MacroEconomics 14 and 15

Exchange rates are determined by demand and supply forces. - When the Federal Reserve sets the exchange rates - Only if both currencies are floating. - False - Only when in equilibrium. - True

True

All of the following are true in regards to the financial/capital account, except what? - Financial account surpluses to offset foreign trade deficits are always a good thing - It is a key component of the balance of payments - A surplus in the financial account can offset a trade deficit - It is made up of domestic investments in foreign countries - It is made up of foreign investments in the domestic sector

Financial account surpluses to offset foreign trade deficits are always a good thing

What is not true about an exchange rate? - Fixed exchange rates are determined by supply and demand forces - Exist so firms and countries can trade and do business with each other - Can be quoted at the spot rate - Rate at which one country's currency can be traded for another country's currency - Are often necessary when individuals travel outside their home country

Fixed exchange rates are determined by supply and demand forces

What exchange rate would most likely be used for a good or service that may be delivered at a future date and time? - Current - Spot - Present value rate - Future - Forward

Forward

All of the following can affect the trade balance of a country except what? - Competitiveness of domestic firms - Currency valuations - Inflation - GDP - Recessions in countries that are trading partners

GDP

A strong dollar most likely leads to what? - No affect on imports or exports - Higher exports - Higher imports - More free trade - Lower imports

Higher imports

____ strategies work to restrict the importation of goods and services produced in foreign countries. - NAFTA - Comparative advantage - Protectionist - Free Trade - Supply and demand

Protectionist

Given the following, what is the balance of payments? Foreign Investment in Domestic sector = $1,000,000 Domestic Investment in Foreign sector = $500,000 Exports = $1,000,000 Imports - $2,000,000 - $500,000 surplus - $1,000,000 deficit - $1,000,000 surplus - $500,000 deficit - $1,500,000 deficit

$500,000 deficit

If a country had $1 million in exports and $1.5 million in imports, what would the trade balance be? - $1.5 million deficit - $500,000 deficit - $500,000 surplus - $2.5 million surplus - $1 million surplus

$500,000 deficit

Current Account is calculated by which of the following definitions? (Exports-Imports) + Net Income from Abroad + Net Current Transfers Net Exports - (Net Income from Abroad + Net Current Transfers) GDP + Personal Savings + Net Bank Deposits (Imports+Exports) + Net Income from Abroad + Net Current Transfers Exports + Net Income from Abroad + Foreign Aid

(Exports-Imports) + Net Income from Abroad + Net Current Transfers

* A weak currency or lower exchange rate can be beneficial for what? - A booming economy - An import business - An economy coming out of recession - It is never beneficial - An individual traveling abroad

An economy coming out of recession

If a country had $5,000,000 in exports, $10,000,000 in GDP, $3,000,000 in imports and $1,000,000 in national savings, what would net exports equal? - 2,000,000 - 3,000,000 - 0 - $5,000,000 - $10,000,000

2,000,000

Assume the following exchange rates for the dollar and Mexican Peso is 13 to 1. If you saw a gallon of ice cream cost 52 pesos, how many dollars would that approximately cost. can't be determined 52 13 2 4

4

Assuming the following exchange rates, what would be the better financial deal for a pair of identical shoes? 1 Dollar = 102 Japanese Yen 1 Dollar = .6 British Pound 1 Dollar = .91 Swiss Franc 1 Dollar = 13 Pesos 507 pesos for shoes 38 francs for shoes can't be determined 5100 yen for shoes 27 pounds for shoes

507 pesos for shoes

Which of the following statements is true? - A strong domestic currency increases exports; a weak currency decreases exports. - A strong domestic currency decreases exports; a weak currency increases exports. - A weak domestic currency decreases exports. - A strong domestic currency increases exports. - Currency valuations have no affect on imports or exports.

A strong domestic currency decreases exports; a weak currency increases exports.

* Which of the following statements is true? - An increase in the U.S. demand for foreign goods and services will cause an increase in the supply of dollars. - An increase in British demand for US goods and services will increase the supply of US dollars. - An increase in the foreign demand for U.S. goods and services will cause an increase in the supply of dollars. - An increase in the exchange rate will cause an increase in the quantity demanded of dollars per month. - An increase in the exchange rate will cause a decrease in the quantity supplied of dollars per month.

An increase in the U.S. demand for foreign goods and services will cause an increase in the supply of dollars.

is a country's record of all transactions between its residents and the residents of all other foreign nations? - Net Exports - Financial Account - GDP - Current Account - Balance of payments

Balance of payments

What two components make up the balance of payments account? - Fiscal and monetary policy - Imports and exports - Fixed and flexible exchange rate - Trade balance and GDP - Capital (financial) and current account

Capital (financial) and current account

_ can often disrupt or make it difficult for domestic firms to compete in various industries? - Cheaper foreign labor - Protectionism - Less productive foreign labor - Domestic standard of living - GDP

Cheaper foreign labor

What additional factor can have a big impact on the current account? - GNP - GDP - Inflation - Currency exchange rates - Mortgage rates

Currency exchange rates

Tariffs and quotas can provide all of the following benefits except what? - Protect new domestic industries - Decrease prices for consumers - Protect or enable domestic job growth - Enhance national security - Protect older or inefficient domestic industries or firms

Decrease prices for consumers

A quota and tariff both have what effect on the supply of goods and domestic prices? - Decrease supply and decrease prices - Increase supply and decrease prices - Decrease supply with no change in prices - Increase supply and increase prices - Decrease supply and increase prices

Decrease supply and increase prices

If more Americans want to suddenly purchase goods in Mexico, what likely happens? - Supply of pesos increases - Demand for dollars increases - No change or effect on currencies - Demand for pesos decreases - Demand for pesos increases, dollar falls in value compared to peso

Demand for pesos increases, dollar falls in value compared to peso

_ are payments made by those in the domestic economy to purchase financial and physical assets in other nations. This is an_______ of money to a domestic country; - Domestic investments in the foreign sector, outflow - Balance of trade payments, outflow - Foreign investments in the domestic sector, outflow - Foreign investments in the domestic sector, inflow - Domestic investments in the foreign sector, inflow

Domestic investments in the foreign sector, outflow

____ are goods that are produced in a home country, but sold to foreign countries? - Currency - Imports - Exports - Factors of production - Foreign bonds

Exports

* A decrease in the exchange rate for the dollar would most likely lead to what? - Lower inflation, lower import prices - Lower inflation, higher import prices - Higher inflation, lower import prices - Higher inflation, higher import prices - No change to inflation or import prices

Higher inflation, higher import prices

_______ are goods that are produced in a foreign country, but sold in a home country? - Currency - Free trade - Imports - Exchange rate - Exports

Imports

What effect will an exchange rate increase most likely have? - Inflation will increase - Imports will decrease - A business owner will export more - Exports get cheaper - Imports get cheaper

Imports get cheaper

Tariffs can have all of the following effects except what? - Lower overall supply of imports and goods in domestic country - Lead to smuggling of goods - Additional tax revenue for government - Increased supply of imported good in a domestic country - Higher prices paid by consumers

Increased supply of imported good in a domestic country

Whether a country has a trade surplus (favorable) or trade deficit (unfavorable) can be influenced by all of the following except? - The infrastructure and competitiveness of domestic firms - The cost to produce goods in the exporting economy compared to other importing countries - Trade policies, tariffs and quotas - Environmental, health or safety standards - Individual retirement account balances

Individual retirement account balances

All of the following are types of exchange rates that countries can use, except? - Partially flexible - Infinite - Pegged - Flexible - Fixed

Infinite

____ is the practice of transferring activities across international borders to achieve cheaper labor costs. - Free trade - Merging - Protectionism - Outsourcing - Exchange rate

Outsourcing

What following statement about the US Trade deficit is true? - It has only existed since 2001 - It stayed roughly the same throughout the 1990s - It increased dramatically through the 1990s and has continued to increase - It shrunk during the 1990s - It is not affected by trading with Japan, China, and Germany

It increased dramatically through the 1990s and has continued to increase

If the American dollar rose in value in relation to the Japanese Yen, what would likely be the effect? - Japan citizens would demand more US dollars - Americans would demand less Japanese goods - Less Americans would buy Japanese products - Japanese goods and services are now relatively cheaper for Americans - It would take more dollars to purchase 1 Yen

Japanese goods and services are now relatively cheaper for Americans

*All of the following are associated with the stock market, except what? - Money markets - The NASDAQ - 401(k)s and individual retirement accounts - Mutual funds - Ownership in companies

Money markets

Foreign trade can be described or associated with all of the following economic terms, except which one? - Surplus - Exports - Mutual funds - Current account - Imports

Mutual funds

The infant industry argument says what? - Small and newer domestic industries may need trade protection - Free trade is the best long-term growth strategy - Newer firms should use cheap foreign labor - Established international industries are easy to compete with - Outsourcing can save a firm money

Small and newer domestic industries may need trade protection

8The goods market encompasses all of the following except what? - Durable goods such as vehicles and appliances - Luxury goods such as jewelry or high-end sports cars - Stocks and bonds - Consumer goods such as household items - Disposable goods such as food and perishables

Stocks and bonds

When a dollar buys more than its equivalent in another currency, it's often labeled as what compared to the other currency? - Weak - Fixed - Pegged - Strong - Normal

Strong

All of the statements are true except... - The US had a trade surplus with Brazil in 2013 - The US had a trade deficit with Mexico in 2013 - The US had an overall trade surplus in 2013 - The US had an overall trade deficit in 2013 - The US had a trade deficit with China in 2013

The US had an overall trade surplus in 2013

All of the following are true about trade balance except what? - Trade balance can result in a surplus - A trade balance can be affected by currency rates and economic growth - The US has run a trade surplus since 1975 - Trade balance is equal to exports - imports - Trade balance can result in a deficit

The US has run a trade surplus since 1975

All of the following are true about the current account except what? - The current account is made up of foreign trade dealing with net exports of goods and services, foreign investment income, and current transfers - The current account is also known as the capital account - The current account can be referred to as a current deficit or surplus - The current account includes foreign aid or gifts paid to other countries - Currency exchange rates can affect the current account

The current account is also known as the capital account

If U.S. exports increased with Japan, what most likely happened? - Imports increased also. - The Japanese Yen weakened. - The dollar decreased in value compared to Yen. - The dollar stayed the same in value compared to Yen. - The dollar increased in value compared to Japanese yen.

The dollar decreased in value compared to Yen.

Fiscal policy can affect exchange rates in what three ways? - Through income effect - Through interest rate, income, and unemployment effect - Through interest rate and income effect - Through interest rate, income and price level effect - Through unemployment and GDP effect

Through interest rate, income and price level effect

A increase in the value of a domestic currency (higher exchange rate) will most likely have what affect? - Trade deficit - No affect on trade balance - Trade surplus - Increased Exports - Lower imports

Trade deficit

Tariffs and quotas can also be referred to as... - Trade restrictions - International trade - Free trade strategies - Exchange rates - Outsourcing strategies

Trade restrictions

*All of the following are true about bonds markets except what? - Is often referred to as debt market - Also referred to as fixed-income market - Involve debt instruments that usually pay interest and a return of principal - Where you can buy General Motors stock - Enables companies and governments to borrow money

Where you can buy General Motors stock Is often referred to as debt market Also referred to as fixed-income market

What variable doesn't influence the level of net exports? - balance of trade - tariffs - political and economic stability - quotas - exchange rates

balance of trade

represents money sent from overseas in order to pay for foreign goods and invest in markets. It is the movement of money among corporations and governments that go in and out of countries. - capital flows - balance of trade - exchange rate - taxes - imports

capital flows

*What group below are all financial markets? - Federal Reserve bank - capital market, money market, stock market, bond market - capital market and durable goods market - money market and goods market - Stock market, bond market, goods market

capital market, money market, stock market, bond market

What component does not make up the current account? - Amount of services imported and exported - value of personal savings accounts - Amount of investment income paid from foreign firms - Amount of current transfers such as foreign aid - Amount goods imported and export

value of personal savings accounts

* Contractionary monetary or fiscal policy lead to what? - increases our income and decreases exchange rates - increases our demand for imports and decreases exchange rates - increase unemployment and increase GDP - decreases our income, decreases our demand for imports, increases the exchange rate. - no change on income or demand for imports, increase exchange rates

decreases our income, decreases our demand for imports, increases the exchange rate.

When expansionary monetary policy leads to a decrease in interest rates, what effect does this have on exchange rates? - demand for dollar decreases, exchange rate decreases - demand for dollar decreases, exchange rate increases - exchange rate increases - demand for dollars increases - exchange rate stays the same

demand for dollar decreases, exchange rate decreases

The _____ is the rate at which one currency is converted in another. - exchange rate - currency swap rate - demand and supply for currency - foreign exchange market - currency market

exchange rate

A high exchange rate for the US dollar has what effect on foreign currencies and imports? - imports more expensive - foreign currencies cheaper, imports cheaper - foreign currencies more expensive - foreign currencies cheaper, imports more expensive - no effect

foreign currencies cheaper, imports cheaper

* When the Federal Reserve uses monetary policy to increase income or available money, what outcome does this have on the exchange rate? - increases demand for dollars, lowers exchange rate - increases demand for foreign currencies, lowers exchange rate - lowers demand for foreign currencies, increases exchange rate - Increases demand for foreign currency, increases exchange rate - increases demand for dollars, increases exchange rate

increases demand for foreign currencies, lowers exchange rate

A sets a numerical limit on how much of a product can be imported into a country. - free trade agreement - tariff - customs inspection - quota - subsidy

quota

*All of the following are characteristics of money markets except what? - short-term maturities - highly liquid - stock ownership - commercial paper and municipal notes - maturities less than a year

stock ownership

A tariff is a _ imposed by the government on imports coming into a country. - rebate - tax - quota - limit - subsidy

tax

Which one one of the following terms would not be used when imports are greater than exports for a country? - trade deficit - trade surplus - unfavorable balance of trade - negative balance of trade - unfavorable trade balance

trade surplus