Question 1

A $10 billion increase in the purchase of foreign assets by U.S. buyers would:

Accepted Answer

A)   increase the U.S. capital account balance by $10 billion.
B)   decrease the U.S. capital account balance by $10 billion.
C)   increase the U.S. current account balance by $10 billion.
D)   decrease the U.S. current account balance by $10 billion.E) A) and B)
F) C) and D)

Question 2

If the return on investments in Switzerland were to move above the return on investments in the United States, the:

Accepted Answer

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

Question 3

The Swiss franc and the U.S. dollar, the Swiss franc and the British pound, and the Japanese yen and the Polish zloty are traded:

Accepted Answer

A)   in the gold market.
B)   in the same foreign exchange market.
C)   in three different foreign exchange markets.
D)   using United Nations guidelines for international agreements.E) B) and D)
F) A) and D)

Question 4

If a South Korean buys $1,000 dollars worth of U.S. stocks, the U.S. current account will _______ and the U.S. trade deficit will _______.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) B) and C)
F) C) and D)

Question 5

A decrease in the U.S. inflation rate relative to inflation rates in other countries would shift the:

Accepted Answer

A)   U.S. demand curve for foreign currency to the left.
B)   U.S. demand curve for foreign currency to the right.
C)   supply curve for foreign currency to the U.S. to the left.
D)   none of the above.E) A) and B)
F) All of the above

Question 6

Flexible, or floating, exchange rates are determined by:

Accepted Answer

A)   the Federal Reserve.
B)   changes in the price of gold.
C)   the forces of supply and demand.
D)   International Monetary Fund agreements.E) C) and D)
F) A) and B)

Question 7

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars.
 
-At this exchange rate, a good costing $24 could be purchased for:

Accepted Answer

A)   16 new shekels.
B)   18 new shekels.
C)   32 new shekels.
D)   42 new shekels.E) B) and D)
F) C) and D)

Question 8

Suppose all nations' monies were backed by gold and Country A devalued its money. This would make Country A's money worth:

Accepted Answer

A)   less in other countries, and other countries' monies worth less in Country A.
B)   more in other countries, and other countries' monies worth less in Country A.
C)   less in other countries, and other countries' monies worth more in Country A.
D)   more in other countries, and other countries' monies worth more in Country A.E) None of the above
F) A) and C)

Question 9

What are exchange rates, and what is the exchange rate between the dollar and the British pound if an automobile priced at 40,000 pounds can be purchased for $60,000?

Accepted Answer

Exchange rates are the cost of...

Question 10

Since 1999, most European countries have adopted the _______ as its currency.

Accepted Answer

A)   Deutsche Mark
B)   Euro
C)   British Pound
D)   CFP FrancE) A) and B)
F) A) and C)

Question 11

What is external debt, and how can it create problems for lending nations?

Accepted Answer

External debt is money owed from borrowe...

Question 12

The supply curve of a foreign currency by those wishing to acquire U.S. dollars slopes:

Accepted Answer

A)   upward, indicating more of the foreign currency is supplied as its price in U.S. dollars increases.
B)   upward, indicating more of the foreign currency is supplied as its price in U.S. dollars decreases.
C)   downward, indicating more of the foreign currency is supplied as its price in U.S. dollars increases.
D)   downward, indicating more of the foreign currency is supplied as its price in U.S. dollars decreases.E) A) and C)
F) B) and C)

Question 13

Which of the following would increase the value of the British pound when compared to the U.S. dollar?

Accepted Answer

A)   A decrease in the U.S. demand for pounds.
B)   An increase in the U.S. demand for pounds.
C)   An increase in the supply of pounds to persons holding U.S. dollars.
D)   None of the above.E) B) and C)
F) C) and D)

Question 14

What is the balance of trade, and how has the U.S. balance of trade behaved since 1980?

Accepted Answer

The balance of trade is the di...

Question 15

What would happen to the equilibrium value and amount traded of a nation's currency in a foreign exchange market if there were a decrease in the supply of that currency?

Accepted Answer

If there is a decrease in supp...

Question 16

A decrease in the dollar price of Mexican pesos makes Mexican goods:

Accepted Answer

A)   less expensive to U.S. buyers and leads to an increase in the demand of pesos by holders of U.S. dollars.
B)   more expensive to U.S. buyers and leads to a decrease in the demand for pesos by holders of U.S. dollars.
C)   less expensive to U.S. buyers and leads to an increase in the quantity of pesos demanded by holders of U.S. dollars.
D)   more expensive to U.S. buyers and leads to a decrease in the quantity of pesos demanded by holders of U.S. dollars.E) A) and C)
F) None of the above

Question 17

An increase in the price of the U.S. dollar relative to foreign currencies would be expected to increase:

Accepted Answer

A)   U.S. imports.
B)   U.S. exports.
C)   U.S. employment.
D)   all of the above.E) B) and C)
F) All of the above

Question 18

The number of units of a nation's currency that is equal to one unit of another nation's currency is the ____________________.

Accepted Answer

The answer of The number of units of a nation's...

Question 19

There is a devaluation of Country A's money relative to Country B's money when the amount of gold backing one unit of Country A's money goes from:

Accepted Answer

A)   1/50 of an ounce to 1/40 of an ounce, and the amount of gold backing one unit of Country B's money remains unchanged.
B)   1/50 of an ounce to 1/60 of an ounce, and the amount of gold backing one unit of Country B's money remains unchanged.
C)   1/50 of an ounce to 1/25 of an ounce, and the amount of gold backing one unit of Country B's money goes from 1/30 of an ounce to 1/60 of an ounce.
D)   none of the above.E) None of the above
F) A) and D)

Question 20

An external debt problem occurs with the inability of some borrowing nations to repay loans from other nations.

Accepted Answer

A) True 
 B)False

Exam 17: International Finance

An increase in the price of the U.S. dollar relative to foreign currencies would be expected to increase:

Correct AnswerverifiedShow Answer

There is a devaluation of Country A's money relative to Country B's money when the amount of gold backing one unit of Country A's money goes from:

Correct AnswerverifiedShow Answer

Suppose all nations' monies were backed by gold and Country A devalued its money. This would make Country A's money worth:

Correct AnswerverifiedShow Answer

A decrease in the U.S. inflation rate relative to inflation rates in other countries would shift the:

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The Swiss franc and the U.S. dollar, the Swiss franc and the British pound, and the Japanese yen and the Polish zloty are traded:

Correct AnswerverifiedShow Answer

Use the following figure showing the supply of, and demand for, Israeli new shekels by holders of U.S. dollars. -At this exchange rate, a good costing $24 could be purchased for:

Correct AnswerverifiedShow Answer

If the return on investments in Switzerland were to move above the return on investments in the United States, the:

Correct AnswerverifiedShow Answer

Since 1999, most European countries have adopted the _______ as its currency.

Correct AnswerverifiedShow Answer

What would happen to the equilibrium value and amount traded of a nation's currency in a foreign exchange market if there were a decrease in the supply of that currency?

Correct AnswerverifiedIf there is a decrease in supp...View AnswerShow Answer

The number of units of a nation's currency that is equal to one unit of another nation's currency is the ____________________.

Correct AnswerverifiedShow Answer

If a South Korean buys $1,000 dollars worth of U.S. stocks, the U.S. current account will _______ and the U.S. trade deficit will _______.

Correct AnswerverifiedShow Answer

What is the balance of trade, and how has the U.S. balance of trade behaved since 1980?

Correct AnswerverifiedThe balance of trade is the di...View AnswerShow Answer

A decrease in the dollar price of Mexican pesos makes Mexican goods:

Correct AnswerverifiedShow Answer

Flexible, or floating, exchange rates are determined by:

Correct AnswerverifiedShow Answer

What are exchange rates, and what is the exchange rate between the dollar and the British pound if an automobile priced at 40,000 pounds can be purchased for $60,000?

Correct AnswerverifiedExchange rates are the cost of...View AnswerShow Answer

A $10 billion increase in the purchase of foreign assets by U.S. buyers would:

Correct AnswerverifiedShow Answer

Which of the following would increase the value of the British pound when compared to the U.S. dollar?

Correct AnswerverifiedShow Answer

The supply curve of a foreign currency by those wishing to acquire U.S. dollars slopes:

Correct AnswerverifiedShow Answer

An external debt problem occurs with the inability of some borrowing nations to repay loans from other nations.

Correct AnswerverifiedShow Answer

What is external debt, and how can it create problems for lending nations?

Correct AnswerverifiedExternal debt is money owed from borrowe...View AnswerShow Answer

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If there is a decrease in supp...
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If a South Korean buys $1,000 dollars worth of U.S. stocks, the U.S. current account will _ and the U.S. trade deficit will _.

Correct Answer
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The balance of trade is the di...
View Answer

Correct Answer
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Exchange rates are the cost of...
View Answer

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External debt is money owed from borrowe...
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