Question 1

The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of flexible exchange rates is in place.
 
-Refer to the above table. The exchange rate is:

Accepted Answer

A)   4 libras for one dollar.
B)   .30 libras for one dollar.
C)   .40 libras for one dollar.
D)   none of the above.E) B) and C)
F) A) and D)

Question 2

1 and S1. The exchange rate will be: A)  M dollars for one peso. B)  1/B pesos for one dollar. C)  A dollars for one peso. D)  C dollars for one peso." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. The initial demand for and supply of pesos are shown by D1 and S1. The exchange rate will be:

Accepted Answer

A)   M dollars for one peso.
B)   1/B pesos for one dollar.
C)   A dollars for one peso.
D)   C dollars for one peso.E) None of the above
F) B) and C)

Question 3

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania had a $2 billion balance of trade surplus.

Accepted Answer

A) True 
 B)False

Question 4

If the price of British pounds, measured in terms of Canadian dollars is rising then, the price of Canadian dollars, measured in terms of British pounds, is also rising.

Accepted Answer

A) True 
 B)False

Question 5

Under a system of flexible exchange rates, an increase in the international value of a nation's currency will:

Accepted Answer

A)   cause an international surplus of its currency.
B)   contribute to disequilibrium in its balance of payments.
C)   cause gold to flow into that country.
D)   cause its imports to rise.E) A) and B)
F) B) and C)

Question 6

The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella. All figures are in billions of dollars.
Current Account:
 
-Refer to the above data. Zabella's balance on goods and services shows a:

Accepted Answer

A)   $5 billion deficit.
B)   $5 billion surplus.
C)   $10 billion surplus.
D)   $15 billion deficit.E) B) and D)
F) B) and C)

Question 7

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Accepted Answer

A) True 
 B)False

Question 8

The leaders of the G-8 nations which meet regularly to discuss economic issues and try to coordinate economic policies are:

Accepted Answer

A)   Canada, U.S., France, Britain, Mexico, Germany, Russia, and Brazil.
B)   Canada, U.S., France, Japan, Italy, Germany, Russia, and the United Kingdom
C)   Canada, U.S., Mexico, Brazil, Argentina, Uruguay, and Chile.
D)   Italy, France, Britain, Germany, Netherlands, Norway, China, and Sweden.E) B) and C)
F) A) and B)

Question 9

Depreciation of the Canadian dollar will tend to:

Accepted Answer

A)   decrease the prices of both imports and exports.
B)   increase the prices of both imports and exports.
C)   decrease the prices of the goods Canadians import, but increase the prices to foreigners of the goods Canadians export.
D)   increase the prices of the goods Canadians import, but decrease the prices to foreigners of the goods Canadians export.E) C) and D)
F) A) and D)

Question 10

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania imported more products than it exported.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following countries is a G-8 nation?

Accepted Answer

A)   China
B)   Brazil
C)   Italy
D)   KoreaE) B) and C)
F) A) and D)

Question 12

The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

Accepted Answer

A) True 
 B)False

Question 13

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. In 2008 Transylvania realized a balance of payments deficit.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was
$1 = 220 yen, and in 2012 it was $1 = 100 yen.
-Refer to the above information. Between 2002 and 2012 the:

Accepted Answer

A)   dollar appreciated in value relative to the yen.
B)   yen appreciated in value relative to the dollar.
C)   dollar price of yen fell.
D)   yen price of dollars rose.E) B) and D)
F) None of the above

Question 15

If the dollar price of yen rises, then:

Accepted Answer

A)   the yen price of dollars also rises.
B)   the dollar depreciates relative to the yen.
C)   the yen depreciates relative to the dollar.
D)   all of the above will occur.E) All of the above
F) A) and C)

Question 16

Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Accepted Answer

A) True 
 B)False

Question 17

If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

Accepted Answer

A)   is $1 = 2 pounds in Canada.
B)   is $2 = 1 pound in Canada.
C)   is $1 = 2 pounds in Great Britain.
D)   is $.5 = 1 pound in Great Britain.E) A) and C)
F) None of the above

Question 18

If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

Accepted Answer

A)   the Swiss franc has appreciated in value.
B)   Canadians will buy more Swiss goods and services.
C)   more Canadian goods and services will be demanded by the Swiss.
D)   the dollar has depreciated in value.E) A) and B)
F) None of the above

Question 19

Under flexible exchange rates a Canadian trade deficit with Britain will cause the dollar price of pounds to rise.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would contribute to a Canadian balance of payments surplus?

Accepted Answer

A)   Canada makes a unilateral tariff reduction on imported goods
B)   Canadian Pacific pays a dividend to a Swiss stockholder
C)   Canada cuts back on Canadian military personnel stationed in Germany
D)   Russian vodka becomes increasingly popular in CanadaE) A) and B)
F) None of the above

Exam 17: Exchange Rates and the Balance of Payments

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania had a $2 billion balance of trade surplus.

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The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra. Assume that a system of flexible exchange rates is in place. -Refer to the above table. The exchange rate is:

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The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania realized a balance of payments deficit.

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The following table shows the 2012 balance of payments data for the hypothetical nation of Zabella. All figures are in billions of dollars. Current Account: -Refer to the above data. Zabella's balance on goods and services shows a:

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Under flexible exchange rates a Canadian trade deficit with Britain will cause the dollar price of pounds to rise.

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Under a system of flexible exchange rates, an increase in the international value of a nation's currency will:

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Which of the following countries is a G-8 nation?

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The leaders of the G-8 nations which meet regularly to discuss economic issues and try to coordinate economic policies are:

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Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was $1 = 220 yen, and in 2012 it was $1 = 100 yen. -Refer to the above information. Between 2002 and 2012 the:

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The foreign demand curve for a nation's currency is considered to be a derived demand because it stems from the willingness of consumers in one country to buy goods and services from another country.

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If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

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Which of the following would contribute to a Canadian balance of payments surplus?

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The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars. -Refer to the above data. In 2008 Transylvania imported more products than it exported.

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If the price of British pounds, measured in terms of Canadian dollars is rising then, the price of Canadian dollars, measured in terms of British pounds, is also rising.

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Depreciation of the Canadian dollar will tend to:

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If the dollar price of yen rises, then:

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A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

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-Refer to the above diagram. The initial demand for and supply of pesos are shown by D1 and S1. The exchange rate will be:

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If a Canadian importer can purchase 10,000 pounds for $20,000, the rate of exchange:

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Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

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-Refer to the above diagram. The initial demand for and supply of pesos are shown by D₁ and S₁. The exchange rate will be:

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