AP Macro: Ch. 31-32 practice

An increase in the international value of the United States dollar will tend to cause A United States exports to fall B the national income of the United States to increase C employment in the manufacturing sector of the United States to increase D the inflation rate in the United States to increase E the growth rate of the United States economy to increase

A

If the international value of the United States dollar depreciates in comparison with the Japanese yen, which of the following is most likely to occur? A United States exports to Japan will increase. B The United States government will increase the tariff on Japanese imports. C The United States balance-of-trade deficit with Japan will become even larger. D United States tourists can be expected to visit Japan in greater numbers. E Trade between the United States and Japan will not be affected.

A

The value of a country's currency will tend to appreciate if A demand for the country's exports increases B the country's money supply increases C the country's citizens increase their travel abroad D domestic interest rates decrease E tariffs on the country's imports decrease

A

Which of the following is an example of foreign direct investment? A A United States automobile manufacturer building a steel plant in Russia B A United States citizen purchasing corporate bonds issued by a French manufacturing firm C A Mexican citizen purchasing United States Treasury bills D The Federal Reserve purchasing Japanese yen E Immigrant workers in the United States sending money to their native country

A

Which of the following monetary policy actions by the Federal Reserve would result in an appreciation of the United States dollar? A An open-market purchase of government bonds B An open-market sale of government bonds C A decrease in the discount rate D A decrease in the required reserve ratio E An increase in the money supply

B

An increase in a government's deficit spending will most likely affect a nation in an open economy in which of the following ways? A The economy will experience financial capital outflows, and its currency will appreciate. B The economy will experience financial capital outflows, and its currency will depreciate. C The economy will experience financial capital inflows, and its currency will appreciate. D The economy will experience financial capital inflows, and its currency will depreciate. E The economy will experience no change in financial capital flows, and the value of its currency will not change.

C

An increase in which of the following would reduce the United States balance-of-trade deficit? A United States demand for foreign goods B United States rate of inflation compared to other countries C The value of foreign currency relative to the United States dollar D The federal budget deficit E United States interest rates compared to other countries

C

Assume that Canada imports more goods and services than it exports. Which of the following is true of the Canadian balance of payments accounts? A The current account balance must be negative. B The current account balance must be positive. C The trade balance must be negative. D The financial account (formerly called capital account) balance must be negative. E The financial account (formerly called capital account) balance must be positive.

C

The exchange rate is 1.2 euros per United States dollar. If a restaurant meal costs 30 euros in Paris, France, what is its dollar cost to a United States tourist? A $2.50 B $3.60 C $25 D $30 E $36

C

Which of the following will lead to a depreciation of a nation's currency? A Lower inflation in the nation than in the rest of the world B Higher required reserve ratio in the nation than in the rest of the world C Decreased real interest rates in the nation compared with the rest of the world D Increased demand for the nation's currency E Decreased supply of the nation's currency

C

Which of the following is recorded in a country's current account? A The value of goods produced and consumed in the country B The value of domestic financial assets sold to foreign investors C The value of foreign bonds purchased by the country's residents D The value of consumer goods produced abroad and purchased by the country's residents E The value of the country's government bonds purchased by the country's central bank

D

Which of the following would be a current account transaction? A India buys $10 billion of new United States Treasury bonds. B A United States firm buys 5 percent of the stock of another United States firm. C A United States firm builds a new factory in Kenya. D A United States firm sells $500 million of its products to a Chinese company. E The United States buys $8 billion worth of euros.

D

An appreciation of the United States dollar on the foreign exchange market could be caused by a decrease in which of the following? A United States interest rates B The United States consumer price index C Demand for the dollar by United States residents D Exports from the United States E The tariff on goods imported into the United States

B

Assume that the inflation rate in Country X is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to Country X's currency on the foreign exchange market? A The demand curve for the currency will shift to the right, and the currency will appreciate. B The demand curve for the currency will shift to the left, and the currency will depreciate. C The supply curve for the currency will shift to the left, and the currency will appreciate. D The supply curve for the currency will shift to the left, and the currency will depreciate. E There will be no shift in the demand curve for the currency, but the currency will depreciate.

B

A depreciation of the United States dollar in foreign exchange markets will result in which of the following? A A decrease in aggregate demand because net exports will increase. B A decrease in aggregate demand because imports will decrease. C A decrease in aggregate demand because exports will increase. D An increase in aggregate demand because imports will decrease. E An increase in aggregate demand because exports will decrease.

D

An increase in Canada's real interest rates relative to real interest rates in the rest of the world will lead to which of the following in Canada? A An increase in exports B A decrease in imports C A reduced government budget deficit D Financial capital inflow E Depreciation of the Canadian dollar

D

An increase in Japan's demand for United States goods would cause the value of the dollar to: A depreciate because of inflation B depreciate because the United States would be selling more dollars to Japan C depreciate because the United States money supply would increase as exports rise D appreciate because Japan would be buying more United Stated dollars E appreciate because Japan would be selling more United States dollars

D

If the Federal Reserve undertakes a policy to reduce interest rates, international capital flows will be affected in which of the following ways? A Long-run capital outflows from the United States will decrease. B Long-run capital inflows to the United States will increase. C Short-run capital outflows from the United States will decrease. D Short-run capital inflows to the United States will decrease. E Short-run capital inflows to the United States will not change.

D

In a flexible system of exchange rates, an open market sale of bonds by the Federal Reserve will most likely change the money supply, the interest rate, and the value of the United States dollar in which of the following ways? A Money Supply: Increase Interest Rate: Decrease Value of the Dollar: Decrease B Money Supply: Increase Interest Rate: Decrease Value of the Dollar: Increase C Money Supply: Decrease Interest Rate: Decrease Value of the Dollar: Decrease D Money Supply: Decrease Interest Rate: Increase Value of the Dollar: Increase E Money Supply: Decrease Interest Rate: Increase Value of the Dollar: Decrease

D

If the current exchange rate of the Mexican peso and the Brazilian real is 0.20 real per peso, and the equilibrium exchange rate is 0.18 real per peso, which of the following describes the foreign exchange market for the Mexican peso? A There is a shortage of pesos and the peso will appreciate. B There is a shortage of pesos and the peso will depreciate. C There is a surplus of pesos and the peso will appreciate. D There is a surplus of pesos and the peso will depreciate. E There is a surplus of pesos and the real will depreciate.

D --> There is a surplus because the current has .02 more than the equilibrium --> The peso will depreciate and the real will appreciate... ... the real is becoming more valuable and is appreciating.

A contractionary monetary policy by the Canadian central bank will likely affect international financial capital flows and the Canadian dollar in which of the following ways in the short run? A Financial capital flows from Canada will increase, and the Canadian dollar will appreciate. B Financial capital flows from Canada will increase, and the Canadian dollar will depreciate. C Financial capital flows from Canada will increase, and the value of the Canadian dollar will not change. D Financial capital flows to Canada will increase, and the Canadian dollar will depreciate. E Financial capital flows to Canada will increase, and the Canadian dollar will appreciate.

E --> TO Canada b/c Canada's higher interest rates will increase capital inflow and draw more foreign investment.