10) The foreign exchange rate describes the A) balance of trade B) balance of pa
ID: 1198324 • Letter: 1
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10) The foreign exchange rate describes the A) balance of trade B) balance of payments C) law of comparative advantage D) price of a foreign currency in terms of domestic currency 11) In a system of flexible or floating exchange rates currency values are determined by the government of the exporting country the government of the importing country the forces of supply and demand the IMF A) B) C) D) 12) Under a floating rate system, an increase in the value of the US dollar in terms of other currencies is referred to as A) a depreciation of the dollar B) an appreciation of the dollar C) monetizing the dollar D) a devaluation of the dollar 13) Which of the following would NOT increase European exports to the U.S.? A) An appreciation of the US dollar B) A depreciation of the Eureo C) An appreciation of the Euro D) An increase in U.S. demand for European goods 14) Suppose the exchange rate is 1 Pound -$1.50, then it moves to 1 Pound -$1.90. we would expect to see A) more imports from the UK B) more U.S. tourism in the UK C) more U.S. exports to the UK D) no change in imports or exports 15) All of the following are determinants of exchange rates EXCEPT A) changes in productivity in one country relative to another B) changes in real interest rates in one country relative to another C) changes in product preferences between countries D) the minting of new gold coins in one country 16) If the U.S. is assumed to be more politically and economically stable relative to the rest of the world, this will likely A) decrease the demand for dollars B) increase the demand for dollars C) have no effect on the demand for dollars D) cause the dollar to depreciate 17) As the dollar price of the Euro falls (eg goes from S1 = 1 Euro to S-90-1 Euro) A) Americans will buy fewer European goods B) The quantity of Euros supplied will increase C) European goods will be less expensive for Americans D) Europeans will increase their purchases of U.S. assets 18) An increase in a country's rate of inflation relative to other countries will likely Worsen its balance of trade and payments ) Improve its balance of trade and payments C) Lower its nominal interest rates D) Cause an increased demand for that country's goods A)Explanation / Answer
3)
If a country has an absolute advantage in every good, then b) it should still exports those goods in which it has a comparative advantage.
4)
A new industry is developing in a country and that country wants to give it time to grow and become competitive in world markets. c) Anti dumping.
5)
Dumping occurs when, in a foreign market, a good is sold c) below its nominal price.
6)
A tariff is c) a tax on imported goods.
7)
An import quota specifies c) the maximum amount of good that can be imported during a specified period.
8)
Quotas and tariffs both serve the purpose of b) restricting international trade.
9)
A problem of facing less developed countries expanding their economic growth is d) all of the above.
10)
The foreign exchange rate describes the d) price of foreign currency in terms of domestic currency.
11)
In the system of flexible exchange rates exchange rates, currency rates are determined by c) the forces of supply and demand.
12)
Under floating exchange rate system, an increase in the value of US dollar in terms of other currencies is referred to as b) an appreciation of the Euro.
13)
c) An appreciation of the Euro would not increase European exports to the U.S.
14)
Suppose the exchange rate is 1 pound = $1.50, then it moves to 1 pound = $1.90. We would expect to see c0 more U.S. exports to the UK.
15)
c) Changes in product preference is not a determinant of exchange rates.
16)
If the U.S. is assumed to be more politically and economically stable relative to the rest of the world, this will likely b) increase the demand for dollars.
17)
As the dollar price of the Euro falls then c) European goods will be less expensive for Americans.
18)
An increase in a country's rate of inflation relative to other countries will a) worsen its balance of trade and payments.
19)
When a dinner in London costs 50 pounds, it will cost an American tourist how much if the exchange rate is 1 pound= $1.80 c) $90
20)
An increase in interest rates in the U.S will most likely a) lead to an inflow of capital to the U.S. and an appreciation of the dollar.
21)
The balance of payments is c) a summary of a country's purchases and sales in the world market.
22)
If a country's exports exceed imports the country is said to have d) negative trade balance.
23)
For balance of payments purposes, official reserve assets include all of the following except d) gifts to foreign countries.
24)
All of the following would be considered a current account transaction except c0 importing of caital.
25)
c) A Japanese buys US govt. bond will lead to an inflow of funds in the US capital account.
26)
An important problem of gold standard was that b) it was too complicated.
27)
Since WWII the US has generally run a) current account deficit.
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