Econ Chapter 35
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- 1.1. The "balance of payments" is a periodic statement of the
- A.
Assets and liabilities of a firm.
- B.
Money value of all transactions between producers and consumers.
- C.
Money value of all transactions between residents of one country and residents of another country.
- D.
Price of one currency-for example, the U.S. dollar-in terms of all other currencies.
- 2.2. When exports of American goods increase, this __________ the demand for U.S. dollars and at the same time __________ foreign currencies.
- A.
Increases; increases the supply of
- B.
Decreases; increases the supply of
- C.
Increases; decreases the supply of
- D.
Increases; increases the demand for
- E.
None of the above
- 3.3. An international transaction that supplies the nation's currency also creates a __________ foreign currency and is recorded as a __________ in the balance of payments.
- A.
Demand for; debit
- B.
Demand for; credit
- C.
Supply of; credit
- D.
None of the above
- 4.4. The Mexican demand for American goods leads to
- A.
The demand for Mexican pesos and the supply of U.S. dollars on the foreign exchange market.
- B.
The demand for U.S. dollars and the demand for Mexican pesos on the foreign exchange market.
- C.
The demand for U.S. dollars and the supply of Mexican pesos on the foreign exchange market.
- D.
The demand for U.S. dollars and the supply of U.S. dollars on the foreign exchange market.
- 5.5. In the balance of payment accounts, a transaction that supplies the nation's currency is recorded as a
- A.
Debit.
- B.
Cost.
- C.
Surplus.
- D.
Shortage
- 6.9. Which of the following statements is true?
- A.
An export transaction is listed as a credit in the U.S. balance of payments.
- B.
An import transaction is listed as a debit in the U.S. balance of payments.
- C.
If Americans buy Japanese cars, Americans supply Japanese yen and demand U.S. dollars.
- D.
A and b
- E.
A, b, and c
- 7.15. The dollar amounts in the U.S. balance of payments have plus (+) or minus (-) signs in front of them. A plus sign represents the
- A.
Foreign demand for U.S. dollars and the supply of foreign currencies.
- B.
Foreign demand for U.S. dollars and the supply of U.S. dollars.
- C.
U.S. demand for U.S. dollars and the supply of U.S. dollars.
- D.
U.S. demand for foreign currencies and the foreign supply of foreign currencies.
- 8.16. The dollar amounts in the U.S. balance of payments have plus (+) or minus (-) signs in front of them. A minus sign represents the
- A.
Foreign demand for foreign currencies and the supply of foreign currencies.
- B.
Foreign demand for U.S. dollars and the supply of foreign currencies.
- C.
U.S. demand for foreign currencies and the supply of U.S. dollars.
- D.
U.S. demand for foreign currencies and the supply of foreign currencies.
- 9.20. In the balance of payments accounts, the current account includes the purchase and sale of
- A.
Credit instruments.
- B.
Foreign currency.
- C.
Precious metals.
- D.
Goods and services.
- 10.24. The three components of the current account are exports of goods and services, imports of goods and services, and
- A.
Net unilateral transfers abroad.
- B.
Foreign investment.
- C.
Capital purchases.
- D.
Military sales.
- 11.25. José lives in the United States where he owns a successful restaurant. Every month he sends his brother in Mexico $300 for living expenses. This payment is referred to as a __________ and is recorded as a __________ in the __________ account.
- A.
Capital outflow; debit; capital
- B.
Merchandise export; debit; current
- C.
Capital outflow; credit; capital
- D.
Unilateral transfer; debit; current
- E.
Unilateral transfer; debit; capital
- 12.26. Refer to Exhibit 35-1. The merchandise trade balance equals __________ billions of dollars. Components of the Balance of Payments ($ 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 + 70 Increase in U.S. official reserve assets – 14 Increase in foreign official assets in U.S. + 13 Statistical discrepancy – 18
- A.
-80
- B.
+100
- C.
-97
- D.
+60
- E.
None of the above
- 13.27. Refer to Exhibit 35-1. The current account balance equals __________ billions of dollars. 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 + 70 Increase in U.S. official reserve assets – 14 Increase in foreign official assets in U.S. + 13 Statistical discrepancy – 18
- A.
-101
- B.
+83
- C.
-61
- D.
+63
- E.
None of the above
- 14.28. Refer to Exhibit 35-1. The capital account balance equals __________ billions of dollars. 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 + 70 Increase in U.S. official reserve assets – 14 Increase in foreign official assets in U.S. + 13 Statistical discrepancy – 18
- A.
+60
- B.
-60
- C.
+44
- D.
-54
- E.
None of the above
- 15.29. Refer to Exhibit 35-1. The official reserve balance equals __________ billions of dollars. 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 + 70 Increase in U.S. official reserve assets – 14 Increase in foreign official assets in U.S. + 13 Statistical discrepancy – 18
- A.
+1
- B.
-1
- C.
0
- D.
+27
- E.
None of the above
- 16.30. Which of the following statements is true?
- A.
The merchandise trade deficit equals the balance of payments.
- B.
The balance of payments always equals zero.
- C.
The capital account includes all payments related to the purchase and sale of assets and to borrowing and lending activities.
- D.
B and c
- E.
A, b, and c
- 17.35. Which of the following statements is true?
- A.
The merchandise trade balance is the same as the current account balance.
- B.
The capital account balance is always negative.
- C.
The United States exports fewer goods than almost all other countries of the world.
- D.
A and c
- E.
None of the above
- 18.40. Which of the following would be recorded as a debit in the capital account of the U.S. balance of payments?
- A.
A Japanese businessman purchases real estate in Los Angeles.
- B.
A group of German investors buy bonds issued by the state of Illinois.
- C.
A Canadian bank makes a loan to a Pittsburgh steel manufacturer.
- D.
A, b, and c
- E.
None of the above
- 19.45. The U.S. balance of payments will equal zero
- A.
When there is no international trade of goods and services.
- B.
When U.S. citizens purchase exactly the same dollar value of goods from foreigners that foreigners purchase from U.S. producers.
- C.
Only when the statistical discrepancy is equal to zero.
- D.
Only when net unilateral transfers equal zero.
- E.
None of the above
- 20.50. The lower 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.
Less expensive; more, more
- B.
More expensive; fewer, fewer
- C.
More expensive; more, fewer
- D.
Less expensive; more, fewer
- E.
None of the above
- 21.56. In a foreign exchange market diagram with pesos per dollar on the vertical axis, the quantity of __________ would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the __________ curve.
- A.
Dollars; demand
- B.
Dollars; supply
- C.
Pesos; demand
- D.
Pesos; supply
- 22.60. Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be __________ and the price of the raincoat in dollars will be __________.
- A.
5000 pesos; $70
- B.
50 pesos; $7,000
- C.
500 pesos; $7
- D.
5 pesos; $7,000
- 23.66. Suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market) the demand for U.S. dollars will __________ and the supply of dollars will __________.
- A.
Increase; increase
- B.
Increase; decrease
- C.
Decrease; increase
- D.
Decrease; decrease
- 24.70. The U.S. real interest rate rises relative to Japan's. As a result,
- A.
The yen will depreciate and the dollar will appreciate.
- B.
Both the dollar and the yen will depreciate.
- C.
Both the dollar and the yen will depreciate.
- D.
Both the dollar and the yen will appreciate.
- 25.75. Suppose the current exchange rate between the U.S. dollar and the Mexican peso is $0.12 = 1 peso. Furthermore, suppose the price level in Mexico rises 25 percent while the U.S. price level remains constant. According to the purchasing power parity theory, what will be the equilibrium exchange rate?
- A.
$0.15 = 1 peso
- B.
$0.09 = 1 peso
- C.
$0.16 = 1 peso
- D.
$0.096 = 1 peso
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