Exam Questions

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

$2 = 1 British pound in the United States

The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in billions of dollars. The United States' balance on financial account is a

$20 billion surplus

The table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of freely floating exchange rates is in place. The exchange rate is

0.25 libra for one dollar

The accompanying diagram represents a flexible exchange market for foreign currency. At the equilibrium exchange rate,

1.25 euros will buy $1

Assume the exchange rate is 1 U.S. dollar equals 1.10 Canadian dollars. If purchasing power parity is correct, a DVD that has a price of $10 in Rochester, New York, in Canada has a price of ________ Canadian dollars.

11.00

If purchasing power parity exists and the exchange rate is 1.50 U.S. dollars per British pound, then a latte that has a price of $4.00 in San Jose, California, has a price of _________ in London, England.

2.67 pounds

Which of the following has contributed to large U.S. trade deficits in recent years?

China fixing its exchange rate

Which of the following combinations is plausible, as it relates to a nation's balance of payments?

Current account = -$50 billion; capital account = +$20 billion; financial account = +$30 billion

In the U.S. balance of payments, U.S. purchases of assets abroad are a(n)

U.S. dollar outflow

According to the purchasing power parity theory of exchange rates,

a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries

Refer to the diagram, where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. A shift of the demand curve to D' might be the result of

a relative decline in interest rates in the United States

In the balance of payments of the United States, U.S. goods imports are recorded as a

current account entry

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a rightward shift of the supply curve would

appreciate the dollar

The table contains 2016 balance of payments data (+ and -) for the hypothetical nation of Zabella. All figures are in billions of dollars. Zabella's balance on financial account shows a

deficit of $10 billion

The accompanying diagram represents a flexible exchange market for foreign currency. Other things equal, a rightward shift of the demand curve would

depreciate the dollar

If today the exchange rate is 1.00 euro per dollar and tomorrow the exchange rate is .98 euros per dollar, then the dollar _____________ and the euro ______________.

depreciated; appreciated

The U.S. demand for euros is

downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

exports of services

In the U.S. balance of payments, foreign purchases of assets in the United States are a

foreign currency inflow

Suppose interest rates fall sharply in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates, we can expect the demand for pounds in the United States to

increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound

The current account section in a nation's balance of payments includes

its goods exports and imports and its services exports and imports

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation,

the Brazilian real will depreciate

"International trade" refers to

purchasing or selling currently produced goods or services across an international border

A government may be able to reduce the international value of its currency by

selling its currency in the foreign exchange market

The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in billions of dollars. The United States has a balance of goods

surplus of $20 billion

Assume that Switzerland and Britain have floating exchange rates. Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland,

the Swiss franc will depreciate

In saying that the present system of floating exchange rates is managed, we mean that

the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates

The exchange rate system currently used by the industrially advanced nations is

the managed float

The accompanying diagram represents a flexible exchange market for foreign currency. At the price $0.80 for 1 euro,

the quantity of euros demanded equals the quantity supplied

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. Between 1985 and 2003, the

yen appreciated in value relative to the dollar