Question 1

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars.  Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Accepted Answer

A) True 
 B)False

Question 2

According to the purchasing power parity theory of exchange rates:

Accepted Answer

A)  a dollar, when converted to other currencies at the prevailing flexible exchange rate, has the same purchasing power in various countries.
B)  in equilibrium, national currencies have equal value in terms of gold.
C)  the higher a nation's price level in terms of its own currency, the greater is the amount of foreign exchange it can obtain for a unit of its currency.
D)  all of the above are true.E) B) and C)
F) A) and C)

Question 3

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if economic growth is more rapid in Switzerland than in Britain:

Accepted Answer

A)  gold bullion will flow out of Switzerland.
B)  the Swiss franc will depreciate.
C)  the pound will depreciate.
D)  the Swiss franc will appreciate.E) B) and C)
F) C) and D)

Question 4

Refer to the diagram below.The initial demand for and supply of pesos are shown by D1 and S1.Suppose Canada reduces its imports of Mexican goods, shifting its demand for pesos from D1 and D2.If Canada was operating under a system of exchange controls that maintains the exchange rate at E, the Canadian government would: 1 and S1.Suppose Canada reduces its imports of Mexican goods, shifting its demand for pesos from D1 and D2.If Canada was operating under a system of exchange controls that maintains the exchange rate at E, the Canadian government would:   A) find that, at the controlled exchange rate, pesos would be in surplus. B) be faced with deteriorating terms of trade. C) be faced with the problem of rationing BG pesos to Canadian importers who want BF pesos. D) be faced with the problem of rationing BF pesos to Canadian importers who want BG pesos." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  find that, at the controlled exchange rate, pesos would be in surplus.
B)  be faced with deteriorating terms of trade.
C)  be faced with the problem of rationing BG pesos to Canadian importers who want BF pesos.
D)  be faced with the problem of rationing BF pesos to Canadian importers who want BG pesos.E) A) and D)
F) B) and C)

Question 5

The following table shows the balance of payments statement of Transylvania in 2013.All the figures are in billions of dollars.  Refer to the above data.In 2013, Transylvania imported more products than it exported.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following, other things equal, will directly alter Canada's balance of trade?

Accepted Answer

A)  an increase in official international reserves
B)  a decrease in merchandise exports
C)  an increase in net transfers
D)  a decrease in capital outflowsE) A) and D)
F) A) and B)

Question 7

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Accepted Answer

A)  an increase in merchandise exports
B)  a decrease in exports of services
C)  an increase in official reserves
D)  an increase in net transfersE) C) and D)
F) B) and C)

Question 8

The current exchange-rate system is an "almost" flexible exchange-rate system.

Accepted Answer

A) True 
 B)False

Question 9

The foreign demand curve for a nation's currency is considered to be a derived demand because:

Accepted Answer

A)  it stems from the willingness of consumers in one country to buy goods and services from another country.
B)  it stems from the willingness of consumers within their country to buy goods and services that are produced within their country.
C)  it is derived from the demand of governments.
D)  it is derived by a nation's central bank.E) None of the above
F) All of the above

Question 10

The exchange rate system currently used by the industrially advanced nations is:

Accepted Answer

A)  the gold standard.
B)  the Bretton Woods system.
C)  the managed float.
D)  a fixed rate system.E) B) and C)
F) None of the above

Question 11

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Accepted Answer

A) True 
 B)False

Question 12

Under a system of fixed exchange rates, a nation which experiences chronic balance of payments deficits may:

Accepted Answer

A)  initiate protectionist trade policies.
B)  run short of international monetary reserves.
C)  be forced to use contractionary monetary and fiscal policies.
D)  do all of the above.E) C) and D)
F) A) and B)

Question 13

If the dollar price of yen rises, then:

Accepted Answer

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)  all of the above will occur.E) None of the above
F) A) and C)

Question 14

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars.  Refer to the information above.Canada had a merchandise trade:

Accepted Answer

A)  surplus of $137 billion.
B)  surplus of $9 billion.
C)  deficit of $9 billion.
D)  deficit of $128 billionE) A) and D)
F) B) and D)

Question 15

International financial transactions mostly fall into two broad categories:

Accepted Answer

A)  international asset transactions and international gold transactions.
B)  international asset transactions and transactions in the stock market.
C)  international trade and international development.
D)  international trade and international asset transactions.E) A) and C)
F) All of the above

Question 16

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Accepted Answer

A)  merchandise imports
B)  changes in foreign currency reserves
C)  capital outflows
D)  exports of servicesE) A) and B)
F) A) and C)

Question 17

The purchasing-power-parity theory holds that exchange rates equate the purchasing power of various currencies.

Accepted Answer

A) True 
 B)False

Question 18

1 and S1.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates: A) gold would flow from Mexico to Canada. B) the peso price of dollars would rise from 1/B pesos equals $1 to, 1/A pesos equals $1. C) a problem of rationing a shortage of pesos would arise in Canada. D) the dollar price of pesos would increase to C dollars equals 1 peso." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

Accepted Answer

A)  gold would flow from Mexico to Canada.
B)  the peso price of dollars would rise from 1/B pesos equals $1 to, 1/A pesos equals $1.
C)  a problem of rationing a shortage of pesos would arise in Canada.
D)  the dollar price of pesos would increase to C dollars equals 1 peso.E) C) and D)
F) A) and B)

Question 19

Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Accepted Answer

A)  100 British pounds.
B)  3.88 British pounds.
C)  0.60 British pounds.
D)  1.25 British pounds.E) A) and B)
F) A) and D)

Question 20

Which one of the following will not directly affect Canada's balance on current account?

Accepted Answer

A)  an increase in merchandise imports
B)  an increase in capital outflows from Canada
C)  a decrease in net investment income
D)  an increase in imports of servicesE) A) and D)
F) A) and C)

Exam 18: B: The Balance of Payments and Exchange Rates

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Correct Answer
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The exchange rate system currently used by the industrially advanced nations is:

Correct Answer
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International financial transactions mostly fall into two broad categories:

Correct Answer
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The foreign demand curve for a nation's currency is considered to be a derived demand because:

Correct Answer
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A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Correct Answer
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Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Correct Answer
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Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

Correct Answer
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If the dollar price of yen rises, then:

Correct Answer
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The current exchange-rate system is an "almost" flexible exchange-rate system.

Correct Answer
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Which one of the following, other things equal, will directly alter Canada's balance of trade?

Correct Answer
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The following table shows the balance of payments statement of Transylvania in 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania imported more products than it exported.

Correct Answer
verified

Under a system of fixed exchange rates, a nation which experiences chronic balance of payments deficits may:

Correct Answer
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Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if economic growth is more rapid in Switzerland than in Britain:

Correct Answer
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Correct Answer
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Which one of the following will not directly affect Canada's balance on current account?

Correct Answer
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Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Correct Answer
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According to the purchasing power parity theory of exchange rates:

Correct Answer
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The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. Refer to the information above.Canada had a merchandise trade:

Correct Answer
verified

The purchasing-power-parity theory holds that exchange rates equate the purchasing power of various currencies.

Correct Answer
verified

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Correct Answer
verified

Exam 18: B: The Balance of Payments and Exchange Rates

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Correct AnswerverifiedShow Answer

The exchange rate system currently used by the industrially advanced nations is:

Correct AnswerverifiedShow Answer

International financial transactions mostly fall into two broad categories:

Correct AnswerverifiedShow Answer

The foreign demand curve for a nation's currency is considered to be a derived demand because:

Correct AnswerverifiedShow Answer

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Correct AnswerverifiedShow Answer

Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The initial demand for and supply of pesos are shown by D1 and S1.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

Correct AnswerverifiedShow Answer

If the dollar price of yen rises, then:

Correct AnswerverifiedShow Answer

The current exchange-rate system is an "almost" flexible exchange-rate system.

Correct AnswerverifiedShow Answer

Which one of the following, other things equal, will directly alter Canada's balance of trade?

Correct AnswerverifiedShow Answer

The following table shows the balance of payments statement of Transylvania in 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania imported more products than it exported.

Correct AnswerverifiedShow Answer

Under a system of fixed exchange rates, a nation which experiences chronic balance of payments deficits may:

Correct AnswerverifiedShow Answer

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if economic growth is more rapid in Switzerland than in Britain:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following will not directly affect Canada's balance on current account?

Correct AnswerverifiedShow Answer

Which one of the following will directly affect Canada's balance on goods and services, but not affect its balance of trade?

Correct AnswerverifiedShow Answer

According to the purchasing power parity theory of exchange rates:

Correct AnswerverifiedShow Answer

The following table shows the trade between Canada and Transylvania for the year 2012.All figures are in billions of dollars. Refer to the information above.Canada had a merchandise trade:

Correct AnswerverifiedShow Answer

The purchasing-power-parity theory holds that exchange rates equate the purchasing power of various currencies.

Correct AnswerverifiedShow Answer

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Correct AnswerverifiedShow Answer

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Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.If the decline in Canadian imports from Mexico described in the previous question occurred under a system of flexible exchange rates:

Correct Answer
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