Chapter 9
If a country has a capital and financial account surplus, that country's stock of international indebtedness is A) increasing. B) decreasing. C) constant. D) zero.
A
The law of demand in the foreign exchange market refers to the relationship between the A) exchange rate and the quantity of U.S. dollars demanded B) interest rate and the exchange rate C) interest rate and the quantity of U.S. dollars demanded D) U.S. price level and the exchange rate
A
If the current account has a positive balance of $100 and the capital and financial account has a negative balance of $90, there will be ________ in official reserves of ________. A) a decrease; $10 B) an increase; $10 C) an increase; $190 D) a decrease; $190
B
The main item in the current account balance is A) net interest income. B) net transfers. C) net exports. D) net taxes.
C
Which of the following equations represents the private sector balance? A) X-M B)T-G C)S-I D)C+S+T
C
If a country is currently borrowing more from the rest of the world than it is lending to the rest of the world, the country is a A) net borrower. B) debtor nation. C) net lender. D) creditor nation.
A
Suppose that the yen-dollar foreign exchange rate changes from 130 yen per dollar to 140 yen per dollar. Then the yen has A) depreciated against the dollar, and the dollar has appreciated against the yen. B) depreciated against the dollar, and the dollar has depreciated against the yen. C) appreciated against the dollar, and the dollar has appreciated against the yen. D) appreciated against the dollar, and the dollar has depreciated against the yen.
A
The U.S. dollar will appreciate in value if A) the demand curve for U.S. dollars shifts rightward. B) the demand curve for U.S. dollars shifts leftward. C) the supply curve of U.S. dollars shifts rightward. D) Americans choose to buy more foreign goods.
A
The ________ the exchange rate, the ________ are foreign-produced goods and hence the smaller the quantity of dollars supplied. A) lower; more expensive B) lower; cheaper C) greater; cheaper D) greater; more expensive
A
If a nation during its entire history has borrowed more from the rest of the world than it has lent to the rest of the world, the country is a A) net borrower. B) debtor nation. C) net lender. D) creditor nation.
B
A country that borrows more from the rest of the world than it lends to it in a year is called a ________, and a country that lends more to the rest of the world than it borrows from it in a year is called a ________. A) borrower; lender B) importer; exporter C) net borrower; net lender D) gross borrower; gross lender
C
A debtor nation means a nation A) whose imports exceeds its exports. B) whose current account is less than its capital account. C) through its history has invested less in the rest of the world D) than other countries have invested in it E) whose current lending to the rest of the world exceeds its borrowing from the rest of the world.
C
A net borrower is a country that ________, while a net lender is a country that ________. A) borrows more than it lends; owes more to foreigners than foreigners owe to it B) decreases its stock of outstanding foreign debt; lends more than it borrows C) borrows more than it lends; lends more than it borrows D) lends more than it borrows; borrows more than it lends
C
Adjusted for risk, interest rate parity A) holds only for larger countries. B) holds only between the U.S. and Canada. C) holds only when purchasing parity holds. D) always holds.
D
The term "foreign currency" refers to foreign coins II. notes III. bank deposits A) II only. B) II and III only. C) I and II only. D) I, II, and III.
d
A country's balance of payments accounts include all of the following EXCEPT A) military account. B) current account. C) capital and financial account. D) official settlements account.
A
The U.S. dollar will depreciate in value if A) the demand for the dollar increases. B) the demand for the dollar decreases. C) the supply of foreign exchange decreases. D) U.S. citizens choose to buy fewer foreign goods.
B
A factor helping determine demand for the dollar in the foreign exchange market is A) the expected future exchange rate. B) the expected future interest rate. C) the amount of U.S. imports. D) the supply of U.S. dollars.
A
Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result, A) the demand curve for European euros and the supply curve for Indian rupees both shift rightward. B) the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward. C) only the demand curve for Indian rupees shifts rightward. D) only the demand curve for European euros shifts rightward.
A
All of the following statements are correct EXCEPT: A) China's exchange rate policy boosts exports in the long run. B) China's exchange rate policy is mainly an attempt to control inflation. C) China's exchange rate policy results in a depreciated yuan. D) China's exchange rate policy does not impact the real exchange rate in the long run.
A
An increase in foreign demand for U.S. exports will ________ the demand for dollars and lead the dollar to ________. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
A
An increase in the value of a domestic currency in terms of other currencies is known as A) an appreciation. B) a depreciation. C) a flexible exchange rate. D) a term not given in the above answers.
A
As the expected profit from holding dollars ________, the quantity of ________. A) increases; dollars demanded increases B) increases; dollars demanded decreases C) decrease; foreign currency demanded decreases D) None of the above answers is correct.
A
Consider the market for euros. Suppose the exchange rate is ________ its equilibrium. This means that the quantity of euros ________ is greater than the quantity of euros ________ and the exchange rate will ________. A) above; supplied; demanded; fall B) below; supplied; demanded; rise C) above; demanded; supplied; fall D) below; demanded; supplied; fall
A
If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was a A) a flexible exchange rate. B) a fixed exchange rate. C) a crawling peg. D) a nominally fixed exchange rate.
A
If interest rates in Mexico decrease while the interest rates in the United States remain unchanged then A) the supply of Mexican pesos will increase. B) the supply of Mexican pesos will decrease. C) the supply of U.S. dollars will increase. D) None of the above answers is correct.
A
If net exports is 100 and the private sector balance is 150, then the government sector balance is A) -50. B) 50. C) 250. D) 0.
A
If net interest and net transfers are zero, and a country's exports exceed its imports, the country definitely has ________. A) a current account surplus B) a current account deficit C) a capital and financial account surplus D) an official settlements account surplus
A
If people expect the dollar to depreciate, then the A) demand for dollars will decrease, the supply of dollars will increase, and the exchange rate will fall. B) demand for dollars will decrease, the supply of dollars will not change, and the exchange rate will fall. C) supply of dollars will increase, the demand for dollars will not change, and the exchange rate will fall. D) demand for dollars will increase, the supply of dollars will decrease, and the exchange rate will rise.
A
If the current account has a negative balance of $100 and the capital and financial account has a positive balance of $80, there will be ________ in official reserves of ________. A) a decrease; $20 B) an increase; $20 C) an increase; $180 D) a decrease; $180
A
If the demand for a country's currency increases, the currency A) appreciates. B) depreciates. C) stays the same. D) could either appreciate, depreciate, or stay the same.
A
If the exchange rate is above equilibrium, there will be ________ in the foreign exchange market. A) a surplus B) a shortage C) a decrease in demand D) an increase in demand
A
If the nominal exchange rate rises and price levels stay constant, the real exchange rate will A) rise B) fall C) stay constant D) could rise, fall or stay constant
A
In the foreign exchange market, a change in which of the following will result in a movement along the demand curve for U.S. dollars? A) the exchange rate B) the U.S. interest rate C) the interest rate in the foreign country D) the expected future exchange rate
A
Other things remaining the same, the ________ the exchange rate for dollars, the greater the ________ in the foreign exchange market. A) higher; quantity of dollars supplied B) higher; quantity of dollars demanded C) lower; value of U.S. imports D) higher; expected profits from holding dollars
A
Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will A) depreciate 4 percent. B) appreciate 4 percent. C) appreciate 10 percent. D) depreciate 10 percent.
A
Suppose a Japanese bank offers a 4 percent interest rate and U.S. banks offer a 2 percent interest rate. People must expect the yen to A) depreciate by 2 percent. B) appreciate by 2 percent. C) depreciate by 6 percent. D) appreciate by 6 percent.
A
Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has ________ against the dollar and the dollar has ________ against the peso. A) appreciated; depreciated B) appreciated; appreciated C) depreciated; appreciated D) depreciated; depreciated
A
The ________ the exchange rate, the ________ are foreign-produced goods and hence the greater the quantity of dollars supplied. A) higher; cheaper B) lower; cheaper C) higher; more expensive D) lower; more expensive
A
The account that records the receipts from the exports of goods and services sold abroad, the payments for imports of goods and services from abroad, net interest income paid abroad, and net transfers is the ________. A) current account B) official settlements account C) international capital account D) capital and financial account
A
The capital and financial account measures ________. A) foreign investment in the United States minus U.S. investment abroad B) capital produced outside of the United States minus capital produced inside the United States C) capital used inside the United States but manufactured outside the United States D) capital used outside the United States but manufactured inside the United States
A
The current account A) measures our exports minus our imports taking into account interest payments paid to and received from the rest of the world. B) measures our imports minus our exports. C) does not account for interest payments paid to and received D) from the rest of the world. E) is part of GDP.
A
The current account balance is equal to A) net exports + net interest income + net transfers. B) net exports - net interest income - net transfers. C) net exports + net interest income - net transfers. D) net interest income + net transfers - net exports.
A
The data in the table above are the U.S. balance of payments. The current account balance is A) $140 billion. B) $155 billion. C) $170 billion. D) -$45 billion.
A
The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if A) the U.S. interest rate differential decreases. B) the expected future exchange rate rises. C) the exchange rate for the dollar rises. D) None of the above answers is correct.
A
The figure above shows the demand and supply of dollars in the foreign exchange market. The equilibrium in the market occurs at a price of ________ Brazilian reals per dollar and a quantity of ________ billion dollars. A) 2.0 ; 100 B) 2.4; 120 C) 1.6; 100. D) 100; 2.0
A
The government sector balance is equal to ________. A) net taxes minus government purchases of goods and services B) tariffs minus imports C) saving minus investment D) exports minus imports
A
The higher the exchange rate today, the A) smaller is the expected profit from buying U.S. dollars today and holding them. B) greater is the expected profit from buying U.S. dollars today and holding them. C) smaller is the expected profit from buying foreign currency today and holding it. D) greater the quantity of U.S. dollars demanded in the foreign exchange market today.
A
The lower the exchange rate today, ceteris paribus, the A) greater is the expected profit from buying U.S. dollars today and holding them. B) smaller is the expected profit from buying U.S. dollars today and holding them. C) greater is the expected profit from buying foreign currency today and holding it. D) smaller the quantity of U.S. dollars demanded in the foreign exchange market today.
A
The nominal exchange rate is A) the value of the U.S. dollar expressed in units of foreign currency per U.S. dollar. B) the real exchange rate multiplied by the ratio of the U.S. price level to the foreign price level. C) the relative price of U.S. produced goods to foreign produced goods. D) a measure of the quantity of the nominal GDP of other countries that we get per unit of U.S. nominal GDP.
A
The private sector surplus or deficit equals A) saving minus investment. B) net taxes minus government purchases. C) investment minus saving. D) government purchases minus net taxes.
A
The real exchange rate is A) the relative price of U.S. produced goods to foreign produced goods. B) the nominal exchange rate multiplied by the ratio of the foreign price level to the U.S. price level. C) the money price of foreign produced goods relative to the money price of U.S. produced goods. D) a measure of how much currency exchanges for a unit of another currency.
A
The real exchange rate is the A) relative price of U.S. produced output relative to foreign-produced output . B) price of foreign goods relative to the price of domestic goods C) trade-weighted index D) current account balance
A
To pay for a current account deficit, a country can A) borrow money from abroad B) lend money abroad C) increase official reserves to cover the shortfall D) transfer money from the capital account to the official settlements account
A
When people who are holding the money of some other country want to exchange it for U.S. dollars, they ________ U.S. dollars and ________ that other country's money. A) demand, supply B) supply, supply C) supply, demand D) demand, demand
A
When the U.S. exchange rate falls, U.S. goods become ________ to foreign residents and U.S. exports ________. A) less expensive; increase B) less expensive; decrease C) more expensive; decrease D) more expensive; increase
A
When the exchange rate falls, in the foreign exchange market the A) quantity demanded of the currency increases. B) demand for the currency increases. C) quantity demanded of the currency decreases. D) demand for the currency decreases.
A
When the value of one currency falls relative to another currency, the exchange rate for the first currency has A) depreciated. B) appreciated. C) demanded. D) revalued.
A
When we export goods to foreign countries, we A) receive payments from the rest of the world. B) make payments to the rest of the world. C) increase our inflation rate. D) decrease our inflation rate.
A
When we have a negative current account, we are A) borrowing from the rest of the world. B) lending to the rest of the world. C) running a government budget surplus. D) None of the above is correct.
A
Which of the following examples definitely illustrates a depreciation of the U.S. dollar? A) The dollar exchanges for 120 euros and then exchanges for 100 euros. B) The dollar exchanges for 100 euros and then exchanges for 120 yen. C) The dollar exchanges for 1 pound and then exchanges for 1.2 pounds. D) The dollar exchanges for 250 yen and then exchanges for 275 euros.
A
Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? A) crawling peg B) flexible exchange rate C) fixed exchange rate D) moving target
A
Which of the following is included in a nation's current account? I. the import of services II. a change of foreign currency holdings net transfers, such as foreign aid payments A) I and III B) I and II C) II and III D) III only
A
Which of the following statements is correct? I. The exchange rate is a price. The exchange rate is different from other prices because it is NOT determined by supply and demand. A) only I B) only II C) I and II D) neither I nor II
A
Which of the following will lead to an appreciation of the U.S. dollar against the British pound? A) an increase in British demand for U.S. imports B) an increase in U.S. demand for British imports C) an increase in British interest rates D) a decrease in British demand for U.S. assets
A
With everything else the same, in the foreign exchange market which of the following increases the supply of U.S. dollars? I. a fall in the U.S. interest rate a fall in interest rates in foreign countries III. a rise in expected future exchange rate A) I only B) I and II only C) I and III only D) I, II, and III
A
X is exports, M is imports, T is net taxes, G is government expenditure, C is consumption expenditure, S is saving, and I is investment. The government sector balance is equal to A)T—G B)C+S+T C)S—I D)X—M
A
A country's balance of payments accounts record A) the country's net indebtedness to foreigners. B) its international trading, borrowing, and lending. C) the flow of human and nonhuman resources between it and its trading partners. D) only its official transactions with other governments.
B
A decrease in the value of a currency in terms of other currencies is known as A) an appreciation. B) a depreciation. C) a par value. D) a gold point.
B
A net exports deficit or surplus equals A) taxes minus savings plus public and private investment. B) the government sector balance plus the private sector balance. C) net lending by both the private and public sector plus savings minus investment. D) net worth plus the government sector balance minus the private sector balance
B
Balance of payments accounts include A) the net interest income account. B) the current account. C) Both answers A and B are correct. D) Neither answer A nor B is correct.
B
If a country has a capital and financial account deficit, that country's stock of international indebtedness is A) increasing. B) decreasing. C) constant. D) zero.
B
If people expect the foreign exchange rate for dollars to rise in the future, A) the demand for dollars decreases. B) the demand for dollars increases. C) the demand for dollars is unaffected. D) there is a movement along the demand curve for dollars.
B
If the U.S. current account balance is -$500 billion and the capital and financial account balance is +$510 billion, A) the U.S. official settlements account balance is $10 billion. B) the U.S. government's holdings of foreign currency increases by $10 billion. C) foreign investment in the United States is smaller than the U.S. investment abroad. D) U.S. exports are greater than U.S. imports.
B
If the current account balance is -$100 billion and the capital and financial account balance is $80 billion, then the official settlement account balance is A) -$20 billion. B) $20 billion. C) always 0. D) impossible to determine with the information given.
B
If the exchange rate falls, then the expected profit from holding the currency A) does not change. B) increases. C) decreases. D) can either increase or decrease.
B
If the interest rate in the United States increases, then in the foreign exchange market the A) demand for U.S. dollars will remain unchanged. B) demand for U.S. dollars will increase. C) demand for U.S. dollars will decrease. D) supply of U.S. dollars will increase.
B
If there are equal rates of return between assets in two currencies, then there is A) purchasing power parity. B) interest rate parity. C) parity of exchange. D) foreign exchange parity.
B
Important factors that change the demand for dollars and shift the demand curve for dollars include which of the following? Interest rates around the world. II. The current exchange rate. III. The expected future exchange rate. A) I and II B) I and III C) II D) I, II, and III
B
In the figure above, the equilibrium exchange rate is: $1 U.S. equals A) $2.00 Canadian. B) $1.50 Canadian. C) $0.50 Canadian. D) none of the above
B
In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when A) the expected future exchange rate decreases. B) the U.S. interest rate rises. C) people expect that the dollar will depreciate. D) foreign interest rates increase
B
The exchange rate is the A) opportunity cost of pursuing a nation's comparative advantage. B) price of one country's currency expressed in terms of another country's currency. C) ratio between imports and exports. D) interest rate that is charged on risk-free international capital flow.
B
The official settlements account records the change in ________. A) international trade B) U.S. official reserves C) foreign investment and domestic investment D) the reserves held by banks and the Fed
B
The quantity of dollars demanded by foreign nations increases as A) U.S. residents purchase more foreign goods. B) foreigners purchase more U.S. goods. C) more U.S. residents travel abroad. D) U.S. exports fall.
B
When the United States imports goods and services from the rest of the world, A) we receive payments from the rest of the world. B) we make payments to the rest of the world. C) we increase our inflation rate. D) we decrease our inflation rate.
B
Which international account is used to record payments for imports, receipts from exports, net interest paid abroad and net transfers? A) the capital and financial account B) the current account C) the official settlements account D) the trade account
B
country's balance of payments accounts records A) only the goods and services purchases among countries over a period of time. B) the international trading, borrowing, and lending positions of a country over a period of time. C) the flow of human and non-human capital among countries over a period of time. D) only official transactions between governments over a period of time.
B
All of the following are a current account transaction EXCEPT A) importing services. B) exporting goods. C) investing abroad. D) importing goods.
C
An increase in the U.S. demand for imports will ________ the supply of dollars and lead the dollar to ________. A) increase; appreciate B) decrease; appreciate C) increase; depreciate D) decrease; depreciate
C
If a country is currently lending more to the rest of the world than it is borrowing from the rest of the world, the country is a A) net borrower. B) debtor nation. C) net lender. D) creditor nation.
C
If a country's central bank does not intervene in the foreign exchange market, the country has A) a crawling peg exchange rate policy. B) a fixed exchange rate policy. C) a flexible exchange rate policy. D) no exchange rate policy.
C
If nothing else changes, the ________ the current exchange rate, the ________ is the expected profit from holding dollars, all other things remaining the same. A) higher; larger B) lower; smaller C) lower; larger D) The premise of the question is wrong because the exchange rate has nothing to do with expected profit from holding dollars.
C
If the interest rate on Japanese yen assets falls, the A) quantity of dollars demanded will increase. B) quantity of dollars demanded will decrease. C) demand for dollars will increase. D) demand for dollars will decrease.
C
In the above table, the government sector balance is a A) surplus of $200 billion. B) deficit of $200 billion. C) surplus of $100 billion. D) deficit of $100 billion.
C
In the foreign exchange market, which of the following results in a movement along the supply curve of dollars? A) a change in the expected future exchange rate B) a change in the U.S. interest rate C) a change in the current exchange rate D) None of the above answers are correct.
C
Suppose that the exchange rate between the dollar and the peso changed from 6 pesos per dollar to 8 pesos per dollar. This change means that the A) peso appreciated. B) dollar depreciated. C) peso depreciated. D) Both answers A and B are correct.
C
Suppose the U.S. interest rate is 6 percent and the world interest rate is 5 percent. The U.S. interest differential is A) -1 percent. B) 1.2 percent. C) 1 percent. D) -0.83 percent.
C
The Federal Reserve can influence the exchange rate by A) changing interest rates. B) buying or selling dollars. C) Both answers A and B are correct. D) None of the above answers is correct
C
The U.S. interest rate minus the foreign interest rate is called the ________. A) foreign interest rate differential B) U.S. bond rate differential C) U.S. interest rate differential D) U.S. stock yield differential
C
The ________ the expected profit from holding a foreign currency, the greater is the ________ in the foreign exchange market. A) larger; quantity demanded of dollars B) smaller; quantity demanded of foreign currency C) larger; quantity supplied of dollars D) None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency.
C
The above figure shows the demand curve for dollars in the yen/dollar exchange market. A movement from point A to point B means that the A) quantity supplied of dollars has increased. B) quantity demanded of dollars has increased. C) quantity demanded of dollars has decreased. D) quantity demanded of yen has decreased.
C
The exchange rate is the price at which the ________ of one country exchanges for the ________ of another country. A) currency; goods B) goods; goods C) currency; currency D) currency; financial instruments
C
The higher the dollar's exchange rate, the ________ the expected profit from holding dollars and so ________ dollars are supplied. A) larger; more B) larger; fewer C) smaller; more D) smaller; fewer
C
The idea that the value of money is equal across countries is known as A) interest rate parity. B) the expected profit parity effect. C) purchasing power parity. D) exchange rate parity.
C
The private sector balance is equal to ________. A) income minus consumption minus net taxes B) income minus consumption minus investment C) saving minus investment D) income minus consumption
C
The value of net exports increases when the value of ________. A) exports of goods and services minus imports of goods and services decreases B) imports of goods and services increase C) imports of goods and services decrease D) exports of goods and services decrease
C
When the U.S. dollar depreciates against the yen, the yen becomes ________ expensive and the U.S. exchange rate ________. A) more; rises B) less; rises C) more; falls D) less; falls
C
A creditor nation means a nation A) whose exports exceed its imports. B) whose current account is larger than its capital account. C) whose current lending to the rest of the world exceeds its D) borrowing from the rest of the world. E) through its history has invested more in the rest of the world F) than other countries have invested in it.
D
As the expected future exchange rate for dollars increases, A)the expected profit from selling U.S. dollars today falls. B) the supply of U.S. dollars decreases. C) the U.S. interest rate will fall. D) Both answers A and B are correct.
D
If a country lends more to foreign countries than it borrows from foreign countries in a year, then definitely that year A) it has a current account deficit. B) it is a creditor nation. C) it is a debtor nation. D) it is a net lender.
D
In part, a country's current account measures A) its current debt as opposed to its long-term debt. B) borrowing and lending activity between the country's residents and foreigners. C) net increases and decreases in a country's holdings of foreign currency. D) receipts from the sale of goods and services to foreigners and payments for goods and services bought from foreigners.
D
In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________. A) decreases; A B) decreases; E C) increases; D D) increases; C
D
In the foreign exchange market, the higher the dollar's exchange rate, the A) larger the supply of dollars. B) smaller the quantity supplied of dollars. C) smaller the supply of dollars. D) larger the quantity supplied of dollars.
D
Net exports equals A) exports of goods and services minus imports of goods and services. B) imports of goods and services minus exports of goods and services. C) the government sector balance plus the private sector balance. D) Both answers A and C are correct.
D
Suppose the exchange rate for the U.S. dollar falls. This could be caused by A) a decrease in U.S. import demand. B) an increase in the world demand for U.S. exports. C) an increase in the U.S. interest rate differential. D) a fall in the expected future exchange rate.
D
Suppose the exchange rate of the U.S. dollar was 1.50 British pounds = $1.00 on Wednesday, and on Monday the exchange rate was $0.75 = 1.00 British pound. Which of the following best explains what has happened between Wednesday and Monday? A) The U.S. dollar appreciated against the British pound. B) The British pound appreciated against the U.S. dollar. C) The U.S. dollar depreciated against the British pound. D) Both answers B and C are correct.
D
The U.S. dollar will depreciate in value if A)the demand curve for U.S. dollars shifts rightward. B) the demand curve for U.S. dollars shifts leftward. C) the supply curve of U.S. dollars shifts rightward. D) Both answers B and C are correct.
D
The law of demand for dollars in the foreign exchange market means that the A) lower the exchange rate, the greater the quantity of dollars demanded. B) higher the exchange rate, the smaller the quantity of dollars demanded. C) lower the exchange rate, the smaller the quantity of U.S. exports demanded. D) Both answers A and B are correct.
D
The sum of the current account, capital and financial account, and official settlements account is A) a positive number if the country has a trade surplus. B) a negative number if the country has a trade deficit. C) positive or negative depending on whether the domestic exchange rate is appreciating or depreciating. D) always equal to zero.
D
The table above shows the transactions made during 2011 by the citizens of Biscuit, whose currency is the crumb. During 2011, the official reserves increased by 380 million crumbs. Calculate the current account balance. A) -880 million crumbs B) -1,000 million crumbs C) 1,000 million crumbs D) 880 million crumbs
D
What factors can change expectations about the exchange rate? A) interest rate parity B) purchasing power parity C) real GDP parity D) Both answers A and B are correct.
D
Which of the following statements is true? A) If private saving is greater than private investment, then the private sector has a surplus. B) If private investment is greater than private saving, then the private sector has a deficit. C) If private investment is greater than private saving, then either the government or net export sector must have a surplus. D) All of the above answers are correct.
D