1- A trade surplus occurs when: Select one:
a. a government spends more than it receives in tax revenue.
b. a government spends less than it receives in tax revenue.
c. the value of a country's imports exceeds the value of its exports.
d. the value of a country's exports exceeds the value of its imports.
2- The balance of payments is: Select one:
a. a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world.
b. the sum of the balance of trade, net income on capital held abroad, and net transfer payments.
c. the price of one currency in another currency.
d. a currency whose value is not pegged but governments will intervene extensively in the market to keep the value within a certain range.
3- If purchasing power parity holds and the nominal exchange rate is 1.5 U.S. dollars for one Canadian dollar, then a Big Mac that costs two Canadian dollars in Canada will cost _____ U.S. dollar(s) in the United States. Select one: a. 1 b. 1.5 c. 2 d. 3
4- A situation where foreign capital inflow exceeds domestic capital outflow to other nation is called a
: Select one:
a. trade surplus.
b. capital surplus.
c. balance of payments surplus.
d. exchange rate surplus.
5- In the short run, a tighter monetary policy by the U.S. Federal Reserve leads to: Select one:
a. an increase in the supply of dollars and a dollar depreciation.
b. a decrease in the supply of dollars and a dollar appreciation.
c. an increase in the demand for dollars and a dollar depreciation.
d. a decrease in the demand for dollars and a dollar appreciation.
6- Which theorem states that exchange rates will adjust until the prices of goods in different countries approximate one another? Select one:
a. purchasing power parity
b. the law of multiple prices
c. the principle of comparative advantage
d. dollarization
7- A country's balance of trade is the difference between its: Select one:
a. nominal and real exchange rates.
b. monetary and fiscal policy.
c. exports and imports.
d. capital inflow and capital outflow.
8- When a foreign business buys stock in a U.S. company, the U.S. capital account will: Select one:
a. move in a positive direction.
b. move in a negative direction.
c. remain unchanged.
d. become more volatile.
9- Saying that the United States is running a large current account deficit is equivalent to saying that: Select one:
a. exports exceed imports in the United States.
b. the United States is running a large capital account surplus.
c. the balance of payments is negative.
d. the value of the current capital stock in the United States exceeds the value of future capital flows.
10- An increase in the demand for a country's exports will have what effect on its currency? Select one:
a. Its value will not change.
b. Its value will increase.
c. Its value will decrease.
d. Its value will depreciate.
11- When the United States has a current account deficit, the U.S. capital account: Select one:
a. will have a deficit also.
b. will be balanced.
c. will have a surplus.
d. must be falling.
12- Which of the following is NOT a way that a country can finance a trade deficit?
Select one:
a. increased borrowing
b. sale of assets
c. decreased exports
d. reduction in cash reserves
13- A trade deficit occurs when the value of a country's:
Select one:
a. imports exceeds the value of its exports.
b. exports exceeds the value of its imports.
c. inflow of foreign capital exceeds the outflow of domestic capital.
d. outflow of domestic capital exceeds its inflow of foreign capital.
14- Which of the following is a U.S. current account transaction? Select one:
a. Selling a computer chip to a resident in Europe.
b. Buying stock shares of a Canadian company.
c. Selling U.S. dollars in exchange for e uros.
d. A foreign investor's purchase of a manufacturing plant in the United States.
15- An exchange rate is: Select one:
a. a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world.
b. the sum of the balance of trade, net income on capital held abroad, and net transfer payments.
c. the price of one currency in terms of another currency.
d. a currency whose value is not pegged but governments will intervene extensively in the market to keep the value within a certain range.