Question 1

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 IIIE) A) and B)
F) None of the above

Question 2

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion.
Foreigners purchased $200 billion worth of assets in Cavland. What is Cavland's
Balance on its current account?

Accepted Answer

A)   $100 billion
B)   -$100 billion
C)   $300 billion
D)   -$300 billionE) B) and C)
F) None of the above

Question 3

Which of the following is an example of a tariff?

Accepted Answer

A)   A limit on the total number of Hondas that can be imported from Japan.
B)   A regulation specifying that each imported Honda must meet certain emission exhaust guidelines
C)   A tax of $500 on each Honda imported from Japan
D)   A tax of 10% of the value of each Honda purchased in JapanE) A) and D)
F) B) and C)

Question 4

The purchase of U.S. goods and services by foreigners

Accepted Answer

A)   requires the purchase of dollar-denominated bonds.
B)   increases the demand for U.S. dollars.
C)   increases the demand for foreign currencies.
D)   requires the purchase of U.S. financial assets as collateral.E) All of the above
F) None of the above

Question 5

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Accepted Answer

A)   a free-floating exchange rate system.
B)   a managed float.
C)   a fixed exchange rate system.
D)   a variable exchange rate system.E) All of the above
F) C) and D)

Question 6

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 Grovner's balance on its current account?

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.E) A) and B)
F) A) and C)

Question 9

Suppose that a change in consumer preferences leads to a $50 billion decrease in net exports.
If the value of the multiplier is 3, what is the size of the shift in the aggregate demand after
The multiplier process works through the economy?

Accepted Answer

A)   $150 billion
B)   $100 billion
C)   Less than $50 billion
D)   Cannot be determined without information on exportsE) A) and D)
F) C) and D)

Question 10

In the short run, a decrease in net exports causes

Accepted Answer

A)   an increase in real GDP and the price level.
B)   increase in real GDP and a decrease in the price level.
C)   decrease in real GDP and an increase in the price level.
D)   a decrease in real GDP and the price level.E) A) and C)
F) A) and B)

Question 11

Suppose a Peruvian financial investor purchases a sporting goods store in Colorado
Springs, Colorado. How will this transaction be recorded in U.S. international transactions?

Accepted Answer

A)   It is recorded in the current account as a positive (plus)  item.
B)   It is recorded in the current account as a negative (minus)  item.
C)   It is recorded in the capital account as a positive item.
D)   It is recorded in the capital account as a negative item.E) A) and B)
F) A) and C)

Question 12

A lower price level in the United States.

Accepted Answer

A)   discourages U.S. exports and increases U.S. imports.
B)   encourages U.S. exports and reduces U.S. imports.
C)   discourages U.S. exports and reduces U.S. imports.
D)   encourages U.S. exports and increases U.S. imports.E) C) and D)
F) None of the above

Question 13

In a simple currency board arrangement, a country can issue

Accepted Answer

A)   domestic currency at its discretion.
B)   at its discretion, the foreign currency to which the domestic currency is pegged.
C)   domestic currency when the board has an equivalent amount of foreign currency to which the domestic currency is pegged.
D)   foreign currency to which the domestic currency is pegged when the board has an equivalent amount of domestic currency.E) B) and C)
F) A) and C)

Question 14

Consider the market for U.S. dollars. Which of the following is true in equilibrium?
I. The quantity demanded of U.S. dollars equals the U.S. money supply.
II. U.S. exports + foreign purchases of U.S. assets equal U.S. imports + purchases of foreign
Assets by U.S. citizens.
III. The quantity demanded of U.S. dollars equals the quantity supplied of U.S. dollars.
IV. The quantity supplied of U.S. dollars by U.S. nationals equals the quantity demanded of U.S. dollars by foreign nationals.

Accepted Answer

A)   I and II.
B)   II and III.
C)   II and IV.
D)   III only.E) B) and C)
F) All of the above

Question 15

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) C) and D)
F) B) and C)

Question 16

Net exports equal

Accepted Answer

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

Question 17

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) B) and C)
F) B) and D)

Question 18

In the long run, international trade

Accepted Answer

A)   affects the economy's natural level of employment.
B)   affects the economy's real wage.
C)   does not affect the natural level of employment or the real wage.
D)   increases real wages because it increases a country's standard of living.E) All of the above
F) A) and D)

Question 19

An increase in exports would shift the U.S. aggregate demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 20

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.E) A) and B)
F) A) and C)

Exam 15: Net Exports and International Finance

Suppose that a change in consumer preferences leads to a $50 billion decrease in net exports. If the value of the multiplier is 3, what is the size of the shift in the aggregate demand after The multiplier process works through the economy?

Correct Answer
verified

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

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

Correct Answer
verified

An increase in exports would shift the U.S. aggregate demand curve to the left.

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 Grovner's balance on its current account?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Net exports equal

Correct Answer
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In a simple currency board arrangement, a country can issue

Correct Answer
verified

In the short run, a decrease in net exports causes

Correct Answer
verified

Suppose a Peruvian financial investor purchases a sporting goods store in Colorado Springs, Colorado. How will this transaction be recorded in U.S. international transactions?

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

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Correct Answer
verified

The purchase of U.S. goods and services by foreigners

Correct Answer
verified

A lower price level in the United States.

Correct Answer
verified

In the long run, international trade

Correct Answer
verified

The international trade effect results in

Correct Answer
verified

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. Foreigners purchased $200 billion worth of assets in Cavland. What is Cavland's Balance on its current account?

Correct Answer
verified

Which of the following is an example of a tariff?

Correct Answer
verified

Exam 15: Net Exports and International Finance

Suppose that a change in consumer preferences leads to a $50 billion decrease in net exports. If the value of the multiplier is 3, what is the size of the shift in the aggregate demand after The multiplier process works through the economy?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

An increase in exports would shift the U.S. aggregate demand curve to the left.

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 Grovner's balance on its current account?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net exports equal

Correct AnswerverifiedShow Answer

In a simple currency board arrangement, a country can issue

Correct AnswerverifiedShow Answer

In the short run, a decrease in net exports causes

Correct AnswerverifiedShow Answer

Suppose a Peruvian financial investor purchases a sporting goods store in Colorado Springs, Colorado. How will this transaction be recorded in U.S. international transactions?

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

The exchange rate system adopted by the European Union countries that are part of the eurozone can be described among the participating countries as

Correct AnswerverifiedShow Answer

The purchase of U.S. goods and services by foreigners

Correct AnswerverifiedShow Answer

A lower price level in the United States.

Correct AnswerverifiedShow Answer

In the long run, international trade

Correct AnswerverifiedShow Answer

The international trade effect results in

Correct AnswerverifiedShow Answer

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. Foreigners purchased $200 billion worth of assets in Cavland. What is Cavland's Balance on its current account?

Correct AnswerverifiedShow Answer

Which of the following is an example of a tariff?

Correct AnswerverifiedShow Answer

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