Name: 
 

Unit 14 - PRACTICE Quiz - MACRO Open Economy



Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 

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
 
practice
 

 2. 

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.
 
 
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
 

 3. 

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
 

 4. 

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
 

 5. 

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
 

 6. 

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
 

 7. 

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
 

 8. 

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
 

 9. 

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
 

 10. 

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.
 

 11. 

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.
 

 12. 

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
 

 13. 

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.
 

 14. 

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
 

True/False
Indicate whether the statement is true or false.
 

 15. 

The balance of payments always equals zero.
 

 16. 

The U.S. currently operates under a gold standard.
 



 
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