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| 1 | |
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.1) U.S. goods exports | +180 | 2) U.S. goods imports | -200 | 3) U.S. service exports | +50 | 4) U.S. service imports | -80 | 5) Net investment income | -10 | 6) Net transfers | +25 | 7) Balance on capital account | +10 | 8) Foreign purchases of assets in the U.S. | +45 | 9) U.S. purchases of foreign assets abroad | -20 |
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 | |
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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| 4 | |
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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| 5 | |
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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| 6 | |
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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| 7 | |
Which of the following is always entered as a negative number in the U.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 | |
If a nation's balance on current account is positive and it has neither a deficit nor surplus in its overall balance of payments: |
| | A) | its imports exceed its exports |
| | B) | foreign purchases of its assets exceed its purchases of assets abroad |
| | C) | it has a trade deficit |
| | D) | it has a capital and financial account deficit |
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| 10 | |
Suppose the exchange rate is currently $1 = 6 Norwegian kroner. If a Big Mac costs $2.50 in the U.S. and there is purchasing power parity, the price of a Big Mac in Oslo is: |
| | A) | 40 kroner |
| | B) | 25 kroner |
| | C) | 15 kroner |
| | D) | 12.5 kroner |
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