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Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

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Question 41

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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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Question 42

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The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.Other things equal,a leftward shift of the demand curve would:

A) depreciate the dollar.
B) appreciate the euro.
C) reduce the equilibrium quantity of euros.
D) cause a surplus of euros.

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Question 43

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People who buy foreign currency for the sole goal of selling it at a profit are called:

Which of the following would contribute to a U.S.balance of payments surplus?

Which of the following problems will most likely occur with a system of flexible exchange rates?

In considering yen and dollars,when the dollar rate of exchange for the yen rises:

The U.S.demand for British pounds is:

Two of the implications of large U.S.trade deficits for the United States are:

In recent years,the United States has had large:

Answer the question on the basis of the following 2012 balance of payments data (+ and -) for the hypothetical nation of Zabella.All figures are in billions of dollars. $\begin{array}{c}\begin{array}{lll}\text {Current Account}\\\hline \text {1) Goods Exports}\\\text {2) Goods Imports}\\\text {3) Exports of Services}\\\text {4) Imports of Services}\\\text {5) Net Investment Income}\\\text {6) Net Transfers}\\\\\text {Financial Account}\\\hline \text {7) Foreign Purchases of Assets in the United States}\\\text {8) US Purchases of Assets Abroad}\\\\\text {Capital Account}\\\hline \text {9) Balance on Capital Account}\end{array}\begin{array}{r}\\\hline+\$ 80 \\-70 \\+20 \\-25 \\+5 \\-5 \\\\\\\hline+13 \\-23\\\\\\\hline+5 \end{array}\end{array}$ Refer to the given data.Zabella's balance on financial account shows a:

The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.At the price $.80 for 1 euro:

A market in which the money of one nation is exchanged for the money of another nation is a:

A government may be able to reduce the international value of its currency by:

Suppose the balance on the financial account is -$300 billion and the balance on the capital account is +$5 billion.The size of the current account is:

Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}\begin{array}{lll}\text { 1) Goods Exports}\\\text { 2) Goods Imports}\\\text { 3) Service Exports}\\\text { 4) Service Imports}\\\text { 5) Net Investment Income}\\\text { 6) Net Transfers}\\\text { 7) Foreign Purchases of Assets}\\\text { 8) Purchases of Foreign Assets}\\\text { 9) Balance on Capital Account}\end{array}\begin{array}{r}+\$ 15 \\-17 \\+5 \\-2 \\-5 \\+4 \\+5 \\-11 \\+1\end{array}\end{array}$ Refer to the given data.Transylvania had a $2 billion balance of trade (goods)surplus in 2008.

Which of the following has contributed to large U.S.trade deficits in recent years?

If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won,then:

The United States has had significant trade and current account surpluses in recent years.

Which of the following is not included in the current account of a nation's balance of payments?

The following table contains hypothetical data for the 2012 U.S.balance of payments.Answer the question on the basis of this information.All figures are in billions of dollars. $\begin{array}{lrrr} \text { 1) US Goods Exports } & +\$100\\ \text {2) US Goods Imports } &-80\\ \text {3) US Service Exports } &+40\\ \text {4) US Service Imports } &-90\\ \text { 5) Net Investment Income } &+20\\ \text { 6) Net Transfers } &-15\\ \text {7) Foreign Purchases of Assets in the United States } &+30\\ \text {8) US Purchases of Foreign Assets Abroad } &-10\\ \text { 9) Balance on Capital Account } &+5\\\end{array}$ Refer to the given data.The United States has a balance of goods: