Exchange Rates Exam 1
For open economies, A) S = I. B) S = I + CA. C) S = I - CA. D) S > I + CA. E) S < I + CA.
B
10) Which major actor is at the center of the foreign exchange market? A) corporations B) central banks C) commercial banks D) non-bank financial institutions E) individual firms
C
1) The covered interest rate parity condition can be stated as follows: The interest rate on dollar deposits equals the interest rate on euro deposits ________ the forward ________ on euros against dollars A) plus; premium B) minus; premium C) plus; discount D) minus; discount E) times; premium
A
13) Which one of the following statements is the MOST accurate? A) A depreciation of a country's currency makes its goods cheaper for foreigners. B) A depreciation of a country's currency makes its goods more expensive for foreigners. C) A depreciation of a country's currency makes its goods cheaper for its own residents. D) A depreciation of a country's currency makes its goods cheaper. E) An appreciation of a country's currency makes its goods more expensive.
A
14) The action of arbitrage is A) the process of buying a currency cheap and selling it dear. B) the process of buying a currency dear and selling it cheap. C) the process of buying and selling currency at the same price. D) the process of selling currency at different prices in different markets. E) the process of buying a currency and holding onto it to take it off the market.
A
15) If the goods' money prices do NOT change, an appreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) doesn't change the relative price of sweaters and jeans. D) makes American jeans cheaper in terms of British sweaters. E) makes British jeans more expensive in Britain.
A
2) What is the expected dollar rate of return on dollar deposits if today's exchange rate is $1.10 per euro, next year's expected exchange rate is $1.165 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0% E) 15%
A
2) Which one of the following statements is the MOST accurate? A) For a fixed interest rate, a rise in the expected future exchange rate causes a rise in the current exchange rate. B) For a fixed interest rate, a rise in the expected future exchange rate causes a fall in the current exchange rate. C) For a fixed interest rate, a rise in the expected future exchange rate does not cause a change in the current exchange rate. D) For a given dollar interest rate and a constant expected exchange rate, a rise in the interest rate of the euro causes the dollar to depreciate. E) For a fixed interest rate, a fall in the expected future exchange rate causes a rise in the current exchange rate.
A
3) The future date on which the currencies are actually exchanged is called what? A) the value date B) the spot exchange date C) the two-day window D) the commitment date E) the forward exchange rate
A
4) The dollar rate of return on euro deposits is A) approximately the euro interest rate plus the rate of depreciation of the dollar against the euro. B) approximately the euro interest rate minus the rate of depreciation of the dollar against the euro. C) the euro interest rate minus the rate of inflation against the euro. D) the rate of appreciation of the dollar against the euro. E) the euro interest rate plus the rate of inflation against the euro.
A
7) How many British pounds would it cost to buy a pair of American designer jeans costing $45 if the exchange rate is 2.00 dollars per British pound? A) 22.5 British pounds B) 32.5 British pounds C) 12.5 British pounds D) 40 British pounds E) 30 British pounds
A
8) The following is an example of Radio Shack hedging its foreign currency risk: A) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to buy yen. B) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to sell yen. C) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack buys yen at a spot-exchange 1 month from now. D) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen at a spot-exchange 1 month from now. E) needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen in a forward-exchange deal.
A
9) If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, then A) an investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. B) an investor should invest only in euros. An investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. C) an investor should be indifferent between dollars and euros. An investor should invest only in dollars if the expected dollar appreciation against the euro is 4 percent. D) an investor should invest only in dollars. E) an investor should invest only in euros.
A
A U.S. citizen buys a newly issued share of stock in England, paying for his order with a check, which the British company deposits in its own U.S. bank account in New York. How is this transaction accounted for in the balance of payments? A) financial account, U.S. asset import B) current account, U.S. service import C) current account, British good export D) financial account, British asset import E) financial account, U.S. asset export
A
A country's current account A) balance equals the change in its net foreign wealth. B) balance equals the change in its foreign wealth. C) surplus equals the change in its foreign wealth. D) deficit equals the change in its foreign wealth. E) balance equals its GNP.
A
A country's gross national product (GNP) is A) the value of all final goods and services produced by its factors of production and sold on the market in a given time period. B) the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period. C) the value of all final goods produced by its factors of production and sold on the market in a given time period. D) the value of all final goods and services produced by its factors of production and sold on the market. E) the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period.
A
GDP is supposed to measure A) the volume of production within a country's borders. B) the volume of services generated within a country's borders. C) the volume of production of a country's output. D) GNP plus depreciation. E) net unilateral transfers from foreigners.
A
Government purchases currently take up about A) 17 percent of U.S. GNP, and this share has not changed much since the late 1950s. B) 38 percent of U.S. GNP, and this share has not changed much since the late 1950s. C) 18 percent of U.S. GNP, and this share has been increasing since the late 1950s. D) 18 percent of U.S. GNP, and this share has been decreasing since the late 1950s. E) 25 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
A
Government savings, , is equal to A) T - G. B) T + G. C) T = G. D) T + G - I. E) T - G = I.
A
How do we allocate statistical discrepancy among the current, capital, and financial accounts? A) We have no way of knowing exactly how to allocate this discrepancy. B) Depend on the degree of certainty which we attribute to these accounts. C) Divide it evenly amongst the three accounts. D) Depend on the convention adopted by the specific financial institution. E) Statistical discrepancy signals human errors made when dealing with financial accounts.
A
In an open economy, the CA is equal to A) Y - (C + I + G). B) Y + (C + I + G). C) Y - (C - I + G). D) Y - (C + I - G). E) Y + (C - I - G).
A
Investment is usually A) more variable than consumption. B) less variable than consumption. C) as variable as consumption. D) a larger component of the GNP than consumption. E) It is hard to tell from the data whether investment is more or less variable than consumption.
A
The official settlements balance or balance of payments is the sum of A) the current account balance, and the capital account balance, less the non-reserve portion of the financial account balance. B) the current account balance and the capital account balance. C) the current account balance, the capital account balance, the non-reserve portion of the financial account balance, the statistical discrepancy. D) the current account balance and the non-reserve portion of the financial account balance. E) the current account balance and the interest in all investments.
A
Which one of the following expressions is the MOST accurate? A) CA = EX - IM B) CA = IM - EX C) CA = EX = IM D) CA = EX + IM E) CA - IM = EX
A
2) Suppose that the one-year forward price of euros in terms of dollars is equal to $1.113 per euro. Further, assume that the spot exchange rate is $1.05 per euro, and the interest rate on dollar deposits is 10 percent and on euro it is 4 percent. Under these assumptions A) interest parity does not hold. B) interest parity does hold. C) it is hard to tell whether interest parity does or does not hold. D) interest parity fluctuates. E) Not enough information is given to answer the question.
B
1) The largest trading of foreign exchange occurs in A) New York. B) London. C) Tokyo. D) Frankfurt. E) Singapore.
B
1) What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.10 per euro, next year's expected exchange rate is $1.165 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0% E) 15%
B
1) Which one of the following statements is the MOST accurate? A) Since dollar and yen interest rates are measured in comparable terms, they can move quite differently over time. B) Since dollar and yen interest rates are not measured in comparable terms, they can move quite differently over time. C) Since dollar and yen interest rates are measured in comparable terms, they move quite the same over time. D) Since dollar and yen interest rates are measured in comparable terms, they still move quite differently over time. E) Since dollar and yen interest rates are so similar, they move quite the same way over time.
B
13) Which of the following statements is TRUE about a vehicle currency? A) It is widely used to denominate contracts made by parties who reside in the country that issues the vehicle currency. B) The dollar is sometimes called a vehicle currency because of its pivotal role in many foreign exchange deals. C) There is much skepticism that the euro will ever evolve into a vehicle currency on par with the dollar. D) The pound sterling, once second only to the dollar as a key international currency, is beginning to rise in importance. E) Vehicle currencies include nondeliverable currencies like the renminbi.
B
16) If the goods' money prices do NOT change, a depreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) makes American jeans more expensive in terms of British sweaters. D) doesn't change the relative price of sweaters and jeans. E) makes British jeans more expensive in Britain.
B
3) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.80 dollars per one British pound? A) 40 dollars B) 90 dollars C) 50 dollars D) 100 dollars E) 95 dollars
B
4) The Japanese currency is called the A) DM. B) Yen. C) Euro. D) Dollar. E) Pound.
B
6) How many British pounds would it cost to buy a pair of American designer jeans costing $45 if the exchange rate is 1.80 dollars per British pound? A) 10 British pounds B) 25 British pounds C) 20 British pounds D) 30 British pounds E) 40 British pounds
B
7) Which one of the following statements is the MOST accurate? A) The sale of a used textbook does generate income for factors of production. B) The sale of a used textbook does not generate income for any factor of production. C) The sale of a used textbook sometimes does and sometimes does not generate income for factors of production. D) It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production. E) The sale of a used textbook is a part of the GNP.
B
8) How many British pounds would it cost to buy a pair of American designer jeans costing $45 if the exchange rate is 1.60 dollars per British pound? A) 38.125 British pounds B) 28.125 British pounds C) 48.125 British pounds D) 58.125 British pounds E) 18.125 British pounds
B
8) If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then A) an investor should invest only in dollars if the expected dollar depreciation against the euro is 8 percent. B) an investor should invest only in euros if the expected dollar depreciation against the euro is 8 percent. C) an investor should be indifferent between dollars and euros if the expected dollar depreciation against the euro is 8 percent. D) an investor should invest only in dollars. E) an investor should invest only in euros.
B
9) What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 Pounds in London? A) 1.5 dollars per British pound B) 0.5 dollars per British pound C) 2.5 dollars per British pound D) 3.5 dollars per British pound E) 2 dollars per British pound
B
9) Which of the following is NOT an example of a financial derivative? A) forwards B) bonds C) swaps D) futures E) options
B
A closed economy A) can save either by building up its capital stock or by acquiring foreign wealth. B) can save only by building up its capital stock. C) can save only by acquiring foreign wealth. D) cannot save either by building up its capital stock or by acquiring foreign wealth. E) can save by avoiding excessive imports.
B
Every international transaction automatically enters the balance of payments A) once either as a credit or as a debit. B) twice, once as a credit and once as a debit. C) once as a credit. D) twice, both times as debit. E) three times, once as a credit, once as a debit, and once as an exchange.
B
Government transfer payments like social security and unemployment benefits are A) included in government purchases. B) not included in government purchases. C) not included in government purchases, but they are included in the consumption component of GNP. D) not included in government purchases, but they are part of the investment component of GNP. E) included in government purchases but not in the GNP.
B
In 1929, government purchases accounted for A) only 18.5 percent of U.S. GNP. B) only 8.5 percent of U.S. GNP. C) 28.5 percent of U.S. GNP. D) 38.5 percent of U.S. GNP. E) 48.5 percent of U.S. GNP.
B
In a closed economy, national saving A) sometimes equals investment. B) always equals investment. C) is always less than investment. D) is always more than investment. E) is never equal to investment.
B
In a closed economy, private saving, Sp, is equal to A) I - (G - T). B) I + (G - T). C) I + (G + T). D) I - (G + T). E) I + (G - T) + C.
B
In the United States, (gross) investment has fluctuated between ________ of GNP in recent years. A) 2 and 12 percent B) 11 and 22 percent C) 22 and 32 percent D) 32 and 42 percent E) 42 and 52 percent
B
Movements in GDP A) differ greatly from movements in GNP. B) do not differ greatly from movements in GNP. C) are not allowed to differ at all from movements in GNP by definition. D) need to be inflation adjusted in order to match movements in GNP. E) are not relevant to an examination of national income.
B
Purchases of inventories by A) firms are not counted in investment spending. B) firms are also counted in investment spending. C) households are also counted in investment spending. D) households and Firms are also counted in investment spending. E) foreign consumers are counter in investment spending.
B
The position of the United States current account balance in 2015 was A) lent roughly 6 percent of its GNP, resulting in a large current account surplus. B) borrowed roughly 3 percent of its GNP, leading to a large current account deficit. C) achieved a currant account balance of zero. D) borrowed roughly 10 percent of its GNP, leading to a large current account deficit. E) borrowed less then 5 percent of its GNP, leading to a large current account surplus.
B
Which one of the following statements is the MOST accurate? A) GNP plus depreciation is called net national product (NNP). B) GNP less depreciation is called net national product (NNP). C) GNP less depreciation is called net factor product (NFP). D) GDP plus depreciation is called net national product (NNP). E) GDP less depreciation is called net national product (NNP).
B
12) By April 2013 A) only about 10 percent of foreign exchange trades were against euros. B) only about 24 percent of foreign exchange trades were against euros. C) only about 33 percent of foreign exchange trades were against euros. D) only about 42 percent of foreign exchange trades were against euros. E) only about 60 percent of foreign exchange trades were against euros.
C
14) A(n) ________ of a nation's currency will cause imports to ________ and exports to ________, all other things held constant. A) depreciation; increase; decrease B) appreciation; decrease; increase C) depreciation; decrease; increase D) appreciation; increase; increase E) depreciation; decrease; decrease
C
15) Futures contracts differ from forward contracts in that A) future contracts ensures you will receive a certain amount of foreign currency at a specified future date. B) future contracts bind you into your end of the deal. C) future contracts allow you to sell your contract on an organized futures exchange. D) future contracts are a disadvantage if your views about the future spot exchange rate are to change. E) futures contracts don't allow you to realize a profit or a loss right away.
C
2) Which of the following type of funds cater to wealthy individuals, are NOT bound by government regulations, and are actively traded in foreign exchange markets? A) pension funds B) mutual funds C) hedge funds D) exchange funds
C
3) What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.167 per euro, next year's expected exchange rate is $1.10 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0%
C
5) How many British pounds would it cost to buy a pair of American designer jeans costing $45 if the exchange rate is 1.50 dollars per British pound? A) 10 British pounds B) 20 British pounds C) 30 British pounds D) 35 British pounds E) 25 British pounds
C
6) The sale of A) a used textbook does enter GNP. B) a used textbook does not enter GNP, but the sale of a used house does. C) both a used textbook and a used house do not enter GNP. D) a used house does not enter GNP, but the sale of a used book does. E) the GNP does not include sale of used items priced below $1000.
C
7) A foreign exchange swap A) is a spot sale of a currency. B) is a forward repurchase of the currency. C) is a spot sale of a currency combined with a forward repurchase of the currency. D) is a spot sale of a currency combined with a forward sale of the currency. E) make up a negligible proportion of all foreign exchange trading.
C
7) If the dollar interest rate is 10 percent, the euro interest rate is 6 percent, then A) an investor should invest only in dollars if the expected dollar depreciation against the euro is 4 percent. B) an investor should invest only in euros if the expected dollar depreciation against the euro is 4 percent. C) an investor should be indifferent between dollars and euros if the expected dollar depreciation against the euro is 4 percent. D) an investor should invest only in dollars. E) an investor should invest only in euros.
C
GDP is different than GNP in that A) it accounts for net unilateral transfers. B) it does not account for indirect business taxes. C) it does not account for a country's production using services with foreign-owned capital. D) it accounts for depreciation. E) it is unhelpful when tracking national income.
C
In 2015, the United States had A) a surplus in the current account. B) a balance in the current account. C) a deficit in the current account. D) a positive balance of net financial flows. E) From 2015 data, it is too difficult to determine whether a surplus or a deficit existed in the current account.
C
In an open economy, private saving, Sp, is equal to A) I - CA + (G - T). B) I + CA - (G - T). C) I + CA + (G - T). D) I - CA - (G - T). E) I + CA + (G + T).
C
In open economies A) saving and investment are necessarily equal. B) as in a closed economy, saving and investment are not necessarily equal. C) saving and investment are not necessarily equal as they are in a closed economy. D) saving and investment are necessarily equal contrary to the case of a closed economy. E) investment always refers to the domestic stock market.
C
Over the 1980s A) there is no question that a large increase in U.S. foreign assets did occur. B) there is a question whether a large decrease in U.S. foreign assets did occur. C) there is no question that a large decrease in U.S. foreign assets did occur. D) there is no question that there was almost no change in U.S. foreign assets. E) there is no question that rising exports exceeded U.S. foreign debt.
C
The German government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy French currency from its citizens. How is this accounted for in the balance of payments? A) current account, French good export B) current account, German good import C) financial account, French asset export D) financial account, German asset export E) financial account, German asset import
C
The services British capital provides in Spain are a service export from Britain A) therefore they are subtracted from British GDP in calculating British GNP. B) therefore they are added to Spanish GDP in calculating Spanish GDP. C) therefore they are added to British GDP in calculating British GNP. D) therefore they are added to Spanish GNP in calculating Spanish GDP. E) therefore they are subtracted from Spanish GNP.
C
Which of the following is TRUE about current cost method and market value method? A) They are used by the BEA to place current values on foreign indirect investments. B) These methods lead to the same valuations. C) Based on the current cost method, the BEA's 2015 estimate of U.S. net foreign wealth was -$7,280.6 billion. D) The market value cost method is preferred by the BEA. E) Foreign direct investments of the U.S. are valued at their original purchase price.
C
You travel to Paris and pay for a $100 dinner with your credit card. How is this accounted for in the balance of payments? A) current account, French service import B) current account, U.S. good export C) financial account, U.S. asset export D) financial account, U.S. asset import E) financial account, French asset export
C
1) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound? A) 50 dollars B) 60 dollars C) 70 dollars D) 62.5 dollars E) 40 British pounds
D
1) Which one of the following statements is the MOST accurate? A) A rise in the interest rate offered by dollar deposits causes the dollar to appreciate. B) A rise in the interest rate offered by dollar deposits causes the dollar to depreciate. C) A rise in the interest rate offered by dollar deposits does not affect the U.S. dollar. D) For a given euro interest rate and constant expected exchange rate, a rise in the interest rate offered by dollar deposits causes the dollar to appreciate. E) A rise in the interest rate offered by the dollar causes the euro to appreciate.
D
12) An appreciation of a country's currency A) decreases the relative price of its exports and lowers the relative price of its imports. B) raises the relative price of its exports and raises the relative price of its imports. C) lowers the relative price of its exports and raises the relative price of its imports. D) raises the relative price of its exports and lowers the relative price of its imports. E) raises the relative price of its exports and does not affect the relative price of its imports.
D
16) Exxon Mobil wants to pay 160,000 euros to a German supplier. They get an exchange rate quotation from its own commercial bank and instructs it to debit their dollar account and pay 160,000 euros to the supplier's German account. If the exchange rate quoted is $1.2 per euro, how much is debited to Exxon Mobil's account? A) $160,000 B) $172,000 C) $180,000 D) $192,000 E) $150,000
D
4) The largest component of GNP is A) the current account. B) investment. C) government purchases. D) consumption. E) trade.
D
5) If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should A) invest only in dollars. B) invest only in euros. C) be indifferent between dollars and euros. D) invest only in dollars if the exchange rate is expected to remain constant. E) invest only in euros if the exchange rate is expected to remain constant.
D
5) Which one of the following statements is the MOST accurate? A) Spot exchange rates are always higher than forward exchange rates. B) Spot exchange rates are always lower than forward exchange rates. C) Spot exchange rates and forward exchange rates are always equal. D) Spot exchange rates and forward exchange rates are equal when the value date and the date of the spot transaction are the same. E) Spot exchange rates and forward exchange rates never move closely together.
D
6) Forward and spot exchange rates A) are necessarily equal. B) do not move closely together. C) are always such that the forward exchange rate is higher. D) move closely together and are equal on the value date. E) are unrelated to the value date.
D
An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is A) earnings of a Spanish factory with British owners counts only in Spain's GDP. B) earnings of a Spanish factory with British owners counts only in Britain's GNP. C) earnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP. D) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP. E) earnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.
D
An open economy A) can save only by building up its capital stock. B) can save only by acquiring foreign wealth. C) cannot save either by building up its capital stock or by acquiring foreign wealth. D) can save either by building up its capital stock or by acquiring foreign wealth. E) can save by avoiding excessive imports.
D
GNP equals GDP A) minus net receipts of factor income from the rest of the world. B) plus receipts of factor income from the rest of the world. C) minus receipts of factor income from the rest of the world. D) plus net receipts of factor income from the rest of the world. E) minus depreciation.
D
Government purchases are defined as A) only goods purchased by federal, state, or local governments. B) all goods and services purchased by the federal government. C) all goods and services purchased by the federal or state government. D) all goods and services purchased by the federal, state, or local government. E) goods and services purchased from the government.
D
The United States issues a $10,000 debt forgiveness to Argentina. How is this accounted for in the balance of payments? A) financial account, U.S. asset import B) current account, Argentina transfer payment C) current account, U.S. service export D) capital account, U.S. transfer payment E) current account, Argentina good import
D
Which of the following statements about the central bank is TRUE? A) Only the central bank may hold foreign reserves and intervene officially in exchange markets. B) Central banks have little power to affect macroeconomic conditions. C) Today, central banks' reserves consist largely of gold. D) The Federal Reserve holds only a small level of official reserve assets other than gold. E) Central banks never inject money into the economy.
D
10) What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 60 dollars in New York and 30 Pounds in London? A) 1.5 dollars per British pound B) 0.5 dollars per British pound C) 2.5 dollars per British pound D) 3.5 dollars per British pound E) 2 dollars per British pound
E
11) When a country's currency depreciates A) foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive. B) foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper. C) foreigners find that its exports are cheaper; however, domestic residents are not affected. D) foreigners are not affected, but domestic residents find that imports from abroad are more expensive. E) foreigners find that its exports are cheaper and domestic residents find that imports from abroad are more expensive.
E
11) Which of the following is NOT a major actor in the foreign exchange market? A) corporations B) central banks C) commercial banks D) non-bank financial institutions E) tourists
E
2) For most macroeconomists A) national income accounts is much more important than national output accounts. B) it is impossible to tell whether national income accounts equal to national output accounts. C) national output accounts exceed national income accounts. D) national income accounts exceed national output accounts. E) national income accounts and national output accounts are equal to each other.
E
2) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.50 dollars per one British pound? A) 50 dollars B) 60 dollars C) 70 dollars D) 80 dollars E) 75 dollars
E
3) An American buys a Japanese car, paying by writing a check on an account with a bank in New York. How would this be accounted for in the balance of payments? A) current account, a Japanese good import B) current account, a U.S. good import C) financial account, a U.S. asset import D) financial account, a U.S. asset export E) a current account as a U.S. good import and a financial account, a U.S. asset export
E
3) For most macroeconomists A) gross national income exceeds gross national product. B) it is hard to tell whether gross national income equals gross national product. C) gross national product exceeds gross national income. D) gross national product is much more important than gross national income. E) gross national income and gross national product are the same.
E
4) In 2013, about A) 20 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. B) 10 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. C) 30 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. D) 40 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. E) 87 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars
E
6) If the dollar interest rate is 4 percent, the euro interest rate is 6 percent, then A) an investor should invest only in dollars. B) an investor should invest only in euros. C) an investor should be indifferent between dollars and euros. D) invest only in dollars if the exchange rate is expected to remain constant. E) invest only in euros if the exchange rate is expected to remain constant.
E
Disposable income is national income A) less taxes collected from households and firms by the government. B) plus net taxes collected from households and firms by the government. C) less net taxes collected from firms by the government. D) less net taxes collected from households by the government. E) less net taxes collected from households and firms by the government.
E
In the United States over the past sixty years, the fraction of GNP devoted to consumption has fluctuated in a range of about A) 42 to 49 percent. B) 32 to 39 percent. C) 22 to 29 percent. D) 82 to 89 percent. E) 62 to 70 percent.
E
National income equals GNP A) less depreciation, less net unilateral transfers. B) less depreciation or net unilateral transfers. C) plus depreciation, less net unilateral transfers. D) plus depreciation, plus net unilateral transfers. E) less depreciation, plus net unilateral transfers.
E
Net unilateral transfers A) are part of a national income. B) are part of a country's product. C) must be added to NNP in calculations of national income. D) are part of a country's GNP. E) Only A and C.
E
The United States began to report its gross domestic product (GDP) only since A) 1900. B) 1921. C) 1931. D) 1941. E) 1991.
E
The profits of a Spanish factory with British owners are A) counted in Spain's GNP. B) not part of Britain's GDP. C) counted in Britain's GDP. D) part of Spain's GNP. E) counted in Spain's GDP and are a part of Britain's GNP.
E
Unilateral transfers between countries are A) long-term loans. B) part of national income, but not part of the current account C) part of the current account, but not a part of national income. D) known for reducing the income of capital owners. E) international gifts or payments that do not correspond to the purchase of any good, service, or asset.
E
Which of the following is FALSE about private savings and government savings? A) SP = Y - T - C B) Unlike private saving decisions, government saving decisions are often made with an eye toward their effect on output and employment. C) Total savings (S) = SP + D) The national income identity can help us to analyze the channels through which government saving decisions influence macroeconomic conditions. E) None of the above; all statements are true.
E
Which of the following is TRUE? A) A country with a current account surplus is earning more from its exports than it spends on imports. B) A country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports. C) A country with a current account deficit must be increasing its net foreign debts by the amount of the deficit. D) We can describe the current account surplus as the difference between income and absorption. E) All of the above are true of current account balances.
E
Which one of the following statements is FALSE? A) The United States had accumulated substantial foreign wealth by the early 1980s. B) The 1980s witnessed a sustained current account deficit of proportions unprecedented in the twentieth century. C) In 1989, the country became a net debtor to foreigners for the first time since World War I. D) U.S. foreign debt has continued to grow and now stands at 40 percent of GNP. E) The U.S. foreign debt was paid off in the 1990s, allowing the U.S. to attain a current account surplus. However, the deficit has returned in recent years.
E
