Econ 101 Chapter 39 Multiple Choice & T/F

The statement that "the yen has fallen against the dollar" means that the yen has weakened and has become less valuable relative to the dollar. T/F?

TRUE

If the dollar price of one yen is $.04, a Japanese good priced at 560 yen would cost an American: A. $22.40. B. $2,240. C. $14,000. D. $2.40.

A. $22.40.

On Nov. 1, a French firm bought machinery from an U.S. co. for 800,000 euros when the exchange rate was $0.83. When preparing financial statements on Dec. 31, assuming the rate for Euros was $0.88, what amount of gain or loss should the U.S. co. report? A. $40,000 gain. B. $40,000 loss. C. $19,000 gain. D. No gain or loss would be reported.

A. $40,000 gain. €800,000 x ($0.88 - $0.83) = $40,000 gain

The number of dollars equivalent to 5,250,000 on this date is: A. $40,110.00. B. $687,172.50. C. $87,225.50. D. Depends upon whether the item is a receivable or a payable.

A. $40,110.00. 5,250,000 yen / 130.89 yen = $40,110 or 5,250,000 yen x $0.00764 = $40,110

In a recent report, the exchange rate between the dollar and the British pound was quoted: Exchange rate in dollars = $1.60 for 1 pound Exchange rate in pounds = .625 pounds for 1 dollar The number of pounds equal to $50,000 on this date is: A. 31,250. B. 80,000. C. 32,500. D. Depends upon whether the item is a receivable or a payable.

A. 31,250. $50,000 /$1.60 = 31,250 pounds or $50,000 x 0.625 pounds = 31,250 pounds

The largest goods exported by the United States (in dollar volume) are: A. Consumer durables, agricultural products, chemicals, and aircraft. B. petroleum, automobiles, clothing, and household appliances. C. iron and steel, clothing, beef, and sugar. D. aircraft, glassware, television sets, and furniture.

A. Consumer durables, agricultural products, chemicals, and aircraft.

In terms of absolute dollar volume, the world's leading export nations are: A. Germany, the United States, and China. B. the United States, Japan, and Canada. C. Japan, China, and the United Kingdom. D. Japan, the United States, and France.

A. Germany, the United States, and China.

Global competition: A. forces domestic producers to become more efficient and to improve product quality. B. drives up prices worldwide. C. reduces employment worldwide. D. creates higher flows of international migration than without trade.

A. forces domestic producers to become more efficient and to improve product quality.

Depreciation of the U.S. dollar (weakening of the U.S. dollar) will: A. increase the prices of U.S. imports because it will take more dollars to buy goods. B. decrease the prices of U.S. imports because it will take less dollars to buy goods. C. increase the prices of both U.S. imports and exports. D. decrease the prices of both U.S. imports and exports.

A. increase the prices of U.S. imports because it will take more dollars to buy goods.

The terms of trade: A. show the ratio at which nations will exchange two goods. B. show how the gains from trade can be equally shared. C. show the value of one nation's currency in terms of another nation's currency. D. compare the volume of a nation's exports and imports.

A. show the ratio at which nations will exchange two goods.

The world's largest importer (measured in total dollar volume) is: A. the United States. B. China. C. Japan. D. Germany.

A. the United States.

If the exchange rate changes from $1 = 2 euros to $1 = 3 euros: A. the dollar has appreciated in value. B. the dollar has depreciated in value. C. the dollar has neither appreciated nor depreciated, but the euro has appreciated in value. D. U.S. exports to Europe will increase.

A. the dollar has appreciated in value.

The primary benefits of international trade include: A. the more efficient use of world resources and higher living standards. B. greater stability of domestic output, employment, and the price level. C. diminished dependence on foreign supplies of goods and materials. D. greater economic security for our domestic producers.

A. the more efficient use of world resources and higher living standards.

The number of dollars equivalent to 50,000 pounds on this date is: A. $31,250. B. $80,000. C. 32,500. pounds D. Depends upon whether the item is a receivable or a payable.

B. $80,000. 50,000 pounds x $1.60 = $80,000 or 50,000 pounds / 0.625 pounds = $80,000

In a recent report, the exchange rate between the dollar and the Japanese yen was quoted: Exchange rate in dollars = $0.00764 for 1 yen Exchange rate in yen = 130.89 yen for 1 dollar 31. The number of Japanese yen equivalent to $40,000 on this date is: (rounded to whole $$) A. 3,056,000 yen. B. 5,235,602 yen. C. 5,245,745 yen. D. Depends upon whether the item is a receivable or a payable.

B. 5,235,602 yen. $40,000 ´ 130.89 yen = 5,235,602 yen or $40,000 / $0.00764 = 5,235,602 yen

The United States' most important trading partner in terms of dollar volume is: A. Mexico. B. Canada. C. Germany. D. China.

B. Canada.

The world's largest exporter (measured in total dollar volume) is: A. the United States. B. China. C. Japan. D. Germany.

B. China.

The largest goods imported by the United States (in dollar volume) are: A. chemicals, consumer durables, aircraft, and grain. B. Computers, automobiles, metals, and petroleum. C. iron and steel, clothing, electronic equipment, and sugar. D. aircraft, paper products, television sets, and furniture.

B. Computers, automobiles, metals, and petroleum.

If yesterday $1 bought 800 South Korean won, but today $1 buys 790 won; the: A. dollar has appreciated in value. B. dollar has depreciated in value. C. demand for dollars in the foreign exchange market has increased relative to the supply of won. D. won price of dollars has gone up.

B. dollar has depreciated in value.

In recent years, the United States has: A. exported more goods and services than it has imported. B. imported more goods and services than it has exported. C. realized an approximate balance in its imports and exports. D. experienced a falling absolute dollar amount of imports and a rising absolute dollar amount of exports.

B. imported more goods and services than it has exported.

A trade deficit occurs for a nation when it: A. exports more than it imports. B. imports more than it exports. C. receives more foreign currency than it sends out in domestic currency. D. loans out U.S. dollars to foreign buyers of domestically produced goods.

B. imports more than it exports.

Appreciation of the Mexican peso (strengthening of the Mexican peso) will: A. make Mexico's exports and imports both more expensive. B. make Mexico's exports more expensive and its imports less expensive. C. make Mexico's exports less expensive and its imports more expensive. D. increase Mexican exports.

B. make Mexico's exports more expensive and its imports less expensive.

Exchange rates are particularly important because: A. they present a challenge to financial speculators. B. they link the price levels of various nations to one another. C. they represent exceptions to the laws of demand and supply. D. equilibrium is never achieved in such markets.

B. they link the price levels of various nations to one another.

The United States' exports are approximately what percentage of U.S. GDP? A. 3-4 percent. B. 20-25 percent. C. 14-17 percent. D. 30-34 percent.

C. 14-17 percent.

Which of the following concepts provides the basic rationale for international trade? A. Increasing opportunity costs. B. Consumer sovereignty. C. Comparative advantage. D. The law of supply.

C. Comparative advantage.

All else equal, weakening of the Mexican peso relative to the U.S. dollar makes a trip by: A. an American to Mexico more expensive. B. a Mexican to the United States less expensive. C. an American to Mexico less expensive. D. an Australian to the United States more expensive.

C. an American to Mexico less expensive.

A change in the dollar price of yen from $1 = 100 yen to $1 = 50 yen will: A. make U.S. goods more expensive to the Japanese. B. make Japanese goods less expensive to Americans. C. increase U.S. exports and depress Japanese exports. D. increase Japanese exports and depress U.S. exports.

C. increase U.S. exports and depress Japanese exports.

The concept of comparative advantage says a good should be produced in that nation where: A. its domestic opportunity cost is greatest. B. money is used as a medium of exchange. C. its domestic opportunity cost is least. D. the terms of trade are maximized.

C. its domestic opportunity cost is least.

If incomes rise rapidly in the United States, and U.S. preferences for foreign goods strengthen, we would expect: A. the dollar to appreciate in value. B. the dollar to depreciate in value. C. the dollar price of foreign monies to decrease. D. U.S. exports to increase.

C. the dollar price of foreign monies to decrease.

Which of the following businesses (individuals) would benefit most from a strong U.S. dollar? A. A small store that sells American-made cameras in St. Louis, Missouri. The store has no foreign receivables or payables. B. The Cancun, Mexico, outlet for Levi's jeans (made in the U.S.) C. International Harvester (an American manufacturer of farming machinery that sells equipment to foreign customers.) D. An American tourist visiting France.

D. An American tourist visiting France.

Which country is the world's top trading nation in terms of total trade volume? A. Chile. B. India. C. Ireland. D. China.

D. China.

If the exchange rate changes so that it takes more dollars to buy a British pound, then: A. the dollar has appreciated in value. B. Americans will import more British goods. C. the British will buy fewer U.S. goods. D. the dollar has depreciated in value.

D. the dollar has depreciated in value.

If the Japanese yen appreciates relative to the Swedish krona, then the krona: A. will be more expensive to the Japanese. B. may either appreciate or depreciate relative to the yen. C. will appreciate relative to the yen. D. will depreciate relative to the yen.

D. will depreciate relative to the yen.

A dollar that is stronger than the British pound would make travel to the United States more attractive to British citizens. T/F?

FALSE

As foreign exchange rates fall, importers in the U.S. will lose. T/F?

FALSE

Having a liability that is fixed in terms of a foreign currency results in a loss for the debtor if the exchange rate falls between the transaction date and the payment date. T/F?

FALSE

Hedging refers to the strategy of taking offsetting positions so that gains in one currency offset losses in another currency. T/F?

FALSE

In a planned economy, ownership of land and the means of production are private and markets dictate the allocation of resources and the output among segments of the economy. T/F?

FALSE

When the dollar price of yen rises (it costs more dollars to buy a yen), the dollar appreciates in value relative to the yen. T/F?

FALSE

Whenever an American corporation sells merchandise to a foreign company, the transaction must be stipulated in U.S. dollars. T/F?

FALSE

A company has a "hedged position" when it has similar amounts of accounts receivable and accounts payable in that same foreign currency. T/F?

TRUE

A wholly owned international subsidiary exists when a company owns 100% of the equity in a U.S. foreign subsidiary. T/F?

TRUE

An American corporation making purchases from foreign companies will experience gains and losses from exchange rate fluctuations if (a) the purchase prices are stated in terms of the foreign currency and (b) the purchases are made on account. T/F?

TRUE

An exchange rate represents the price of one currency stated in terms of another. T/F?

TRUE

An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss. T/F?

TRUE

An international joint venture involves the creation of a new company that is owned by two or more firms from different countries. T/F?

TRUE

Differences in accounting practices among countries reflect the different sources of capital in those countries. T/F?

TRUE

Future contracts are used by companies to hedge against losses in foreign currencies. T/F?

TRUE