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| 1 | |
If the rate of exchange for a euro is $1.25, the rate of exchange for the dollar is: |
| | A) | .8 euros |
| | B) | .75 euros |
| | C) | .25 euros |
| | D) | $4 |
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| 2 | |
In the U.S. balance of payments, tuition payments by foreign exchange students studying in the U.S. are recorded as a: |
| | A) | negative entry |
| | B) | current account entry |
| | C) | capital account entry |
| | D) | official reserves entry |
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| 3 | |
The Bretton Woods system: |
| | A) | relied on fixed exchange rates and gold convertibility |
| | B) | was replaced by the gold standard in 1971 |
| | C) | ended when the U.S. stopped official exchanges of gold for $35 per ounce |
| | D) | was the natural successor to the managed float system |
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| 4 | |
Which of the following is not included in the current account in the U.S. balance of payments? |
| | A) | net transfers |
| | B) | net investment income |
| | C) | foreign purchases of assets in the U.S. |
| | D) | U.S. goods and services exports and imports |
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| 5 | |
Suppose that Canada and Mexico allow their currencies to float. Other things equal, if the Canadian central bank raises Canadian interest rates relative to Mexican rates: |
| | A) | the Canadian dollar will appreciate relative to the Mexican peso |
| | B) | Mexico will be forced to accept policies leading to lower unemployment and higher prices |
| | C) | gold will flow into Canada |
| | D) | Mexico will be forced to sell official dollar reserves to maintain price stability |
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| 6 | |
In recent years, the U.S. has had significant deficits in both its current and capital and financial accounts. |
| | A) | True |
| | B) | False |
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| 7 | |
Which of the following is always entered as a negative number in a country's balance of payments? |
| | A) | Net transfers |
| | B) | Net investment income |
| | C) | Goods exports |
| | D) | U.S. purchases of assets abroad |
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| 8 | |
If the exchange rate changes so that fewer Swiss francs are required to buy a Mexican peso, then: |
| | A) | the franc has appreciated relative to the peso |
| | B) | Mexicans will buy more Swiss goods and services |
| | C) | the franc has depreciated relative to the peso |
| | D) | gold will flow from Mexico to Switzerland |
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| 9 | |
Which of the following represents a source of foreign exchange for the U.S. and would therefore be recorded as a credit in its balance of payments account? |
| | A) | A U.S. airline purchases an Airbus A300 from the European consortium |
| | B) | Foreign tourists spend money in the U.S. |
| | C) | A U.S. distributor purchases 1000 cases of fine French wine |
| | D) | The U.S. sends foreign aid to Iraq |
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| 10 | |
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 goods is: |
| | A) | a $35 billion deficit |
| | B) | a $50 billion deficit |
| | C) | a $20 billion deficit |
| | D) | balanced - neither deficit nor surplus |
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