1-) When there is a deficit in the U.S. balance of payments on the current accou
ID: 1099046 • Letter: 1
Question
1-) When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:
A. allowing the price of currency to rise.
B. allowing the price of currency to fall.
C. buying assets from other countries.
D. selling assets to other countries.
2-) In 2010, the $471 billion deficit on the U.S. current account was offset by a surplus of $255 billion on financial account. This difference is the result of:
A. budget deficit.
B. statistical discrepancy.
C. trade deficit.
D. national debt.
3-) (Figure: International Capital Flows) Refer to the information in the figure. At an interest rate of 4%, the quantity of loanable funds supplied by American lenders is ______ the quantity of loanable funds demanded by American borrowers.
A. greater than
B. less than
C. equal to
D. not related to
4-) In countries with rapidly growing economies, like China and India, the demand for loanable funds is _______ and interest rates are _______ than in countries with slowly growing economies.
A. larger; higher
B. larger; lower
C. smaller; higher
D. smaller; lower
5-) (Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure. A movement from E1 to E2 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe.
A. the same amount of
B. fewer
C. more
D. The answer cannot be determined from the information provided
6-) (Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure. A movement from E2 to E1 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe.
A. the same amount of
B. fewer
C. more
D. The answer cannot be determined from the information provided
7-) A depreciation of the domestic currency below the exchange rate fixed by the government can be countered by all of the following measures EXCEPT by:
A. decreasing capital flows out of the country.
B. limiting the domestic purchase of foreign financial assets.
C. decreasing capital flows into the country.
D. decreasing foreign exchange reserves.
8-) To fix its exchange rate, a government can use:
A. competition.
B. exchange market intervention.
C. speculation.
D. arbitrage.
9-) When countries seek to maintain fixed exchange rates through intervention, their governments or central banks:
A. never have to intervene in currency markets because the exchange rate is fixed.
B. may have to stop printing domestic currency.
C. must buy domestic currency when foreign demand for their currency increases.
D. must sell domestic currency when foreign demand for their currency increases.
10-) The 2001 devaluation of the Argentinean peso had all the following effects EXCEPT:
A. promoting Argentinean exports.
B. helping close a recessionary gap.
C. reducing the deficit of the balance on current account.
D. helping close an inflationary gap.
Explanation / Answer
1-) When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:
A. allowing the price of currency to rise.
B. allowing the price of currency to fall.
C. buying assets from other countries.
D. selling assets to other countries.
2-) In 2010, the $471 billion deficit on the U.S. current account was offset by a surplus of $255 billion on financial account. This difference is the result of:
A. budget deficit.
B. statistical discrepancy.
C. trade deficit.
D. national debt.
3-) (Figure: International Capital Flows) Refer to the information in the figure. At an interest rate of 4%, the quantity of loanable funds supplied by American lenders is ______ the quantity of loanable funds demanded by American borrowers.
A. greater than
B. less than
C. equal to
D. not related to
4-) In countries with rapidly growing economies, like China and India, the demand for loanable funds is _______ and interest rates are _______ than in countries with slowly growing economies.
A. larger; higher
B. larger; lower
C. smaller; higher
D. smaller; lower
5-) (Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure. A movement from E1 toE2 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe.
A. the same amount of
B. fewer
C. more
D. The answer cannot be determined from the information provided
6-) (Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure. A movement from E2 toE1 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe.
A. the same amount of
B. fewer
C. more
D. The answer cannot be determined from the information provided
7-) A depreciation of the domestic currency below the exchange rate fixed by the government can be countered by all of the following measures EXCEPT by:
A. decreasing capital flows out of the country.
B. limiting the domestic purchase of foreign financial assets.
C. decreasing capital flows into the country.
D. decreasing foreign exchange reserves.
8-) To fix its exchange rate, a government can use:
A. competition.
B. exchange market intervention.
C. speculation.
D. arbitrage.
9-) When countries seek to maintain fixed exchange rates through intervention, their governments or central banks:
A. never have to intervene in currency markets because the exchange rate is fixed.
B. may have to stop printing domestic currency.
C. must buy domestic currency when foreign demand for their currency increases.
D. must sell domestic currency when foreign demand for their currency increases.
10-) The 2001 devaluation of the Argentinean peso had all the following effects EXCEPT:
A. promoting Argentinean exports.
B. helping close a recessionary gap.
C. reducing the deficit of the balance on current account.
D. helping close an inflationary gap.
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