Question 1

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Accepted Answer

A)   U.S. purchases of foreign goods and services
B)   Payments to foreign owners of U.S. assets
C)   Transfer payments from foreign individuals, firms, or governments to U.S. residents
D)   Domestic purchases of U.S. goods and services

Question 2

Net exports equal

Accepted Answer

A)   imports − exports.
B)   domestic consumption − foreign consumption.
C)   exports − imports.
D)   foreign consumption − domestic consumption.

Question 3

In a currency board arrangement, participating countries make an explicit legislative
Commitment to
I. use the currency of the largest (based on real GDP)  participating country.
II. exchange domestic currency for a specified foreign currency at a fixed rate and agreed to
Submit to the board's disciplines to fulfill its obligations.
III. adopt common monetary and fiscal policies prescribed by the board.

Accepted Answer

A)   I only
B)   II only
C)   II and III only
D)   I, II, and III

Question 4

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100
Billion, and foreign purchase of Boulinas' assets equal $200 billion. What is the value of
Boulinas' imports?

Accepted Answer

A)   $100 billion
B)   -$100 billion
C)   $150 billion
D)   -$150 billion

Question 5

An exchange rate system in which prices of various currencies are fixed relative to a given
Quantity of some commodity is called a

Accepted Answer

A)   managed float system.
B)   free-floating exchange rate system.
C)   commodity standard system.
D)   fixed exchange rate system.

Question 6

Managed floating is typically undertaken by a country to

Accepted Answer

A)   maximize a country's net exports.
B)   attract foreign investors to invest in the country.
C)   keep inflation moderate.
D)   prevent sudden large swings in the value of a nation's currency.

Question 7

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in
Value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports as a result of these two
Events?

Accepted Answer

A)   Net exports must necessarily rise.
B)   Net exports must necessarily fall.
C)   Net exports will remain constant.
D)   The effect on net exports is indeterminate.

Question 8

Technological changes have changed production worldwide toward the application of
Computers to manufacturing processes. How does this affect countries that have a
Comparative advantage in the production of high-tech equipment, such as the United States?

Accepted Answer

A)   U.S. high-tech equipment manufacturers will face increased competition.
B)   U.S. exports will rise because of an increased demand for high-tech equipment.
C)   In the U.S., the cost of producing high-tech equipment will rise because of greater demand.
D)   U.S. imports will rise because the increased demand for high-tech equipment will require an increase in raw materials and other inputs.

Question 9

Which of the following is an example of a quota?

Accepted Answer

A)   Limit on the total number of Hondas that can be imported from Japan
B)   Regulation specifying that each imported Honda must meet certain emission exhaust guidelines
C)   Tax of $500 on each Honda imported from Japan
D)   Tax of 10% of the value of each Honda imported from Japan

Question 10

Under the Bretton Woods system, each currency's value was to be fixed relative to other currencies. What was the mechanism for maintaining these rates?

Accepted Answer

A)   A currency board made up of representatives from all participating nations
B)   A currency board made up of representatives from the 12 largest (based on real GDP)  participating nations
C)   Intervention by governments and central banks in the currency market
D)   Joint intervention by the Federal Reserve of the United States and the British Central Bank

Question 11

Of the systems listed below, the exchange rate system in which a country's ability to
Conduct independent monetary policy is most limited is the

Accepted Answer

A)   free-floating exchange rate system.
B)   floating exchange rate system.
C)   managed float exchange rate system.
D)   currency board exchange rate system.

Question 12

When countries seek to maintain fixed exchange rates through intervention, their governments or central banks

Accepted Answer

A)   rarely have to intervene in currency markets because the exchange rate is fixed.
B)   can always rely on foreign governments or central banks to intervene in currency markets when necessary.
C)   must buy domestic currency when foreign demand for their currency increases.
D)   must sell domestic currency when foreign demand for their currency increases.

Question 13

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

Accepted Answer

A)   Net exports increases and shifts the short-run aggregate supply curve to the right.
B)   Net exports decreases and shifts the short-run aggregate supply curve to the right.
C)   Net exports increases and shifts the aggregate demand curve to the right.
D)   Net exports decreases and shifts the aggregate demand curve to the left.

Question 14

Prosperity in the United States will

Accepted Answer

A)   increase imports of the United States.
B)   increase exports of the United States.
C)   increase imports and exports of the United States.
D)   eventually lead to prosperity in foreign countries too.

Question 15

When foreigners purchase U.S. assets, there is an inflow of funds from abroad and this is recorded as a

Accepted Answer

A)   positive item in the capital account.
B)   positive item in the current account.
C)   negative item in the capital account.
D)   negative item in the current account.

Question 16

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200
Billion, and foreign purchase of Jaffe's assets equal $100 billion. What is the value of Jaffe's
Exports?

Accepted Answer

A)   $100 billion
B)   -$100 billion
C)   $150 billion
D)   -$150 billion

Question 17

Employment in the long run does not depend on the trade deficit.

Accepted Answer

A) True 
 B)False

Question 18

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and
Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's
Assets purchased by foreigners?

Accepted Answer

A)   $50 billion
B)   -$50 billion
C)   $850 billion
D)   -$850 billion

Question 19

The current account is

Accepted Answer

A)   an accounting statement that includes all spending flows within a nation's borders.
B)   an accounting statement that includes all spending flows across a nation's border, except those that represent the purchases of assets.
C)   equal to value of a country's exports.
D)   equal to value of a country's imports.

Question 20

All other things unchanged, a recession in Japan

Accepted Answer

A)   increases U.S. net exports and shifts the U.S. aggregate demand curve to the right.
B)   decreases U.S. net exports and shifts the U.S. aggregate demand curve to the right.
C)   increases U.S. net exports and shifts the U.S. aggregate demand curve to the left.
D)   decreases U.S. net exports and shifts the U.S. aggregate demand curve to the left.

Exam 15: Net Exports and International Finance

Of the systems listed below, the exchange rate system in which a country's ability to Conduct independent monetary policy is most limited is the

Correct Answer
verified

When countries seek to maintain fixed exchange rates through intervention, their governments or central banks

Correct Answer
verified

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Billion, and foreign purchase of Boulinas' assets equal $200 billion. What is the value of Boulinas' imports?

Correct Answer
verified

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

Correct Answer
verified

An exchange rate system in which prices of various currencies are fixed relative to a given Quantity of some commodity is called a

Correct Answer
verified

All other things unchanged, a recession in Japan

Correct Answer
verified

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's Assets purchased by foreigners?

Correct Answer
verified

The current account is

Correct Answer
verified

Employment in the long run does not depend on the trade deficit.

Correct Answer
verified

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Billion, and foreign purchase of Jaffe's assets equal $100 billion. What is the value of Jaffe's Exports?

Correct Answer
verified

Technological changes have changed production worldwide toward the application of Computers to manufacturing processes. How does this affect countries that have a Comparative advantage in the production of high-tech equipment, such as the United States?

Correct Answer
verified

Prosperity in the United States will

Correct Answer
verified

Correct Answer
verified

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Correct Answer
verified

Which of the following is an example of a quota?

Correct Answer
verified

Net exports equal

Correct Answer
verified

When foreigners purchase U.S. assets, there is an inflow of funds from abroad and this is recorded as a

Correct Answer
verified

Under the Bretton Woods system, each currency's value was to be fixed relative to other currencies. What was the mechanism for maintaining these rates?

Correct Answer
verified

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in Value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports as a result of these two Events?

Correct Answer
verified

Managed floating is typically undertaken by a country to

Correct Answer
verified

Exam 15: Net Exports and International Finance

Of the systems listed below, the exchange rate system in which a country's ability to Conduct independent monetary policy is most limited is the

Correct AnswerverifiedShow Answer

When countries seek to maintain fixed exchange rates through intervention, their governments or central banks

Correct AnswerverifiedShow Answer

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Billion, and foreign purchase of Boulinas' assets equal $200 billion. What is the value of Boulinas' imports?

Correct AnswerverifiedShow Answer

All other things unchanged, what happens if the U.S. reduces its quota on sugar imports?

Correct AnswerverifiedShow Answer

An exchange rate system in which prices of various currencies are fixed relative to a given Quantity of some commodity is called a

Correct AnswerverifiedShow Answer

All other things unchanged, a recession in Japan

Correct AnswerverifiedShow Answer

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Purchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's Assets purchased by foreigners?

Correct AnswerverifiedShow Answer

The current account is

Correct AnswerverifiedShow Answer

Employment in the long run does not depend on the trade deficit.

Correct AnswerverifiedShow Answer

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Billion, and foreign purchase of Jaffe's assets equal $100 billion. What is the value of Jaffe's Exports?

Correct AnswerverifiedShow Answer

Technological changes have changed production worldwide toward the application of Computers to manufacturing processes. How does this affect countries that have a Comparative advantage in the production of high-tech equipment, such as the United States?

Correct AnswerverifiedShow Answer

Prosperity in the United States will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following affects the quantity of U.S. dollars demanded in the currency market?

Correct AnswerverifiedShow Answer

Which of the following is an example of a quota?

Correct AnswerverifiedShow Answer

Net exports equal

Correct AnswerverifiedShow Answer

When foreigners purchase U.S. assets, there is an inflow of funds from abroad and this is recorded as a

Correct AnswerverifiedShow Answer

Under the Bretton Woods system, each currency's value was to be fixed relative to other currencies. What was the mechanism for maintaining these rates?

Correct AnswerverifiedShow Answer

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in Value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports as a result of these two Events?

Correct AnswerverifiedShow Answer

Managed floating is typically undertaken by a country to

Correct AnswerverifiedShow Answer

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