Question 1

Which of the following best describes the circumstances surrounding the breakdown of the Bretton Woods system?

Accepted Answer

A)  The United States was enjoying a persistent trade surplus.
B)  There was too much dependence on the dollar because no other country had a stable currency.
C)  Germany, with its strong currency, refused to defend the dollar.
D)  Speculators were betting on the depreciation of the U.S. dollar, and they started selling dollars in the foreign exchange market.
E)  The member countries began restricting free trade by introducing tariffs.F) A) and E)
G) None of the above

Question 2

If the British pound appreciates,U.S.television stations need fewer dollars to buy episodes of a British sitcom from the British Broadcasting Company.

Accepted Answer

A) True 
 B)False

Question 3

The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

Accepted Answer

A) True 
 B)False

Question 4

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Accepted Answer

A) True 
 B)False

Question 5

Net unilateral transfers in the United States have been _____

Accepted Answer

A)  positive every year since 1950.
B)  negative every year since 1950.
C)  positive every year since 1950, except in 1991 during the Persian Gulf War.
D)  negative every year since 1950, except in 1991 during the Persian Gulf War.
E)  positive about half the time and negative about half the time since 1950.F) A) and B)
G) A) and C)

Question 6

Any decrease in supply for foreign exchange,other things constant,will _____

Accepted Answer

A)  increase the number of foreign exchange units required to purchase dollars.
B)  decrease the number of dollars required to purchase one unit of foreign exchange.
C)  cause the dollar to appreciate.
D)  cause the foreign currency to depreciate.
E)  have no effect.F) B) and C)
G) None of the above

Question 7

Foreign exchange is foreign money _____

Accepted Answer

A)  used as an entry in the current account.
B)  used to price of foreign goods.
C)  used as an entry in the capital account.
D)  used as an entry in the balance of trade.
E)  needed to carry out international transactions.F) B) and D)
G) A) and E)

Question 8

Under the gold standard,_____

Accepted Answer

A)  a nation's currency was traded for gold at a fixed rate.
B)  a nation's central bank or monetary authority had absolute control over its money supply.
C)  new discoveries of gold had no effect on money supply or prices.
D)  prices were constant globally.
E)  all international transactions were financed with gold.F) B) and D)
G) B) and C)

Question 9

The current international monetary system is a _____

Accepted Answer

A)  flexible exchange rate system.
B)  fixed exchange rate system.
C)  system combining fixed and flexible exchange rates.
D)  gold standard.
E)  gold exchange rate system.F) B) and D)
G) A) and D)

Question 10

If a country's balance-of-payments surplus resulted in _____ of gold,the country's money supply would _____.

Accepted Answer

A)  a loss; expand
B)  a loss; shrink
C)  an influx; expand
D)  an influx; shrink
E)  an increase; not changeF) D) and E)
G) A) and B)

Question 11

The U.S.dollar will appreciate if _____

Accepted Answer

A)  the U.S. demand for foreign exchange decreases.
B)  the U.S. demand for foreign exchange increases.
C)  the supply of foreign exchange increases in the foreign exchange market.
D)  Americans want to buy more foreign goods.
E)  foreigners want fewer American goods.F) B) and C)
G) C) and E)

Question 12

A nation has an unfavorable balance of trade when _____

Accepted Answer

A)  it has a surplus in its balance of payments.
B)  it has a deficit in its balance of payments.
C)  the value of its imports is greater than the value of its exports.
D)  merchandise exports exceed merchandise imports.
E)  it has high tariffs.F) D) and E)
G) A) and E)

Question 13

The International Monetary Fund was founded in _____

Accepted Answer

A)  Paris.
B)  Brentwood.
C)  Washington.
D)  New York.
E)  Bretton Woods.F) All of the above
G) C) and E)

Question 14

When gold production did not keep pace with the growth in economic activity,_____

Accepted Answer

A)  the price level dropped.
B)  the price level rose.
C)  the price level was unchanged.
D)  money supply increased.
E)  inflation occurred.F) A) and E)
G) B) and C)

Question 15

In the United States,imports have exceeded exports every year since 1979.

Accepted Answer

A) True 
 B)False

Question 16

Since 1983,the United States has typically run a financial account surplus.

Accepted Answer

A) True 
 B)False

Question 17

If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would increase the U.S.demand for foreign currency?

Accepted Answer

A)  an increase in the U.S. demand for foreign goods
B)  an increase in incomes abroad
C)  a decrease in U.S. income
D)  a decrease in the U.S. demand for foreign goods
E)  an increase in U.S. real interest rateF) A) and B)
G) A) and E)

Question 19

The purchasing power parity theory _____

Accepted Answer

A)  is more a predictor of a long-run tendency than of the day-to-day relationship between changes in the price level and the exchange rate.
B)  predicts that exchange rates between two currencies will adjust in the short run so that the price level is equal to the exchange rate between two countries.
C)  is more a predictor of a short-run phenomenon than of a long-run relationship between the price level and the exchange rate between two countries.
D)  is helpful in explaining long-run trends, even though trade barriers and central bank intervention may hinder the usefulness of the theory.
E)  tells us that a country's currency generally will appreciate if its inflation rate is higher than that of the rest of the world.F) D) and E)
G) B) and C)

Question 20

Table 20.2
   Current Account ($)  Merchandise exports 500 Merchandise imports 200 Merchandise trade balance  Service exports 400 Service imports 600 Goods and services bal ance  Net investment income from abroad 50 Net unilateral transfers −90 Current account balance \begin{array} { | l | c | } \hline 	ext { Current Account } & ( \$ )  \\hline 	ext { Merchandise exports } & 500 \\hline 	ext { Merchandise imports } & 200 \\hline 	ext { Merchandise trade balance } & \\hline 	ext { Service exports } & 400 \\hline 	ext { Service imports } & 600 \\hline 	ext { Goods and services bal ance } & \\hline 	ext { Net investment income from abroad } & 50 \\hline 	ext { Net unilateral transfers } & - 90 \\hline 	ext { Current account balance } & \\hline\end{array} Current Account  Merchandise exports  Merchandise imports  Merchandise trade balance  Service exports  Service imports  Goods and services bal ance  Net investment income from abroad  Net unilateral transfers  Current account balance ​($) 50020040060050−90​​ 
-Refer to Table 20.2,which shows a balance-of-payments account.What is the merchandise trade balance?

Accepted Answer

A)  $300
B)  $100
C)  ?-$300
D)  ?$100
E)  $60 F) All of the above
G) A) and E)

Exam 20: International Finance

Under the gold standard,_____

Correct Answer
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The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

Correct Answer
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The International Monetary Fund was founded in _____

Correct Answer
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When gold production did not keep pace with the growth in economic activity,_____

Correct Answer
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In the United States,imports have exceeded exports every year since 1979.

Correct Answer
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Foreign exchange is foreign money _____

Correct Answer
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The current international monetary system is a _____

Correct Answer
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The purchasing power parity theory _____

Correct Answer
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The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Correct Answer
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If a country's balance-of-payments surplus resulted in _ of gold,the country's money supply would _.

Correct Answer
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Which of the following best describes the circumstances surrounding the breakdown of the Bretton Woods system?

Correct Answer
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Any decrease in supply for foreign exchange,other things constant,will _____

Correct Answer
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The U.S.dollar will appreciate if _____

Correct Answer
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A nation has an unfavorable balance of trade when _____

Correct Answer
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If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Correct Answer
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Correct Answer
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Since 1983,the United States has typically run a financial account surplus.

Correct Answer
verified

If the British pound appreciates,U.S.television stations need fewer dollars to buy episodes of a British sitcom from the British Broadcasting Company.

Correct Answer
verified

Which of the following would increase the U.S.demand for foreign currency?

Correct Answer
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Net unilateral transfers in the United States have been _____

Correct Answer
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Exam 20: International Finance

Under the gold standard,_____

Correct AnswerverifiedShow Answer

The term foreign exchange is used to denote the value of domestic currency held to finance international trade.

Correct AnswerverifiedShow Answer

The International Monetary Fund was founded in _____

Correct AnswerverifiedShow Answer

When gold production did not keep pace with the growth in economic activity,_____

Correct AnswerverifiedShow Answer

In the United States,imports have exceeded exports every year since 1979.

Correct AnswerverifiedShow Answer

Foreign exchange is foreign money _____

Correct AnswerverifiedShow Answer

The current international monetary system is a _____

Correct AnswerverifiedShow Answer

The purchasing power parity theory _____

Correct AnswerverifiedShow Answer

The purchasing power parity theory helps explain long-run trends in exchange rates,but not short-run fluctuations.

Correct AnswerverifiedShow Answer

If a country's balance-of-payments surplus resulted in _____ of gold,the country's money supply would _____.

Correct AnswerverifiedShow Answer

Which of the following best describes the circumstances surrounding the breakdown of the Bretton Woods system?

Correct AnswerverifiedShow Answer

Any decrease in supply for foreign exchange,other things constant,will _____

Correct AnswerverifiedShow Answer

The U.S.dollar will appreciate if _____

Correct AnswerverifiedShow Answer

A nation has an unfavorable balance of trade when _____

Correct AnswerverifiedShow Answer

If the U.S.dollar appreciates,it becomes cheaper for Australians to visit their relatives in the United States.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Since 1983,the United States has typically run a financial account surplus.

Correct AnswerverifiedShow Answer

If the British pound appreciates,U.S.television stations need fewer dollars to buy episodes of a British sitcom from the British Broadcasting Company.

Correct AnswerverifiedShow Answer

Which of the following would increase the U.S.demand for foreign currency?

Correct AnswerverifiedShow Answer

Net unilateral transfers in the United States have been _____

Correct AnswerverifiedShow Answer

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If a country's balance-of-payments surplus resulted in _ of gold,the country's money supply would _.

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