Multiple Choice Identify the
choice that best completes the statement or answers the question.
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1.
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The three major components of the current account are
a. | merchandise exports, merchandise imports, and net unilateral transfers
abroad. | b. | outflow of U.S. foreign capital, inflow of foreign capital, and statistical
discrepancy. | c. | exports of goods and services, imports of goods and services, and net unilateral
transfers abroad. | d. | exports of goods and services, imports of goods
and services, and inflow of foreign capital. | e. | none of the
above |
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2.
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If country A has a "merchandise trade deficit," then
a. | producers in country A have sold more than they produced in a given year and
therefore will experience an increase in inventories. | b. | consumers in country A have bought more
products from their own nation than from other countries. | c. | consumers in country
A have bought more products from other countries than from their own nation. | d. | consumers in country
A have bought more of other countries' products than other countries' consumers have bought
of country A's products. | e. | consumers in other countries have bought more
of country A's products than country A's consumers have bought of other countries'
products. |
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Exhibit 19-1
Components of the Balance of Payments | ($ billions) | Exports of goods and services | +
440 | Merchandise exports
(including military sales) | + 280 | Exports of services | + 40 | Income from U.S. assets abroad | +
120 | Imports of goods and
services | – 490 | Merchandise imports (including military purchases) | –
360 | Imports of
services | – 60 | Income from foreign assets in U.S. | –
70 | Net unilateral
transfers abroad | – 11 | Outflow of U.S. capital | – 26 | Inflow of foreign capital | +
88 | Increase in U.S.
official reserve assets | – 14 | Increase in foreign official assets in U.S. | +
13 | Statistical
discrepancy | 0 | | |
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3.
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Refer to Exhibit 19-1. The capital account balance equals __________ billions of
dollars.
a. | +61 | b. | -61 | c. | +44 | d. | -54 | e. | none of the
above |
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4.
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If exports of goods and services are $450 billion, imports of goods and services
are $500 billion, unilateral transfers made by U.S. citizens to foreigners are $5 billion, and
unilateral transfers made by foreigners to U.S. citizens are $4 billion, then the current account
balance will be __________ billion.
a. | +$49 | b. | -$49 | c. | +$51 | d. | -$51 | e. | +$41 |
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5.
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If U.S. purchases of foreign assets equal $200 billion, U.S. loans to foreigners
equal $150 billion, foreign purchases of U.S. assets equal $275 billion, and foreign loans to
Americans equal $135 billion, then the capital account balance equals __________ billion.
a. | +$40 | b. | -$40 | c. | +$60 | d. | +$10 | e. | -$60 |
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6.
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The higher the U.S. dollar price per Mexican peso, the __________ Mexican goods
are for Americans and the __________ Mexican goods Americans will buy; thus __________ pesos will be
demanded.
a. | more expensive; fewer, more | b. | less expensive; more, fewer | c. | more expensive;
fewer, fewer | d. | less expensive; fewer, more | e. | none of the
above |
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7.
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An American computer is priced at $2,000. If the exchange rate between the U.S.
dollar and the Mexican peso is $.103 = 1 peso, approximately how many pesos will a Mexican buyer pay
for the computer?
a. | 206 pesos | b. | 2,000 pesos | c. | 19,417
pesos | d. | 20,000 pesos |
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8.
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Which of the following exchange rates between the dollar and the peso would a
Mexican buyer of American goods most prefer?
a. | $.20 = 1 peso | b. | $.15 = 1 peso | c. | $.125 = 1
peso | d. | $.10 = 1 peso |
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9.
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Suppose the exchange rate between U.S. dollars and Japanese yen was initially
$0.01 = 1 yen, but then changed to $0.012 = 1 yen. Which of the following is more likely to appear
cheaper to the buyer and therefore more likely to happen now?
a. | An American will take a vacation in Japan. | b. | Toyota will sell a
Japanese-built car in America | c. | Oracle (an American company) will sell more
U.S. produced software to Japanese firms | d. | A Japanese will take a vacation in
Hawaii | e. | c and d above |
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10.
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The market in which the currencies of different countries are exchanged is
called the
a. | money market. | b. | capital market. | c. | foreign exchange
market. | d. | loanable funds market. |
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11.
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The current international monetary system is best described as a
a. | fixed exchange rate system. | b. | flexible exchange rate
system. | c. | managed flexible exchange rate system. | d. | dollar standard. | e. | partial gold
standard. |
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12.
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Components of the capital account include
a. | exports of goods and services. | b. | inflow of foreign capital. | c. | net unilateral
transfers abroad. | d. | imports of goods and
services. | e. | a and d |
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13.
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If it takes 118 Japanese yen to buy one dollar, then how many dollars does it
take to buy one yen?
a. | $0.0085 | b. | $1.18 | c. | $0.85 | d. | $0.01286 | e. | There is not enough
information to answer the question. |
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14.
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Who would be hurt if the U.S. dollar fell by about 10% with respect to the
Canadian dollar?
a. | U.S. companies that compete with imports from Canada | b. | U.S. companies that
export to Canada | c. | U.S. tourists traveling to Canada | d. | U.S. residents that hold Canadian
dollars |
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True/False Indicate whether the
statement is true or false.
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15.
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The balance of payments always equals zero.
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16.
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The U.S. currently operates under a gold standard.
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