Question 1

Explain how exchange rates are determined in a managed float exchange rate system. Discuss the advantages and disadvantages of a managed float system.

Accepted Answer

In a managed float exchange rate system,...

Question 2

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

Accepted Answer

A)   $50 billion
B)   -$50 billion
C)   $850 billion
D)   -$850 billionE) A) and D)
F) None of the above

Question 3

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is the value of foreign
Jassets purchased by the citizens of Salvania?

Accepted Answer

A)   $100 billion
B)   -$100 billion
C)   $300 billion
D)   -$300 billionE) All of the above
F) C) and D)

Question 4

Which of the following is an advantage of a free-floating exchange rate system?

Accepted Answer

A)   A free-floating exchange rate acts as a buffer to insulate an economy from the impact of international events.
B)   Under a system of free-floating exchange rates, a nation will, over the long run, experience more surpluses than deficits in its balance of payments.
C)   Fluctuating exchange rates reduces the risk involved in international transactions r and thus lower the cost of doing business with other countries.
D)   A free-floating exchange rate system improves the effectiveness of a country's monetary policy and promotes price stability.E) B) and C)
F) None of the above

Question 5

International finance is the study of economics that deals with

Accepted Answer

A)   the balance of trade
B)   the macroeconomic consequences of financial flows associated with international trade.
C)   international investment opportunities for American multinational corporations.
D)   the relationships among world currency dealers.E) A) and B)
F) B) and C)

Question 6

What is a quota?

Accepted Answer

A)   A restriction on exports
B)   A unit tax imposed on a product
C)   A ceiling on the amount of a good or service that can be exported
D)   A ceiling on the amount of a good or service that can be importedE) A) and B)
F) B) and D)

Question 7

If compared to Akerji, Bunyan can produce palm oil by giving up less of an alternative good Jthen, Bunyan has

Accepted Answer

A)   a higher foreign-trade multiplier than Akerji.
B)   a lower foreign-trade multiplier than Akerji.
C)   an absolute advantage in palm oil production.
D)   a comparative advantage in palm oil production.E) B) and C)
F) All of the above

Question 8

Which of the following statements is true?

Accepted Answer

A)   A positive balance on current account means a current account deficit.
B)   A negative balance on current account means a current account deficit.
C)   A positive balance on current account is a capital account surplus.
D)   A negative balance on current account means a capital account deficit.E) C) and D)
F) None of the above

Question 9

It is impossible to have a current account deficit and a current account surplus at the same
Jtime.

Accepted Answer

A) True 
 B)False

Question 10

Figure 15-1 
-Refer to Figure 15-1. The demand curve of dollars represents 
I. U.S. purchases of imported goods and services.
II. payments to U.S. owners of foreign assets.
III. demand for U.S. Treasury bonds by U.S. residents.
IV. foreigners' purchases of U.S. assets.

Accepted Answer

A)   I, II and IV.
B)   II and IV
C)   II and IV.
D)   I, II, III and IV.E) None of the above
F) All of the above

Question 11

The principle of comparative advantage states that a country should specialize in the
Jproduction of a good that it can produce at a lower monetary cost.

Accepted Answer

A) True 
 B)False

Question 12

A current account deficit is generally a result of imports exceeding exports.

Accepted Answer

A) True 
 B)False

Question 13

How has rising productivity in the United States affected the balance on capital account?

Accepted Answer

A)   It has attracted foreign investors, thereby increasing the surplus on capital account.
B)   It has attracted foreign investors, thereby decreasing the surplus on capital account.
C)   It has raised real wages and discouraged foreigners from investing in the U.S., thereby increasing the surplus on capital account.
D)   It has raised real wages and discouraged foreigners from investing in the U.S., thereby decreasing the surplus on capital account.E) A) and D)
F) B) and C)

Question 14

Which of the following statements is true about international trade?

Accepted Answer

A)   In the long-run, trade not only reduces employment in some sectors but also reduces employment in the economy as a whole.
B)   In the short-run, trade can reduce employment in some sectors and also in the economy as a whole.
C)   Owners of factors of production used in industries in which a nation lacks a comparative advantage are more likely to gain from trade than those owners of resources used in industries in which a country has a comparative advantage.
D)   Countries with relatively higher wage rates are more likely to be hurt by international trade.E) B) and C)
F) A) and B)

Question 15

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

Accepted Answer

A)   $50 billion
B)   -$50 billion
C)   $850 billion
D)   -$850 billionE) B) and C)
F) All of the above

Question 16

An exchange rate system in which prices of various currencies are fixed relative to a given Jquantity 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.E) B) and D)
F) A) and C)

Question 17

From 2008 to 2011, which euro nation had the greatest lack of fiscal discipline and the greatest risk of default on its debt?

Accepted Answer

A)   Germany
B)   France
C)   Denmark
D)   GreeceE) A) and B)
F) A) and C)

Question 18

A recession in foreign countries will

Accepted Answer

A)   decrease imports of the United States.
B)   decrease exports of the United States.
C)   have no effect on the aggregate demand of the United States.
D)   shift the aggregate supply curve of the United States.E) A) and D)
F) B) and D)

Question 19

The international trade effect results in

Accepted Answer

A)   a shift to the right in the aggregate demand curve.
B)   a shift to the left in the aggregate demand curve.
C)   a movement along the aggregate demand curve.
D)   a shift in the aggregate demand curve equal to the change in net exports times the multiplier.E) A) and B)
F) A) and C)

Question 20

One reason to demand a nation's currency is to facilitate foreigners' purchases of that
Jnation's goods.

Accepted Answer

A) True 
 B)False

Exam 15: Net Exports and International Finance

A recession in foreign countries will

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International finance is the study of economics that deals with

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

Correct AnswerverifiedShow Answer

From 2008 to 2011, which euro nation had the greatest lack of fiscal discipline and the greatest risk of default on its debt?

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A current account deficit is generally a result of imports exceeding exports.

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The principle of comparative advantage states that a country should specialize in the Jproduction of a good that it can produce at a lower monetary cost.

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Which of the following is an advantage of a free-floating exchange rate system?

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Which of the following statements is true?

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Which of the following statements is true about international trade?

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If compared to Akerji, Bunyan can produce palm oil by giving up less of an alternative good Jthen, Bunyan has

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How has rising productivity in the United States affected the balance on capital account?

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One reason to demand a nation's currency is to facilitate foreigners' purchases of that Jnation's goods.

Correct AnswerverifiedShow Answer

It is impossible to have a current account deficit and a current account surplus at the same Jtime.

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

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Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is the value of foreign Jassets purchased by the citizens of Salvania?

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The international trade effect results in

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

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What is a quota?

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Explain how exchange rates are determined in a managed float exchange rate system. Discuss the advantages and disadvantages of a managed float system.

Correct AnswerAnswered by ExamLex AIIn a managed float exchange rate system,...View AnswerShow Answer

Figure 15-1 -Refer to Figure 15-1. The demand curve of dollars represents I. U.S. purchases of imported goods and services. II. payments to U.S. owners of foreign assets. III. demand for U.S. Treasury bonds by U.S. residents. IV. foreigners' purchases of U.S. assets.

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In a managed float exchange rate system,...
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