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The following table contains hypothetical data for the U.S. balance of payments in a particular year. Answer the next question on the basis of this information. All figures are in billions of dollars.
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Refer to the above data. The U.S. balance on current account is a: |
| | A) | deficit of $10 billion |
| | B) | deficit of $25 billion |
| | C) | deficit of $35 billion |
| | D) | surplus of $10 billion |
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| 2 | |
Consider the following hypothetical exchange rates: $1 = .50 British pounds; 1 Chinese yuan = $.10. We can conclude that 1 pound trades for: |
| | A) | 10 yuan |
| | B) | 5 yuan |
| | C) | 1 yuan |
| | D) | 20 yuan |
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| 3 | |
U.S. imports of services create a demand for foreign currencies and reduce the amount of foreign currencies held by U.S. banks. |
| | A) | True |
| | B) | False |
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| 4 | |
Under the international gold standard, a country that had a balance of payments deficit would: |
| | A) | have to devalue its currency (decrease its international exchange value) |
| | B) | have to revalue its currency (increase its international exchange value) |
| | C) | experience an inflow of gold |
| | D) | experience an outflow of gold |
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| 5 | |
The currency futures market: |
| | A) | is the major source of macroeconomic instability in developing countries |
| | B) | is controlled by the International Monetary Fund |
| | C) | allows importers and exporters to reduce exchange rate risk |
| | D) | increases interest rate risk associated with international currency speculation |
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| 6 | |
If Nokia (a Finnish telephone manufacturer) purchases a production facility in the U.S., this will be recorded in the U.S. balance of payments as a: |
| | A) | debit in the current account |
| | B) | foreign currency outflow |
| | C) | credit in the capital and financial account |
| | D) | credit in the reserve account |
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| 7 | |
All else equal, the sale of Microsoft software to a French distributor: |
| | A) | creates a demand for euros |
| | B) | creates a supply of dollars |
| | C) | reduces the amount of euros held by U.S. banks |
| | D) | increases the amount of euros held by U.S. banks |
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| 8 | |
Use the following diagram to answer the next question:
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Refer to the diagram. At the equilibrium exchange rate: |
| | A) | $1 will buy 20 pesos |
| | B) | $1 will buy 5 pesos |
| | C) | 95 pesos will buy one dollar |
| | D) | 5 pesos will buy one dollar |
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| 9 | |
Use the following diagram to answer the next question:
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Refer to the diagram. Suppose the U.S. increases its imports from Mexico. All else equal, this would: |
| | A) | shift the demand curve to the left, causing the dollar to depreciate |
| | B) | shift the demand curve to the right, causing the dollar to depreciate |
| | C) | shift the supply curve to the right, causing the dollar to appreciate |
| | D) | shift the supply curve to the left, causing the peso to appreciate |
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| 10 | |
Which one of the following will add to a trade surplus? |
| | A) | a decrease in debt forgiveness |
| | B) | a decrease in imports of services |
| | C) | a decrease in net investment income |
| | D) | a decrease in U.S. purchases of assets abroad |
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