Econ Chapter 9 Pearson Questions

The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports. The government sector balance is ___ billion dollars. The private sector balance is ___ billion dollars. Net exports is ___ billion dollars

-150 ; -150 ; -300

The table shows the balance of payments accounts in Canada in 2007. What is Canada​'s current account​ balance, capital and financial account​ balance, and official settlements account​ balance? The current account balance is ___ billion dollars. The capital and financial account balance is ___ billion dollars. The official settlements account balance is ___ billion dollars

14 ; -10 ; -4

The table gives some items from the national income and product accounts. Calculate the government sector​ balance, the private sector​ balance, and net exports The government sector balance is ___ billion dollars. The private sector balance is ___ billion dollars. Net exports is ___ billion dollars.

350 ; 50 ; 400

The table shows the only international transactions that the citizens of​ Nickleodeon, whose currency is the​ dime, conducted in 2010. What is​ Nickleodeon's current account​ balance, capital and financial account​ balance, and official settlements account​ balance? ​Nickleodeon's current account balance is ____ billion dimes. ​Nickleodeon's capital and financial account balance is ____ billion dimes. ​Nickleodeon's official settlements account balance is ____ billion dimes.

50 ; -140 ; 90

The table gives some information about international transactions in the country of Plutonia. What is the capital and financial account​ balance? The capital and financial account balance is ___ billion dollars

980

Choose the statement about fixed exchange rates that is incorrect. A. If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese​ yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value. B. Hong Kong has a fixed exchange rate. C. A fixed exchange rate blocks the unregulated forces of demand and supply by direct intervention in the foreign exchange market. D. The world economy operated a fixed exchange rate regime from the end of World War II to the early 1970s

A

Choose the statement that is incorrect. A. In the long​ run, a change in the nominal exchange rate brings an equivalent change in the real exchange rate. B. In the long​ run, the nominal exchange rate is a monetary phenomenon. C. In the long​ run, the nominal exchange rate is determined by the quantities of money in two countries. D. In the long​ run, a rise in the foreign price level brings dollar appreciation and a rise in the U.S. price level brings dollar depreciation.

A

Interest rate parity means​ ______. A. equal rates of return B. equal value of money C. that if interest rates are higher in a developing nation than in the United​ States, U.S. investors will move their assets from the United States into that developing nation D. interest rates in Canada and the United States are the same

A

Suppose the exchange rate is 90 yen per U.S. dollar and the United States wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollars increases​, the Fed​ ______. A. sells dollars to lower the exchange ratesells dollars to lower the exchange rate B. buys dollars to raise the exchange ratebuys dollars to raise the exchange rate C. buys dollars to lower the exchange rate D. sells dollars to raise the exchange rate

A

The demand for U.S. dollars changes when there is a change in any of the following except​ ______. A. the foreign exchange rate B. the U.S. interest rate relative to the foreign interest rate C. world demand for U.S. exports D. the expected future exchange rate

A

The market in which the currency of one country is exchanged for the currency of another country is the​ ______. The price at which one currency exchanges for another currency is the​ ______. A. foreign exchange​ market; exchange rate B. money​ market; exchange rate C. foreign exchange​ market; currency rate D. money​ market; currency rate

A

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______. A. U.S. demand for imports B. the exchange rate C. interest rates in the United States and other countriesinterest rates in the United States and other countries D. the expected future exchange rate

A

Draw a demand for dollars curve. Label it D. Draw a supply of dollars curve. Label it S. Draw a point at the equilibrium quantity and equilibrium exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a surplus of dollars. Label it. When there is a surplus of dollars in the foreign exchange​ market, ______. A. the forces of supply and demand pull the foreign exchange market into equilibrium B. the demand for Japanese yen will increase so the foreign exchange market can move into equilibrium C. prices in the United States will fall relative to prices in Japan D. the supply of Japanese yen will increase so the foreign exchange market can move into equilibrium

A (Graph was crossing supply and demand curves, point of equilibrium, and surplus above equilibrium)

Between 2007 and​ 2012, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest differential​ _______ ​ ______ against the yen. A. ​fell; decreased and because currency traders expected the dollar to depreciate B. ​rose; increased and because currency traders expected the dollar to appreciate C. ​rose; decreased and because currency traders expected the dollar to depreciate D. ​fell; increased and because currency traders expected the dollar to appreciate The expectations about the exchange rate​ ______ the demand for U.S. dollars and​ ______ the supply of U.S. dollars. A. ​decreased; increased B. ​decreased; decreased C. did not​ change; increased D. ​increased; did not change

A ; A

One consequence of China operating a crawling peg is that China​ ______. A. is accumulating U.S. dollars B. will become more competitive in the long run C. will eventually run out of foreign​ reserves, and the yuan will appreciate D. will eventually run out of foreign​ reserves, and the yuan will depreciate China fixes its exchange rate​ ______. A. to keep its export prices low in the long run B. to maintain interest rate parity C. as a way of achieving a low inflation rate D. to increase its U.S. reserves

A ; C

Choose the correct statements. 1. Upper A fall in the exchange rate is called a devaluation of the dollar.A fall in the exchange rate is called a devaluation of the dollar. nothing 2. The foreign exchange market is a place.The foreign exchange market is a place. nothing 3. The exchange rate fluctuates.The exchange rate fluctuates. nothing 4. If $ 1 buys 100 yen comma then the exchange rate is 100 yen per dollar.If $1 buys 100 yen, then the exchange rate is 100 yen per dollar. nothing A. Statements 2 and 4 are correct. B. Statements 3 and 4 are correct. C. Statements 1 and 2 are correct. D. Statements 1 and 3 are correct.

B

Choose the statement about flexible exchange rates that is incorrect. A. The United States operates a flexible exchange rate. B. The world economy has operated a flexible exchange rate regime since the end of World War II. C. A flexible exchange rate is influenced by central bank actions. D. A flexible exchange rate policy is one in which the exchange rate is determined by demand and supply in the foreign exchange​ market, with no direct intervention by the central bank.

B

Choose the statement that is incorrect. A. Against the Chinese​ yuan, the dollar was constant between 2000 and 2005. B. Against the Chinese​ yuan, the dollar appreciated between 2005 and 2014. C. Against the European​ euro, the dollar appreciated before​ 2002, depreciated from 2002 through​ 2008, and then appreciated. D. Against the Japanese​ yen, the dollar appreciated before​ 2002, then depreciated against the yen through​ 2012, and then appreciated.

B

If most prices have decreased in the United States and not decreased in Japan and other​ countries, ______. A. then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will fall B. then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will rise C. nothing can happen to make purchasing power parity hold D. the demand for U.S. dollars will decrease

B

The graph shows the demand curve for U.S. dollars. The exchange rate is currently 100 yen per dollar. Over​ time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change. The law of demand for foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the smaller is the​ ______ in the foreign exchange market. A. ​lower; demand for U.S. dollars B. ​higher; quantity of U.S. dollars demanded C. ​lower; quantity of U.S. dollars demanded D. ​higher; demand for U.S. dollars

B (Graph was just an arrow along demand curve)

The graph shows the demand curve for U.S. dollars. Draw a new demand curve that shows the effect of an increase in the world demand for U.S. exports. Label it. A change in the expected future exchange rate changes the demand for U.S. dollars​ ______, and a change in the world demand for U.S. exports changes the demand for U.S. dollars​ ______. A. in the​ future; today B. ​today; today C. in the​ future; in the future D. ​today; in the future

B (graph is a rightward shift of the demand curve)

The graph shows the demand curve for U.S. dollars. Draw a new demand curve that shows the effect of a decrease in the U.S. interest rate differential. Label it. The U.S. interest rate differential falls when​ ______. A. the gap between the U.S. interest rate and the foreign interest rate becomes largerlarger B. the U.S. interest rate fallsfalls and the foreign interest rate risesrises C. the U.S. interest rate rises and the foreign interest rate falls D. the U.S. interest rate rises and the foreign interest rate remains the same

B (leftward shift of D curve)

The graph shows the supply curve of U.S. dollars. Draw a new supply curve that shows the effect of an increase for imports. Label it. A change in the expected future exchange rate changes the supply of U.S. dollars​ ______, and a change in U.S. demand for imports changes the supply of U.S. dollars​ ______. A. ​today; in the future B. ​today; today C. in the​ future; today D. in the​ future; in the future

B (rightward shift of S curve)

Choose the statement about a crawling peg that is incorrect. A. A crawling peg is an exchange rate that follows a path determined by a decision of the government or the central bank. B. When China abandoned its fixed exchange​ rate, it replaced it with a crawling peg. C. A crawling peg makes the exchange rate fluctuate wildly. D. The Fed has never operated a crawling peg.

C

If in the long​ run, the U.S. dollar appreciates against the Japanese​ yen, then​ ______. A. it must be the case that the real exchange rate has also appreciated B. purchasing power parity does not exist between Japan and the United States C. Japan has created money at a faster pace than has the United​ States, and the price level in Japan has risen more rapidly than the U.S. price level D. the United States has created money at a faster pace than has​ Japan, and the price level in the United States has risen more rapidly than​ Japan's price level

C

If most prices increase in Japan and other countries but remain constant in the United​ States, ______. A. the U.S. exchange rate is expected to fall B. purchasing power parity does not hold C. then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases D. people generally believe that the value of the U.S. dollar in the foreign exchange market is too high

C

The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market. A. the U.S. interest rate​ rises; smaller B. the U.S. interest rate​ falls; smaller C. the foreign interest rate​ falls; greater D. the foreign interest rate​ rises; greater

C

The private sector balance and the government sector balance tend to move in​ ______. Net exports respond​ ______. A. the same​ direction; to the sum of the government sector and private sector balances B. the same​ direction; closely to the government sector balance C. opposite​ directions; to the sum of the government sector and private sector balances D. opposite​ directions; closely to the government sector balance

C

The supply of U.S. dollars changes when there is a change in any of the following except​ ______. A. U.S. demand for imports Your answer is not correct.B. the U.S. interest rate relative to the foreign interest rate C. the foreign exchange rate D. the expected future exchange rate

C

Between 2012 and​ 2014, the U.S. exchange rate​ ______ against the Japanese yen because the U.S. interest rate differential was expected to​ _______. A. ​fell; increase B. ​fell; decrease C. ​rose; decrease D. ​rose; increase

D

Suppose a country has a crawling peg exchange rate policy against the U.S. dollar and the equilibrium exchange rate in units of foreign currency per U.S. dollar is above the target rate. To keep the exchange rate pegged at its target​ level, the​ country's central bank must​ ______ U.S. dollars and​ ______ its foreign currency reserves. A. ​buy; decrease B. ​buy; increase C. ​sell; increase D. ​sell; decrease

D

The quantity of U.S. dollars supplied in the foreign exchange market depends on all of the following except​ ______. A. interest rates in the United States and other countriesinterest rates in the United States and other countries B. U.S. demand for importsU.S. demand for imports C. the expected future exchange ratethe expected future exchange rate D. world demand for U.S. exportsworld demand for U.S. exports

D

Draw a demand for dollars curve. Label it D. Draw a supply of dollars curve. Label it S. Draw a point at the equilibrium quantity and exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a shortage of dollars. Label it. When there is a shortage of dollars in the foreign exchange​ market, ______. A. the demand for Japanese yen will increase so the foreign exchange market can move into equilibrium B. prices in the United States will fall relative to prices in Japan C. the supply of Japanese yen will increase so the foreign exchange market can move into equilibrium D. the forces of supply and demand pull the foreign exchange market into equilibrium

D (graph is crossing supply and demand curves, equilibrium point, and shortage below equilibrium

A country that is borrowing more from the rest of the world than it is lending to the rest of the world is a​ ______, and a country that during its entire history has borrowed more from the rest of the world than it has lent to it is a​ ______. A. borrower​ nation; net debtor B. debtor​ nation; net borrower C. net​ debtor; borrower nation D. net​ borrower; debtor nation ​Currently, the United States is a ____.

D ; debtor nation

The graph shows the supply curve of U.S. dollars. The exchange rate is currently 100 yen per dollar. Over​ time, the exchange rate rises to 120 yen per dollar. Show the effect in the graph. Draw either a new supply curve or an arrow along the curve showing the direction of change. The law of supply of foreign exchange states that other things remaining the​ same, the​ ______ the exchange​ rate, the​ ______ in the foreign exchange market. A. ​higher; smaller is the quantity of U.S. dollars supplied B. ​lower; greater is the quantity of U.S. dollars supplied C. ​higher; greater is the supply of U.S. dollars D. ​higher; greater is the quantity of U.S. dollars supplied The graph ____ illustrate the law of supply of foreign exchange.

D ; does ; graph was an arrow along supply curve

A country that is lending more to the rest of the world than it is borrowing from the rest of the world is a​ ______. A country that during its entire history has invested more in the rest of the world than other countries have invested in it is a​ ______. A. creditor​ nation; net lender B. debtor​ nation; net lender C. net​ borrower; creditor nation D. net​ lender; creditor nation This is the correct answer. ​China, Japan, and Saudi Arabia are ______. The United States is a net _____.

D ; net lenders ; net borrower

Suppose a Canadian dollar bank deposit in Toronto earns 4 percent a year and a U.S. dollar bank deposit in Chicago earns 1 percent a year. What expectations do people hold if interest rate parity is to​ hold? For interest rate parity to​ hold, people expect that the U.S. dollar will ____ by ____ percent a year.

appreciate ; 3