Question 1

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars.
 
-If the dollar price per new shekel were $0.50, there would be a:

Accepted Answer

A)   surplus of new shekels on the market and the dollar price per new shekel would fall.
B)   surplus of new shekels on the market and the dollar price per new shekel would rise.
C)   shortage of new shekels on the market and the dollar price per new shekel would fall.
D)   shortage of new shekels on the market and the dollar price per new shekel would rise.E) None of the above
F) A) and B)

Question 2

When considering U.S. international transactions accounts, the current account balance plus the capital account balance should total to:

Accepted Answer

A)   zero, once adjustments have been made for statistical discrepancies.
B)   a negative number if the U.S. is experiencing a capital account deficit.
C)   a positive number if the U.S. is experiencing a balance of trade surplus.
D)   a positive number if the current account balance is greater than the capital account balance.E) B) and D)
F) None of the above

Question 3

The failure of foreign countries to meet their external debt obligations was an especially serious problem for which group of lenders?

Accepted Answer

A)   Commercial banks.
B)   Lending governments.
C)   Charitable organizations.
D)   Nonbank multinational corporations.E) A) and D)
F) All of the above

Question 4

Paying off external debt has been particularly difficult for:

Accepted Answer

A)   developing countries.
B)   European Union countries.
C)   developed economies like the U.S.
D)   Organization of Petroleum Exporting Countries, or OPEC.E) A) and B)
F) A) and C)

Question 5

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars.
 
-The exchange rate that emerges in this market is:

Accepted Answer

A)   $0.75 = 1.00 new shekel.
B)   $0.75 = 1.33 new shekels.
C)   $1.00 = 0.75 new shekels.
D)   $1.00 = 1.25 new shekels.E) C) and D)
F) A) and C)

Question 6

A major step among the countries in Europe toward monetary integration occurred in the early 1990s with the Maastricht Treaty. The purpose of this was to:

Accepted Answer

A)   ensure a common defense against the former Soviet Union.
B)   develop a banking system modeled after the U.S. Federal Reserve System.
C)   develop a common currency.
D)   determine which country's money would be adopted for use by all the countries in Europe.E) B) and C)
F) B) and D)

Question 7

If return on investments in Europe were greater than the return on investments in the U.S., the:

Accepted Answer

A)   dollar price of Euros would decrease.
B)   amount of Euros demanded by U.S. investors would decrease.
C)   amount of dollars demanded by Europeans would increase.
D)   dollar price of Euros would increase.E) B) and C)
F) None of the above

Question 8

A decrease in the value of the dollar compared to a foreign currency would:

Accepted Answer

A)   reduce the dollar prices of foreign goods and investment opportunities.
B)   increase the dollar prices of foreign goods and investment opportunities.
C)   have no impact on the dollar prices of foreign goods and investment opportunities.
D)   none of the above.E) A) and C)
F) B) and C)

Question 9

The repayment of a debt to a foreign lender could create a recession in the borrowing country because:

Accepted Answer

A)   households and businesses in the borrowing country would have to cut their spending in order to pay back the lending country.
B)   part of the labor force in the borrowing country would have to be diverted to producing goods for export to the lending country.
C)   the general level of prices in the borrowing country would decrease as more goods and services were produced to pay off the debt.
D)   output in the borrowing country would increase faster than the labor force as production grew to meet debt obligations, resulting in too little unemployment.E) B) and C)
F) All of the above

Question 10

Under a system of flexible exchange rates, the values of two nations' monies are determined:

Accepted Answer

A)   in a gold market.
B)   in a foreign exchange market.
C)   using United Nations guidelines for international agreements.
D)   on the basis of intergovernmental agreements between the two nations.E) C) and D)
F) B) and D)

Question 11

If exchange rates are based on gold, and a nation devalues its money, goods from the devaluing country become:

Accepted Answer

A)   less expensive to foreign buyers, and foreign goods become less expensive in the devaluing country.
B)   less expensive to foreign buyers, and foreign goods become more expensive in the devaluing country.
C)   more expensive to foreign buyers, and foreign goods become more expensive in the devaluing country.
D)   more expensive to foreign buyers, and foreign goods become less expensive in the devaluing country.E) B) and C)
F) A) and D)

Question 12

An increase in foreign demand for U.S. wheat and corn would lead to:

Accepted Answer

A)   a decrease in the price of dollars to foreign buyers.
B)   an increase in the supply of dollars to foreign buyers.
C)   an increase in the demand for dollars by foreign buyers.
D)   an increase in the demand for dollars by U.S. buyers.E) A) and B)
F) C) and D)

Question 13

With a system of floating, or flexible, exchange rates, inflation in the United States would decrease the Japanese demand for dollars.

Accepted Answer

A) True 
 B)False

Question 14

As the dollar price of Chinese Yuan goes down, the quantity of Yuan demanded by persons in the United States holding U.S. dollars:

Accepted Answer

A)   decreases because more dollars are needed to acquire Chinese Yuan.
B)   decreases because the prices of Chinese goods and investment opportunities go up for U.S. buyers.
C)   remains unchanged because the U.S. demand for Yuan depends on factors other than the price of Yuan.
D)   increases because more Chinese goods and investment opportunities can be purchased with the same amount of U.S. dollars.E) A) and B)
F) A) and C)

Question 15

A decrease in the U.S. dollar price of Turkish liras causes:

Accepted Answer

A)   Turkish goods and services to become cheaper in the United States.
B)   a shift in the demand curve for Turkish liras by persons holding dollars.
C)   a decrease in the quantity of Turkish liras demanded by persons holding dollars.
D)   none of the above.E) B) and C)
F) A) and B)

Question 16

If you were graphing a demand curve for Jordanian dinars by persons holding U.S. dollars, you would use the vertical axis of the graph to measure:

Accepted Answer

A)   the price of U.S. dollars in gold.
B)   the price in U.S. dollars per dinar.
C)   the quantity of Jordanian dinars that can be obtained for one dollar.
D)   none of the above.E) A) and D)
F) A) and C)

Question 17

If a bottle of Australian wine priced at 60 Australian dollars can be purchased for $24, then the exchange rate between the U.S. dollar and the Australian dollar is:

Accepted Answer

A)   $1.00 = 0.25 Australian dollars.
B)   $1.00 = 0.40 Australian dollars.
C)   $1.00 = 2.50 Australian dollars.
D)   $1.00 = 4.00 Australian dollars.E) A) and C)
F) A) and D)

Question 18

What is devaluation on a fixed exchange rate system, and why does it cause demand for foreign products in the devaluing nation to decrease?

Accepted Answer

On a fixed rate system, the amount of go...

Question 19

What is the difference between the current account and the capital account for recording international transactions?

Accepted Answer

The current account is the bal...

Question 20

If a country's external debt is 105 percent of its Gross National Income (GNI) :

Accepted Answer

A)   the debt is so small that it should have no effect on the economy.
B)   the debt should be easily repaid since it only requires an increase in GNI of 5 percent.
C)   the country owes 105 times as much to foreign lenders as its economy produces in one year.
D)   the value of one year's worth of the economy's output is not enough to satisfy the country's debt to foreign lenders.E) A) and D)
F) B) and C)

Exam 17: International Finance

An increase in foreign demand for U.S. wheat and corn would lead to:

Correct AnswerverifiedShow Answer

What is devaluation on a fixed exchange rate system, and why does it cause demand for foreign products in the devaluing nation to decrease?

Correct AnswerverifiedOn a fixed rate system, the amount of go...View AnswerShow Answer

A major step among the countries in Europe toward monetary integration occurred in the early 1990s with the Maastricht Treaty. The purpose of this was to:

Correct AnswerverifiedShow Answer

Paying off external debt has been particularly difficult for:

Correct AnswerverifiedShow Answer

If a bottle of Australian wine priced at 60 Australian dollars can be purchased for $24, then the exchange rate between the U.S. dollar and the Australian dollar is:

Correct AnswerverifiedShow Answer

If return on investments in Europe were greater than the return on investments in the U.S., the:

Correct AnswerverifiedShow Answer

The failure of foreign countries to meet their external debt obligations was an especially serious problem for which group of lenders?

Correct AnswerverifiedShow Answer

When considering U.S. international transactions accounts, the current account balance plus the capital account balance should total to:

Correct AnswerverifiedShow Answer

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars. -If the dollar price per new shekel were $0.50, there would be a:

Correct AnswerverifiedShow Answer

If you were graphing a demand curve for Jordanian dinars by persons holding U.S. dollars, you would use the vertical axis of the graph to measure:

Correct AnswerverifiedShow Answer

If a country's external debt is 105 percent of its Gross National Income (GNI) :

Correct AnswerverifiedShow Answer

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars. -The exchange rate that emerges in this market is:

Correct AnswerverifiedShow Answer

A decrease in the U.S. dollar price of Turkish liras causes:

Correct AnswerverifiedShow Answer

Under a system of flexible exchange rates, the values of two nations' monies are determined:

Correct AnswerverifiedShow Answer

If exchange rates are based on gold, and a nation devalues its money, goods from the devaluing country become:

Correct AnswerverifiedShow Answer

A decrease in the value of the dollar compared to a foreign currency would:

Correct AnswerverifiedShow Answer

What is the difference between the current account and the capital account for recording international transactions?

Correct AnswerverifiedThe current account is the bal...View AnswerShow Answer

The repayment of a debt to a foreign lender could create a recession in the borrowing country because:

Correct AnswerverifiedShow Answer

With a system of floating, or flexible, exchange rates, inflation in the United States would decrease the Japanese demand for dollars.

Correct AnswerverifiedShow Answer

As the dollar price of Chinese Yuan goes down, the quantity of Yuan demanded by persons in the United States holding U.S. dollars:

Correct AnswerverifiedShow Answer

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On a fixed rate system, the amount of go...
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The current account is the bal...
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