Econ Final- Chapter 9

Which of the following equations represents the private sector balance? A) S - I B) T - G C) X - M D) C + S + T

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) creditor nation C) debtor nation D) net lender

C.

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 fixed exchange rate B) a crawling peg C) a flexible exchange rate D) a nominally fixed exchange rate

C.

If the United States sells beef to Japan, the U.S. beef producer is paid with A) euros, or any third currency. B) yen, Japanese currency. C) dollars. D) international monetary credits.

C.

Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is A) 85.5 million yuan B) 10 million yuan C) 950 million yuan D) 9.5 yuan

C.

If the prices in the United States rise faster than those in other countries, A) the exchange rate falls. B) the interest rate in the United States falls. C) the exchange rate rises. D) then interest rate parity must not hold.

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 interest rate in the foreign country. C) the U.S. interest rate. D) the expected future exchange rate.

A.

Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? A) crawling peg B) moving target C) flexible exchange rate D) fixed exchange rate

A.

A decrease in the expected future exchange rate _____ the demand for U.S. dollars and shifts the demand curve for U.S. dollars _____. A) decreases; rightward B) decreases; leftward C) increases; rightward D) increases; leftward

B.

If the Fed wants to depreciate the dollar against the yen, the Fed will A) increase the supply of dollars by selling yen B) increase the supply of dollars by buying yen C) increase the demand for dollars by selling yen D) decrease the supply of dollars by selling yen

B.

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if A) the exchange rate for the dollar rises. B) the U.S. interest rate differential decreases. C) the expected future exchange rate rises. D) None of the above answers is correct.

B.

Suppose the exchange rate between the U.S. dollar and the French franc is 0.25 francs per dollar. If a television sells for 100 francs in France, what is the dollar price of the television set? A) $25 B) $50 C) $400 D) $200

C.

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can A) violate purchasing power parity B) violate interest rate parity C) sell dollars D) buy dollars

C.

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result, A) there is a movement downward along the demand curve for dollars B) the demand curve for dollars shifts leftward C) the demand curve for dollars shifts rightward D) None of the above answers are correct

C.

If a country has a capital and financial account surplus, that country's stock of international indebtedness is A) decreasing B) constant C) zero D) increasing

D.

If the U.S. interest rate differential increases, in the foreign exchange market the demand for U.S. dollars _____ and the supply of U.S. dollars _____. A) decreases; increases B) decreases; decreases C) increases; increases D) increases; decreases

D.

The People's Bank of China has A) purchased U.S. dollars to appreciate the yuan B) strictly followed a fixed exchange rate to boost exports C) allowed a flexible exchange rate to boost exports D) managed its exchange rate to help control inflation

D.

When you arrive at the airport in Paris and go to the bank window to exchange dollars into euros, you are A) selling euros to the French. B) contributing to U.S. exports. C) avoiding the use of foreign exchange markets. D) None of the above answers is correct.

D.