macro chapter 21

A deficit on the current account: A) normally causes a surplus on the capital and financial account. B) normally causes a deficit on the capital and financial account. C) has no relationship to the capital and financial account. D) means that a nation is making international transfers.

A

A government may be able to reduce the international value of its currency by: A) selling its currency in the foreign exchange market. B) buying its currency in the foreign exchange market. C) selling foreign currencies in the foreign exchange market. D) increasing its domestic interest rates.

A

Answer the question on the basis of the following 2012 balance of payments data (+ and -) for the hypothetical nation of Zabella. All figures are in billions of dollars. Refer to the given data. Zabella's balance on financial account shows a: A) deficit of $10 billion. B) surplus of $5 billion. C) deficit of $28 billion. D) surplus of $13 billion.

A

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a: A) balance of trade (goods) surplus. B) balance of payments surplus. C) positive balance on current account. D) positive balance on goods and services.

A

If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is: A) $.005. B) $.05. C) $.50. D) $5.

A

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is: A) ¼ pound. B) 4 pounds. C) $.25. D) $1.00.

A

In the U.S. balance of payments, U.S. purchases of assets abroad are a(n): A) U.S. dollar outflow. B) U.S. dollar inflow. C) current account item. D) inpayment.

A

In the balance of payments of the United States, inflows of foreign currencies to the United States are recorded as: A) a positive entry. B) a current account entry. C) a negative entry. D) net investment income.

A

Suppose the balance on the financial account is -$300 billion and the balance on the capital account is +$5 billion. The size of the current account is: A) +$295 billion. B) -$295 billion. C) +$305 billion. D) +$5 billion.

A

The U.S. demand for euros is: A) downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services. B) downsloping because, at higher dollar prices for euros, Americans will want to buy more European goods and services. C) downsloping because the dollar price of euros and the euro price of dollars are directly related. D) upsloping because a higher dollar price of euros makes European goods and services more attractive to Americans.

A

The current account section in a nation's balance of payments includes: A) its goods exports and imports, and its services exports and imports. B) foreign purchases of domestic assets. C) purchases of foreign assets. D) all of these.

A

In the U.S. balance of payments, foreign purchases of assets in the United States are a: A) foreign currency outflow. B) foreign currency inflow. C) current account item. D) debit, or out payment.

B

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram. Other things equal, a leftward shift of the supply curve would: A) appreciate the euro. B) cause a shortage of euros. C) increase the equilibrium quantity of euros. D) appreciate the dollar.

A

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram. Other things equal, a rightward shift of the demand curve would: A) depreciate the dollar. B) appreciate the dollar. C) reduce the equilibrium quantity of euros. D) depreciate the euro.

A

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Refer to the given information. Zippo has a: A) current account deficit. B) capital account deficit. C) balance of payments deficit. D) trade surplus on goods and services.

A

Answer the question on the basis of the following information. In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Refer to the given information. Between 1985 and 2003, the: A) dollar appreciated in value relative to the yen. B) yen appreciated in value relative to the dollar. C) dollar price of yen fell. D) yen price of dollars rose.

B

Answer the question on the basis of the following table, which indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of freely floating exchange rates is in place. Refer to the table. The equilibrium dollar price of libras is: A) $5. B) $4. C) $3. D) $2.

B

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico, but Brazil experiences rapid inflation: A) gold bullion will flow into Brazil. B) the Brazilian real will depreciate. C) the Mexican peso will depreciate. D) the Brazilian real will appreciate.

B

If in a system of fixed exchange rates the dollar price of euros is above the market equilibrium level: A) gold will flow from the United States to Europe. B) there will be a surplus of euros. C) the U.S. government will have to ration euros to U.S. importers. D) there will be a shortage of euros.

B

If the dollar price of yen rises, then: A) the yen price of dollars also rises. B) the dollar depreciates relative to the yen. C) the yen depreciates relative to the dollar. D) the dollar will buy fewer U.S. goods.

B

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then: A) the peso has appreciated in value. B) Americans will buy more Mexican goods and services. C) more U.S. goods and services will be demanded by the Mexicans. D) the dollar has depreciated in value.

B

Refer to the diagram. The initial demand for and supply of pesos are shown by D1 and S1. The exchange rate will be: A) M dollars for one peso. B) B pesos for one dollar. C) A dollars for one peso. D) C dollars for one peso.

B

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. The U.S. balance on current account is a: A) $40 billion surplus. B) $25 billion deficit. C) $25 billion surplus. D) $30 billion deficit.

B

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Refer to the given information. The current account items for Zippo are: A) 1, 2, 3, and 4. B) 1, 3, 4, 5, 7, and 9. C) 6 and 8. D) 1, 2, 4, 7, and 9.

B

Which of the following combinations is plausible, as it relates to a nation's balance of payments? A) Current account = $+40 billion; capital account = $+20 billion; financial account = $-50 billion. B) Current account = $-50 billion; capital account = $+20 billion; financial account = $+30 billion. C) Current account = $+10 billion; capital account = $+40 billion; financial account = $+50 billion. D) Current account = $+30 billion; capital account = $-20 billion; financial account = $-50 billion

B

Which of the following would call for inpayments to the United States? A) Gold flows into the United States. B) U.S. firms sell insurance to Brazilian shippers. C) The United States sends foreign aid to developing countries. D) The United States imports German automobiles.

B

Which of the following would call for outpayments from the United States? A) The United States exports computer software. B) The United States purchases assets abroad. C) Foreigners purchase assets in the United States. D) Foreign tourists spend money in the United States.

B

A nation's capital and financial account: A) contains inpayment items but not outpayment items. B) includes service exports and service imports. C) includes both inpayments and outpayments. D) includes net investment income and net transfers.

C

Answer the question on the basis of the following 2012 balance of payments data (+ and −) for the hypothetical nation of Zabella. All figures are in billions of dollars. Refer to the given data. Zabella has a balance of trade (goods): A) deficit of $10 billion. B) surplus of $5 billion. C) surplus of $10 billion. D) deficit of $5 billion.

C

The financial account balance is a nation's: A) net investment income minus its net transfers. B) exports of goods and services minus its imports of goods and services. C) sale of real and financial assets to people living abroad minus its purchases of real and financial assets from foreigners. D) domestic investment spending minus domestic saving.

C

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram. At the equilibrium exchange rate: A) $8 will buy 1 euro. B) 0.8 euros will buy $1. C) 1.25 euros will buy $1. D) $1 will buy 8 euros.

C

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. Item (5) indicates: A) that the United States' current account was in surplus. B) the size of the net inflow of foreign investment to the United States that occurred in 2012. C) the net amount Americans received as interest and dividends on existing U.S. investments abroad. D) the net amount Americans paid as interest and dividends on existing foreign investments in the United States.

C

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. The United States' balance of capital and financial account is a: A) surplus of $5. B) deficit of $10. C) surplus of $25. D) deficit of $5.

C

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Refer to the given information. Zippo has a: A) current account surplus. B) financial account deficit. C) financial account surplus. D) surplus on goods and services.

C

Which of the following would contribute to a U.S. balance of payments surplus? A) The United States makes a unilateral tariff reduction on imported goods. B) General Motors pays a dividend to a Swiss stockholder. C) The United States cuts back on U.S. military personnel stationed in Germany. D) Russian vodka becomes increasingly popular in the United States.

C

Which of the following is not included in the current account of a nation's balance of payments? A) Its goods exports. B) Its goods imports. C) Its net investment income. D) Its purchases of real assets abroad.

D

A market in which the money of one nation is exchanged for the money of another nation is a: A) resource market. B) bond market. C) stock market. D) foreign exchange market.

D

Depreciation of the dollar will: A) decrease the prices of both U.S. imports and exports. B) increase the prices of both U.S. imports and exports. C) decrease the prices of U.S. imports but increase the prices to foreigners of U.S. exports. D) increase the prices of U.S. imports but decrease the prices to foreigners of U.S. exports.

D

If a nation has a current account surplus and it does not have to make any inpayments or outpayments of official reserves, it must have a: A) surplus in its capital and financial account. B) balance of payments deficit. C) balance of payments surplus. D) deficit in its capital and financial account.

D

The U.S. demand for British pounds is: A) downsloping because a higher dollar price of pounds means British goods are cheaper to Americans. B) downsloping because a lower dollar price of pounds means British goods are more expensive to Americans. C) upsloping because a lower dollar price of pounds means British goods are cheaper to Americans. D) downsloping because a lower dollar price of pounds means British goods are cheaper to Americans.

D

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $.10. We can conclude that: A) 1 yen = 280 Swiss francs. B) 1 yen = 14 Swiss francs. C) 1 Swiss franc = 28 yen. D) 1 Swiss franc = 14 yen.

D

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. The U.S. balance on goods and services is a: A) $10 billion deficit. B) $20 billion deficit. C) $30 billion surplus. D) $30 billion deficit.

D

The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars. Refer to the given data. The United States has a balance of goods: A) deficit of $10 billion. B) surplus of $30 billion. C) deficit of $30 billion. D) surplus of $20 billion.

D

Under a system of freely floating exchange rates, an increase in the international value of a nation's currency will: A) cause an international surplus of its currency. B) contribute to disequilibrium in its balance of payments. C) cause gold to flow into that country. D) cause its imports to rise.

D

Which of the following combinations is plausible, as it relates to a nation's balance of payments? A) Current account = $+40 billion; capital account = $-10 billion; financial account = $-50 billion. B) Current account = $+50 billion; capital account = $-20 billion; financial account = $+30 billion. C) Current account = $+10 billion; capital account = $+40 billion; financial account = $+50 billion. D) Current account = $+30 billion; capital account = $-20 billion; financial account = $-10 billion.

D