FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Balance of Payments, Exchange Rates, and Trade Deficits

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 141

Multiple Choice

Review LaterAdd Note

Review Later

Under an international gold standard,

A) exchange rates would fluctuate inversely with the domestic interest rates of the participating countries.
B) each nation must agree to depreciate its currency in direct proportion to the growth of its real GDP.
C) gold would flow into a nation experiencing a balance of payments surplus.
D) exchange rates would fluctuate directly with the domestic price levels of the various trading countries.

E) A) and C)
F) All of the above

Correct Answer

verified

Show Answer

Question 142

Multiple Choice

Review LaterAdd Note

Review Later

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity of Euros } \\\text { Supplied }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity of Euros } \\\text { Demanded }\end{array} \\\hline 400 & \$ 1.10 & 100 \\\hline 360 & 1.00 & 200 \\\hline 300 & 0.90 & 300 \\\hline 286 & 0.80 & 400 \\\hline 287 & 0.70 & 500 \\\hline\end{array}$ The table shows the supply and demand schedules for the European euro. Under a ?exible exchange-rate system, what will be the rate of exchange for one euro?

A) $0.80
B) $0.90
C) $1.00
D) $1.10

E) A) and B)
F) C) and D)

Correct Answer

verified

Show Answer

Question 143

Multiple Choice

Review LaterAdd Note

Which of the following combinations is plausible, as it relates to a nation's balance of payments?

In a graph showing the market supply and demand for British pounds in terms of U.S. dollars, the demand-for-pounds curve is downsloping because

Under a gold standard, a balance of payments disequilibrium would be corrected automatically by

With flexible exchange rates, an increase in U.S. interest rates can be expected to

If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is

Under a system of freely flexible (floating) exchange rates, a U.S. trade deficit with Mexico will tend to cause

Which one of the following will not directly affect the U.S. balance on the current account?

$\begin{array} { | l | r | } \hline \text { U.S. goods exports } & + \$ 390 \\\hline \text { U.S. goods imports } & - 498 \\\hline \text { U.S. service exports } & + 133 \\\hline \text { U.S. service imports } & - 107 \\\hline \text { Net investment income } & + 12 \\\hline \text { Net transfers } & - 22 \\\hline \text { Capital account } & - 5 \\\hline \text { Foreign purchases of U.S. assets } & + 156 \\\hline \text { U.S. purchases of foreign assets } & - 59 \\\hline\end{array}$ The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All ?gures are in billions of dollars. The balance on the ?nancial account was a

$\begin{array} { | l | c | } \hline \text { (1) US Goods Exports } & + \$ 100 \\\hline \text { (2) US Goods Imports } & - 80 \\\hline \text { (3) US Service Exports } & + 40 \\\hline \text { (4) US Service Imports } & - 90 \\\hline \text { (5) Net Investment Income } & + 20 \\\hline \text { (6) Net Transfers } & - 15 \\\hline \text { (7) Foreign Purchases of Assets in the United States } & + 30 \\\hline \text { (8) US Purchases of Foreign Assets Abroad } & - 10 \\\hline \text { (9) Balance on Capital Account } & + 5 \\\hline\end{array}$ The table contains hypothetical data for the U.S. balance of payments. All ?gures are in billions of dollars. The United States has a balance of goods

When the U.S. dollar decreases in value relative to foreign currencies, the

Assume that, under a system of floating exchange rates, Mexicans decide to increase their investments in the United States. As a result,

$\begin{array} { | l | c | } \hline \text { (1) US Goods Exports } & + \$ 100 \\\hline \text { (2) US Goods Imports } & - 80 \\\hline \text { (3) US Service Exports } & + 40 \\\hline \text { (4) US Service Imports } & - 90 \\\hline \text { (5) Net Investment Income } & + 20 \\\hline \text { (6) Net Transfers } & - 15 \\\hline \text { (7) Foreign Purchases of Assets in the United States } & + 30 \\\hline \text { (8) US Purchases of Foreign Assets Abroad } & - 10 \\\hline \text { (9) Balance on Capital Account } & + 5 \\\hline\end{array}$ The table contains hypothetical data for the U.S. balance of payments. All ?gures are in billions of dollars. Item 5 indicates

Explain what foreign exchange reserves are and how they are used when a country implements a fixed exchange rate policy.

Assume that Japan and the United States are engaged in a system of flexible exchange rates. If more people in the United States decide to purchase Japanese cars, what effect will this have on The market for yen?

The purchase of a British Rolls-Royce by a U.S. citizen would result in all the following except a(n)

At the time when a trade deficit is occurring, U.S. consumers benefit from having more goods and services available.

(Last Word) Which of the following is a disadvantage of belonging to a common currency?

The financial account balance is a nation's