Question 1

Which of the following is not true about the U.S.trade balance since 1979?

Accepted Answer

A)  The balance of trade has been in deficit.
B)  During recessions the balance has usually been flat.
C)  The balance of trade has been in surplus.
D)  When the economy expanded,the demand for imports increased.
E)  When the economy expanded,the trade balance worsened.F) A) and D)
G) C) and D)

Question 2

Under the gold standard,a country with a surplus in its balance of payments experienced a rise in its money supply and a drop in its price level.

Accepted Answer

A) True 
 B)False

Question 3

Table 20.1 shows a current account.In the table below,_____ is the balance on current account.
Table 20.1
($) 
?
  Net exports of goods −2,000 Net exports of services 500 Net unilateral transfers −1,000 Net investment 100 Statistical discrepancy −20\begin{array}{lr}	ext { Net exports of goods } & -2,000 \	ext { Net exports of services } & 500 \	ext { Net unilateral transfers } & -1,000 \	ext { Net investment } & 100 \	ext { Statistical discrepancy } & -20\end{array} Net exports of goods  Net exports of services  Net unilateral transfers  Net investment  Statistical discrepancy ​−2,000500−1,000100−20​ 
?

Accepted Answer

A)  ?$1,500
B)  ?$2,000
C)  ?$2,400
D)  ?$2,420
E)  ?$2,500 F) A) and E)
G) None of the above

Question 4

If the exchange rate changes from 20 cents per franc to 18 cents per franc,the U.S.dollar has:

Accepted Answer

A)  appreciated,since its value has increased.
B)  appreciated,since its value has declined.
C)  depreciated,making French goods more expensive in the U.S.
D)  depreciated,since its value has declined.
E)  depreciated,since its value has increased.F) B) and D)
G) C) and E)

Question 5

An exchange rate is the price of one commodity (e.g. ,corn)measured in terms of another commodity (e.g. ,wheat).

Accepted Answer

A) True 
 B)False

Question 6

The merchandise trade balance measures:

Accepted Answer

A)  the value of goods and services exported.
B)  the value of all goods and services exported minus the value of all goods and services imported.
C)  the value of all goods and services exported minus the value of all goods and services imported,and the transactions to finance the difference.
D)  the value of all tangible products exported minus the value of all tangible products imported.
E)  the value of all tangible products exported minus the value of all tangible products imported,and the transactions to finance the difference.F) B) and C)
G) D) and E)

Question 7

Suppose U.S.consumers start buying more English shoes and fewer American shoes.Which of the following will be a likely impact on the foreign exchange market?

Accepted Answer

A)  U.S.demand for British pounds will increase.
B)  U.S.demand for British pounds will decrease.
C)  U.S.demand for British pounds will increase,but the demand for foreign exchange will decrease.
D)  U.S.demand for British pounds will decrease,but the demand for foreign exchange will increase.
E)  There would be no effect on the demand for foreign exchange in the U.S.F) C) and E)
G) B) and D)

Question 8

Suppose the exchange rate is such that 1 U.S.dollar equals 1 euro in New York and 0.9 euros in Paris.An arbitrageur would sell euros:

Accepted Answer

A)  in New York and buy U.S.dollars in Paris.
B)  in both Paris and New York at different prices.
C)  in New York while buying them in Paris.
D)  in Paris while buying them in New York.
E)  at the same price in both cities.F) B) and C)
G) A) and D)

Question 9

One feature of the gold standard was that:

Accepted Answer

A)  countries had almost complete control over their own monetary policies.
B)  a surplus of gold caused the money supply to decrease.
C)  slow gold production led to deflation.
D)  exchange rates were highly unstable.
E)  each currency was worth the same as other currencies.F) C) and D)
G) All of the above

Question 10

Flexible exchange rates do not allow for discretionary monetary policy.

Accepted Answer

A) True 
 B)False

Question 11

Under the Bretton Woods agreement,_____.

Accepted Answer

A)  nations could not adjust their exchange rates relative to the dollar for any reason
B)  exchange rates were based on a market basket of European currencies plus the dollar
C)  the United States stood ready to convert foreign holdings of dollars into gold at a fixed rate of $35 per ounce
D)  the international monetary system operated exactly like the gold standard of the pre-World War II years
E)  gold played no role in the international monetary systemF) A) and D)
G) A) and E)

Question 12

The statistical discrepancy in the balance of payments is:

Accepted Answer

A)  always positive.
B)  always negative.
C)  always zero.
D)  positive,negative,or zero.
E)  indeterminate.F) C) and D)
G) A) and E)

Question 13

A nation's merchandise trade balance reflects _____.

Accepted Answer

A)  trade in tangible products
B)  the value of exports of services
C)  the value of imports of services
D)  the same information as its balance of payments
E)  trade in tangibles and intangiblesF) B) and C)
G) D) and E)

Question 14

Under the gold standard,each country had little control over its own monetary policies.

Accepted Answer

A) True 
 B)False

Question 15

The Bretton Woods system collapsed because:

Accepted Answer

A)  the countries started introducing trade barriers.
B)  the collapse of world gold production undermined the operation of the system.
C)  the gold value of the dollar exceeded the exchange value,causing an outflow of gold from the U.S.
D)  the dollar was undervalued.
E)  the exchange value of the dollar exceeded its gold value,causing an inflow of gold to the U.S.F) A) and E)
G) B) and C)

Question 16

Which of the following would increase the U.S.demand for foreign currency?

Accepted Answer

A)  An increase in the U.S.demand for foreign goods
B)  An increase in incomes abroad
C)  A decrease in U.S.income
D)  A decrease in the U.S.demand for foreign goods
E)  An increase in U.S.real interest rateF) A) and E)
G) A) and B)

Question 17

The Bretton Woods system:

Accepted Answer

A)  pegged exchange rates in terms of U.S.dollars.
B)  pegged exchange rates in terms of all major currencies in the world.
C)  pegged exchange rates in terms of pounds.
D)  established a system of flexible exchange rates.
E)  established the European monetary system.F) All of the above
G) A) and E)

Question 18

In order for the balance of payments to balance,the:

Accepted Answer

A)  current account balance must equal the capital account balance.
B)  sum of the current account balance,the capital account balance,the net flow of international reserves,and the statistical discrepancy must have a negative value.
C)  sum of the current account balance,the capital account balance,the net flow of international reserves,and the statistical discrepancy must have a positive value.
D)  sum of the current account balance,the capital account balance,the net flow of international reserves,and the statistical discrepancy must equal zero.
E)  the sum of the current account balance,the capital account balance,and the net flow of international reserves must be greater than the statistical discrepancy.F) A) and C)
G) A) and B)

Question 19

For the U.S. ,a drop in the price of foreign exchange means that:

Accepted Answer

A)  fewer U.S.dollars are needed to purchase foreign currency.
B)  more U.S.dollars are needed to purchase foreign currency.
C)  imports will become more expensive worldwide.
D)  exports will become cheaper worldwide.
E)  transaction costs in international markets will decrease.F) All of the above
G) B) and D)

Question 20

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Accepted Answer

A) True 
 B)False

Exam 18: International Finance

Correct Answer
verified

One feature of the gold standard was that:

Correct Answer
verified

The Bretton Woods system:

Correct Answer
verified

An exchange rate is the price of one commodity (e.g. ,corn)measured in terms of another commodity (e.g. ,wheat).

Correct Answer
verified

Suppose U.S.consumers start buying more English shoes and fewer American shoes.Which of the following will be a likely impact on the foreign exchange market?

Correct Answer
verified

Which of the following would increase the U.S.demand for foreign currency?

Correct Answer
verified

The statistical discrepancy in the balance of payments is:

Correct Answer
verified

In order for the balance of payments to balance,the:

Correct Answer
verified

Suppose the exchange rate is such that 1 U.S.dollar equals 1 euro in New York and 0.9 euros in Paris.An arbitrageur would sell euros:

Correct Answer
verified

Under the Bretton Woods agreement,_____.

Correct Answer
verified

A nation's merchandise trade balance reflects _____.

Correct Answer
verified

Under the gold standard,a country with a surplus in its balance of payments experienced a rise in its money supply and a drop in its price level.

Correct Answer
verified

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Correct Answer
verified

The Bretton Woods system collapsed because:

Correct Answer
verified

Which of the following is not true about the U.S.trade balance since 1979?

Correct Answer
verified

Under the gold standard,each country had little control over its own monetary policies.

Correct Answer
verified

Flexible exchange rates do not allow for discretionary monetary policy.

Correct Answer
verified

If the exchange rate changes from 20 cents per franc to 18 cents per franc,the U.S.dollar has:

Correct Answer
verified

The merchandise trade balance measures:

Correct Answer
verified

For the U.S. ,a drop in the price of foreign exchange means that:

Correct Answer
verified

Exam 18: International Finance

Correct AnswerverifiedShow Answer

One feature of the gold standard was that:

Correct AnswerverifiedShow Answer

The Bretton Woods system:

Correct AnswerverifiedShow Answer

An exchange rate is the price of one commodity (e.g. ,corn)measured in terms of another commodity (e.g. ,wheat).

Correct AnswerverifiedShow Answer

Suppose U.S.consumers start buying more English shoes and fewer American shoes.Which of the following will be a likely impact on the foreign exchange market?

Correct AnswerverifiedShow Answer

Which of the following would increase the U.S.demand for foreign currency?

Correct AnswerverifiedShow Answer

The statistical discrepancy in the balance of payments is:

Correct AnswerverifiedShow Answer

In order for the balance of payments to balance,the:

Correct AnswerverifiedShow Answer

Suppose the exchange rate is such that 1 U.S.dollar equals 1 euro in New York and 0.9 euros in Paris.An arbitrageur would sell euros:

Correct AnswerverifiedShow Answer

Under the Bretton Woods agreement,_____.

Correct AnswerverifiedShow Answer

A nation's merchandise trade balance reflects _____.

Correct AnswerverifiedShow Answer

Under the gold standard,a country with a surplus in its balance of payments experienced a rise in its money supply and a drop in its price level.

Correct AnswerverifiedShow Answer

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Correct AnswerverifiedShow Answer

The Bretton Woods system collapsed because:

Correct AnswerverifiedShow Answer

Which of the following is not true about the U.S.trade balance since 1979?

Correct AnswerverifiedShow Answer

Under the gold standard,each country had little control over its own monetary policies.

Correct AnswerverifiedShow Answer

Flexible exchange rates do not allow for discretionary monetary policy.

Correct AnswerverifiedShow Answer

If the exchange rate changes from 20 cents per franc to 18 cents per franc,the U.S.dollar has:

Correct AnswerverifiedShow Answer

The merchandise trade balance measures:

Correct AnswerverifiedShow Answer

For the U.S. ,a drop in the price of foreign exchange means that:

Correct AnswerverifiedShow Answer

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