Section 8 Econ Quizzes
In 2013 in Econoland, total purchases of assets from the rest of the world equaled $450 billion, purchases of Econoland assets by the rest of the world equaled $300 billion, and Econoland imported goods and services equaling $225 billion. What was Econoland's balance on its financial account in 2013? Give the answer, in billions, in the form of a number, such as: 300 50 -7500
-150
Assume now that 2 euros = $3. If a shirt costs $50, how much would it cost in euros?
33.33 euros
If a shirt costs $50, how much would it cost in euros at an exchange rate of $1 = 0.75 euros?
37.5 euros
Assume that now 1 euro = $1.2 If a shirt costs $50, how much would it cost in euros?
41.67 euros
Frank is a citizen of Gatorland. He wants a better return on his savings than he gets in Gatorland, so he buys newly issued government bonds from the nation of Hamsterville. How is this purchase counted in the balance of payments in each country?
A debit in Gatorland's financial account; a credit in Hamsterville financial account.
Which of the following best describes the balance of payments accounts?
A record of all international transactions
Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in the United States?
Aggregate demand will decrease because demand for U.S. exports decreases.
The international value of the dollar will appreciate if
American income falls relative to the rest of the world.
If exchange rates are allowed to fluctuate freely and the U.S. demand for Japanese yen increases, which of the following will happen?
Americans will have to pay more for Japanese goods.
The structural problem of a global trade imbalance includes:
An export-dependent China, and import-dependent Europe, and an import-dependent America
Which of the following would definitely move a country toward a current account deficit?
An increase in imports
Suppose the Fed decided to purchase bonds in an open market operation. What would be the effect, ceteris paribus, on a trading partner's currency such as Great Britain?
Appreciate.
Which of the following is an indirect cost of protecting domestic markets:
Certain domestic goods that rely on foreign inputs increase in price as well.
If a nation's currency appreciates, in the short run its net exports and aggregate demand are most likely to change in which of the following ways?
Decrease Decrease
In the short run, in which of the following ways is an expansionary monetary policy most likely to cause the real interest rate and the value of the domestic currency to change?
Decrease Decrease
If Mexican tourism to New York increases, what will happen in the foreign exchange market, (FOREX), for the dollar and the exchange rate for the dollar (in terms of the peso)?
Demand for the dollar increases, the dollar appreciates
If real interest rates in the European Union increase, what will happen to the international value of the Euro and international trade in Europe?
Euro will appreciate, net exports will fall.
All of the following are true regarding international trade except:
Exports are considered a debit in a county's balance of trade
When export demand is weak in Europe and the United States because of slow growth, what is likely to happen to China's import demand for commodities such as coal and iron ore?
Falls
The Central Bank of Hamsterville sells bonds, which has influenced the interest rate in Hamsterville. What is the impact of this action on the financial account, the value of the Hamsterville currency (the Snark), and imports into Hamsterville in the short run?
Financial account increases; the snark appreciates; imports increase
What change will occur in the balance of payments accounts in Wakanda when it sells bonds to Hamsterville?
Financial capital inflows increase
A depreciation of the euro relative to the U.S. dollar will have which of the following effects on the exports of Germany and the exports of the U.S.?
German exports increase; U.S. exports decrease
A depreciation of the euro relative to the dollar will have which of the following effects on the exports of Germany and the exports of the U.S.?
German exports increase; U.S. exports decrease
Which of the following would cause the aggregate demand curve to shift to the left?
Higher value of the dollar on the foreign exchange market
In the United States, an increase in which of the following will cause an increase in U.S. imports? I. Per capita real income II. Price level III. Real interest rates IV. Tariffs
I, II, and III only
Which of the following will occur if inflation in the United States begins to rise while prices in other countries remain relatively stable?
In the United States, real interest rates decrease.
An import tariff will have what effect on price and quantity in the domestic market for the good?
Increase Decrease
If the U.S. dollar appreciates in the foreign exchange market, U.S. imports and exports are most likely to change in which of the following ways
Increase Decrease
Suppose that the price level in Country A increases relative to the price level in other countries. In which of the following ways are Country A's imports and exports most likely to change?
Increase Decrease
If expansionary fiscal policies in the United States lead to increased budget deficits, what will happen to real interest rates in the United States and the value of the dollar?
Increase Increase
The economies of Maxistan and Babka are open economies. If Maxistan runs a budget surplus, how will this impact Babka in the short run?
Increases inflation in Babka
What happens to interest rates and exports in the short run in Atlantis if the central bank of Atlantis buys bonds?
Interest rates decrease; exports increase
If a country has a trade deficit, which of the following must also be true?
It has a financial account surplus
If the United States budget deficit increases, what will most likely happen to the United States dollar in the foreign exchange market?
It will appreciate because interest rates will increase.
Suppose the exchange rates are 0.5 British Pound per dollar; 10 Mexican Pesos per dollar; and 100 Chinese Yuan per dollar. Further suppose that a Big Mac costs 3 dollars in America; 2 pounds in England; 50 pesos in Mexico; and 200 yuan in China. In which country is a Big Mac most expensive?
Mexico ($5)
Nation A's current account is in surplus. If Nation A increases the tax on the interest earnings of foreign assets held by Nation A's citizens, then which of the following will most likely occur?
Nation A's current account surplus will decrease.
If government spending causes government budget deficits to add to the public debt and push up interest rates, how would an increase in G of $100 million affect net exports?
Net Exports would fall because the higher interest rates make U.S. dollar assets more attractive to foreign savers and the value of the U.S. Dollar would rise.
A country's financial account includes which of the following?
Sales of assets to other countries
Assume the financial account between the U.S. and Mexico nets out to zero. If, now, the real return on financial assets in Mexico increases, and the real return on U.S. financial assets does not change, then which of the following will occur?
The U.S. current account with Mexico will move to a surplus.
A country's current account includes which of the following?
The country's trade balance
Which of the following is true if the financial account between the U.S. and Mexico nets out to zero for a given year?
The current account nets out to zero for that year.
The current account in Wakanda is currently balanced. Which of the following will occur in the balance of payments if Wakanda begins to export more than it imports?
The current account will move to a surplus
If real interest rates in the United States are increasing faster than real interest rates in other countries, which of the following is most likely to occur?
The demand for dollars will increase, and the value of the dollar will increase.
If a nation's current account has a zero balance, then which of the following must be true?
The financial account has a zero balance.
Which of the following will occur as a result of an increase in exports?
The financial account will move to a deficit
Assume the European Union's Central Bank begins selling European bonds in an attempt to fight inflation. How would this policy impact the international value of the euro and the balance of trade in the European Union?
The international value of euro would increase and the European Union would move towards a trade deficit.
Which of the following would NOT be included in the current account of Wakanda?
The nation of Maxistan buys a bond from Wakanda
Ceteris paribus, which of the following best illustrates the net exports effect?
The price level in Canada decreases, so Canada's real GDP increases.
If the ecobuck depreciates relative to the macrobuck, then which of the following will occur?
The price of Macroville's goods will be higher when measured in ecobucks.
If real interest rates in the United States increase relative to real interest rates in other countries, which of the following will occur?
The supply of loanable funds will increase in other countries.
When the value of the U.S. dollar appreciates relative to other currencies; which of the following is the most likely to occur?
U.S. residents will take more vacations in foreign countries.
If the balance on the current account is zero, which of the following transactions will cause it to go into deficit?
U.S. tourists in Great Britain purchase pounds sterling.
Assume US consumers increase their demand for foreign prducts and decrease their demande for domestic products. How will this affect: Unemployment in the US The current account of the US The international value of the dollar
US unemployment increases; US current account deficit; and the international value of the dollar decreases.
An increase in the international value of the United States dollar will tend to cause:
United States exports to fall.
As a result of deficit spending, the government of Japan borrowed money in the market for loanable funds. What happens to the exchange rate for the yen and Japanese exports as the result of the change in the market for loanable funds?
Yen appreciates; exports decrease
If the rate of inflation in the U.S. increases relative to the rate of inflation in Canada, then which of the following will occur?
a depreciation of the U.S. dollar
An increase in real income in the euro area will have which of the following effects in the foreign currency market?
a depreciation of the euro
Which of the following would cause the United States dollar to increase in value compared to the Japanese yen?
an increase in interest rates in the United States
In the balance of payments, the trade balance
appears in the current account
If the dollar exchange rate in the euro-dollar market changes from 1.00 euros per dollar to 0.8 euros per dollar, has the euro appreciated or depreciated?
appreciated
Regarding the balance of payments, if one sums the Current Accounts, and Capital Accounts and the Reserve Changes then the answer will be
be zero.
Suppose an American investor held bonds issued by the German government. When the bond, valued at $10,000 American dollars, matured, the investor received the principle plus $1,100 in earned interest. That transaction would be classified in the U.S. Balance of Trade as
credit to the Current Account.
Assume Canada imports products from the U.S. A large decrease in Canadian income causes U.S. net exports, price level and Real GDP to change in whichof the following ways in the short run?
decrease, decrease, decrease
If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?
demand for United States dollars and supply of euros
If the dollar exchange rate in the euro-dollar market changes from 0.75 euros per dollar to 0.8 euros per dollar, has the euro appreciated or depreciated?
depreciated
Which of the following explains why higher interest rates from a U.S. government budget deficit can decrease exports?
dollar-denominated financial assets become more attractive, increasing demand for the dollar, and the stronger dollar makes exports relatively less affordable
If the value of the U.S. dollar depreciates, ceteris paribus, then U.S.
exports will rise.
An increase in the international value of the United States dollar will tend to cause U. S. exports to:
fall and aggregate demand to decrease.
An increase in U.S. real interest rates relative to the rest of the world can be expected to
increase the international value of the dollar.
Which of the following is true of an import quota?
it limits quantity of imports allowed into a country.
When a country has a balance of trade deficit
its imports exceed its exports.
Which of the following will occur if there is an increase in the demand for the dollar in the foreign exchange market?
supply of foreign currency increases (shifts right); U.S. dollar appreciates; foreign currency depreciates
In terms of US government revenue, a quote on Japanese goods is different form a protective tariff in that:
the U.S. probably sustains less net revenue from a quota than a tariff.
The supply curve for ecobucks in the foreign exchange market is upward sloping because an increase in the macrobuck price of an ecobuck will decrease which of the following?
the ecobuck price of Macroville's goods and services
The price of one nation's currency expressed in terms of another nation's currency is called:
the exchange rate.
The price of one nation's currency expressed in terms of another nation's currency is:
the exchange rate.
The financial account of the balance of payments accounts includes which of the following?
the purchase of stock in Google, a U.S. firm, by a British citizen
If interest rates rise in the United States relative to other nations, then
the value of the dollar will tend to appreciate.
If the demand for our exports rises while our tastes for foreign goods falls off, then
the value of the dollar will tend to appreciate.
If prices rise in the United States relative to other countries, then
the value of the dollar will tend to depreciate.
If the real interest rates in the United States rise relative to rates in other countries, what will happen to the international value of the United States dollar and United States net exports?
value of the dollar appreciates; net exports decreases
