pound price of dollars
D)   Rationing LN dollars among British importers who would like to acquire LM dollarsE) All of the above
F) A) and B)

Question 10

With flexible exchange rates, an increase in U.S. interest rates can be expected to:

Accepted Answer

A)   Adversely affect U.S. exporters
B)   Encourage investment spending by U.S. firms
C)   Lower the foreign exchange value of the dollar
D)   Cause a net outflow of foreign capital from the United StatesE) None of the above
F) C) and D)

Question 11

Faster economic growth in the United States relative to other nations tends to worsen the U.S. trade deficit.

Accepted Answer

A) True 
 B)False

Question 12

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the demand-for-pounds curve is downsloping because:

Accepted Answer

A)   Fewer British pounds can be purchased if pounds become less expensive
B)   Fewer U.S. dollars can be purchased if British pounds become less expensive
C)   More U.S. dollars can be purchased if British pounds become more expensive
D)   More British pounds can be purchased if pounds become less expensiveE) B) and C)
F) A) and D)

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

With flexible exchange rates, an increase in U.S. interest rates can be expected to:

Correct Answer
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In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the demand-for-pounds curve is downsloping because:

Correct Answer
verified

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Correct Answer
verified

Faster economic growth in the United States relative to other nations tends to worsen the U.S. trade deficit.

Correct Answer
verified

The equilibrium exchange rate between two currencies is determined by the supply and demand in the:

Correct Answer
verified

Correct Answer
verified

Speculation in foreign exchange markets could be:

Correct Answer
verified

Correct Answer
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United States exports, international tourism in the United States, and foreign capital inflow into the United States all give rise to:

Correct Answer
verified

When a U.S. importer buys 100,000 pairs of pants from a Hong Kong company, this transaction will represent a:

Correct Answer
verified

In one year the United States had a current account deficit of $461 billion. The balance on the capital account was -$8 billion. What was the balance on the financial account?

Correct Answer
verified

Refer to the graph above. If U.S. citizens flock to Canada for summer vacations and buy more Canadian goods and services, then the:

Correct Answer
verified

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

With flexible exchange rates, an increase in U.S. interest rates can be expected to:

Correct AnswerverifiedShow Answer

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the demand-for-pounds curve is downsloping because:

Correct AnswerverifiedShow Answer

What are the effects on U.S. imports and exports when the U.S. experiences economic growth stronger than its major trading partners?

Correct AnswerverifiedShow Answer

Faster economic growth in the United States relative to other nations tends to worsen the U.S. trade deficit.

Correct AnswerverifiedShow Answer

The equilibrium exchange rate between two currencies is determined by the supply and demand in the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Speculation in foreign exchange markets could be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

United States exports, international tourism in the United States, and foreign capital inflow into the United States all give rise to:

Correct AnswerverifiedShow Answer

When a U.S. importer buys 100,000 pairs of pants from a Hong Kong company, this transaction will represent a:

Correct AnswerverifiedShow Answer

In one year the United States had a current account deficit of $461 billion. The balance on the capital account was -$8 billion. What was the balance on the financial account?

Correct AnswerverifiedShow Answer

Refer to the graph above. If U.S. citizens flock to Canada for summer vacations and buy more Canadian goods and services, then the:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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