Question 1

The items in a hypothetical country's balance of payments account were: current account deficit -$100; capital account surplus +$85.The value of official reserves was:

Accepted Answer

A)  +$15.
B)  -$15.
C)  +$185.
D)  -$185.E) None of the above
F) A) and D)

Question 2

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Accepted Answer

A)  gold bullion will flow into Switzerland.
B)  the Swiss franc will depreciate.
C)  the British pound will depreciate.
D)  the Swiss franc will appreciate.E) B) and C)
F) A) and B)

Question 3

A deficit on the current account:

Accepted Answer

A)  normally causes a surplus on the capital account.
B)  normally causes a deficit on the capital account.
C)  has no relationship to the capital account.
D)  means that a nation is not making any international transfers.E) C) and D)
F) A) and D)

Question 4

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars.  Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Accepted Answer

A) True 
 B)False  True

Question 5

Fixed exchange rates are often maintained by using all of the following except:

Accepted Answer

A)  open speculation by individual traders in foreign currency markets.
B)  international monetary reserves held by central banks.
C)  controls on imports and exports such as tariffs and quotas.
D)  domestic macroeconomic adjustments using monetary and fiscal policies.E) B) and D)
F) B) and C)

Question 6

The exchange rate system currently used by the industrially advanced nations is:

Accepted Answer

A)  the gold standard.
B)  the Bretton Woods system.
C)  the managed float.
D)  a fixed rate system.E) None of the above
F) C) and D) C

Question 7

Refer to the diagram below.The initial demand for and supply of pesos are shown by D1 and S1.Suppose Canada reduces its imports of Mexican goods, shifting its demand for pesos from D1 and D2.If Canada was operating under a system of exchange controls that maintains the exchange rate at E, the Canadian government would: 1 and S1.Suppose Canada reduces its imports of Mexican goods, shifting its demand for pesos from D1 and D2.If Canada was operating under a system of exchange controls that maintains the exchange rate at E, the Canadian government would:   A) find that, at the controlled exchange rate, pesos would be in surplus. B) be faced with deteriorating terms of trade. C) be faced with the problem of rationing BG pesos to Canadian importers who want BF pesos. D) be faced with the problem of rationing BF pesos to Canadian importers who want BG pesos." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  find that, at the controlled exchange rate, pesos would be in surplus.
B)  be faced with deteriorating terms of trade.
C)  be faced with the problem of rationing BG pesos to Canadian importers who want BF pesos.
D)  be faced with the problem of rationing BF pesos to Canadian importers who want BG pesos.E) A) and B)
F) B) and C)

Question 8

The following table shows the balance of payments statement for the hypothetical nation of Zabella for 2014.All the figures are in billions of dollars.  Refer to the above data.The sign of the official settlement account indicates that:

Accepted Answer

A)  Zabella exported more services than it imported in 2014.
B)  Zabella imported more merchandise than it exported.
C)  there has been an out payment of $5 billion to official international reserves in 2014.
D)  there has been an in payment of $10 billion from the stock of official international reserves in 2014.E) C) and D)
F) None of the above

Question 9

In the balance of payments of Canada, Canadian merchandise imports are recorded as a:

Accepted Answer

A)  positive entry.
B)  capital account entry.
C)  current account entry.
D)  official reserves entry.E) A) and B)
F) B) and D)

Question 10

Depreciation of the Canadian dollar will tend to:

Accepted Answer

A)  decrease the prices of both imports and exports.
B)  increase the prices of both imports and exports.
C)  decrease the prices of the goods Canadians import, but increase the prices to foreigners of the goods Canadians export.
D)  increase the prices of the goods Canadians import, but decrease the prices to foreigners of the goods Canadians export.E) B) and C)
F) All of the above

Question 11

International financial transactions mostly fall into two broad categories:

Accepted Answer

A)  international asset transactions and international gold transactions.
B)  international asset transactions and transactions in the stock market.
C)  international trade and international development.
D)  international trade and international asset transactions.E) B) and D)
F) B) and C)

Question 12

Which one of the following will not directly affect Canada's balance on current account?

Accepted Answer

A)  an increase in merchandise imports
B)  an increase in capital outflows from Canada
C)  a decrease in net investment income
D)  an increase in imports of servicesE) A) and B)
F) All of the above B

Question 13

Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Accepted Answer

A)  0.68 Euros.
B)  70 Euros.
C)  20 Euros.
D)  5.5 Euros.E) A) and B)
F) None of the above

Question 14

A nation's merchandise balance of trade is equal to its exports less its imports of:

Accepted Answer

A)  goods.
B)  goods and services.
C)  financial assets.
D)  official reserves.E) B) and C)
F) C) and D)

Question 15

Refer to the above diagram where D and S are Canada's demand for and supply of Swiss francs.At the equilibrium exchange rate, E, Canada's balance of payments is in equilibrium.Given a change in demand from D to D' Canada could maintain the dollar price of francs by:

Accepted Answer

A)  shifting the S curve to the right through the use of domestic expansionary policies.
B)  instituting exchange controls to ration Ed francs to Canadian importers who want Ec francs.
C)  using international monetary reserves to cover the Ec shortage of francs.
D)  using international monetary reserves to cover the cd shortage of francs.E) A) and D)
F) A) and C)

Question 16

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Accepted Answer

A) True 
 B)False

Question 17

The current exchange-rate system is an "almost" flexible exchange-rate system.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the current account balance of an economy is -$50 billion and the stock of official international reserves is -$11 billion.Given the information, it can be said that the balance in the capital account is:

Accepted Answer

A)  $61 billion.
B)  -$61 billion.
C)  -$111 billion.
D)  $111 billion.E) A) and B)
F) A) and C)

Question 19

A nation which imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Accepted Answer

A) True 
 B)False

Question 20

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Accepted Answer

A)  Canadians will buy fewer British goods and services.
B)  the pound has appreciated in value.
C)  fewer Canadian goods and services will be demanded by the British.
D)  the dollar has depreciated in value.E) A) and B)
F) A) and C)

Exam 18: Part A: The Balance of Payments and Exchange Rates

The items in a hypothetical country's balance of payments account were: current account deficit -$100; capital account surplus +$85.The value of official reserves was:

Correct Answer
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Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Correct Answer
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A deficit on the current account:

Correct Answer
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The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Correct Answer
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True

Fixed exchange rates are often maintained by using all of the following except:

Correct Answer
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The exchange rate system currently used by the industrially advanced nations is:

Correct Answer
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C

Correct Answer
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The following table shows the balance of payments statement for the hypothetical nation of Zabella for 2014.All the figures are in billions of dollars. Refer to the above data.The sign of the official settlement account indicates that:

Correct Answer
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In the balance of payments of Canada, Canadian merchandise imports are recorded as a:

Correct Answer
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Depreciation of the Canadian dollar will tend to:

Correct Answer
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International financial transactions mostly fall into two broad categories:

Correct Answer
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Which one of the following will not directly affect Canada's balance on current account?

Correct Answer
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B

Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Correct Answer
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A nation's merchandise balance of trade is equal to its exports less its imports of:

Correct Answer
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Refer to the above diagram where D and S are Canada's demand for and supply of Swiss francs.At the equilibrium exchange rate, E, Canada's balance of payments is in equilibrium.Given a change in demand from D to D' Canada could maintain the dollar price of francs by:

Correct Answer
verified

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Correct Answer
verified

The current exchange-rate system is an "almost" flexible exchange-rate system.

Correct Answer
verified

Suppose the current account balance of an economy is -$50 billion and the stock of official international reserves is -$11 billion.Given the information, it can be said that the balance in the capital account is:

Correct Answer
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A nation which imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Correct Answer
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If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Correct Answer
verified

Exam 18: Part A: The Balance of Payments and Exchange Rates

The items in a hypothetical country's balance of payments account were: current account deficit -$100; capital account surplus +$85.The value of official reserves was:

Correct AnswerverifiedShow Answer

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Correct AnswerverifiedShow Answer

A deficit on the current account:

Correct AnswerverifiedShow Answer

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In 2013, Transylvania was a net recipient of transfers from the rest of the world.

Correct AnswerverifiedTrue

Fixed exchange rates are often maintained by using all of the following except:

Correct AnswerverifiedShow Answer

The exchange rate system currently used by the industrially advanced nations is:

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

The following table shows the balance of payments statement for the hypothetical nation of Zabella for 2014.All the figures are in billions of dollars. Refer to the above data.The sign of the official settlement account indicates that:

Correct AnswerverifiedShow Answer

In the balance of payments of Canada, Canadian merchandise imports are recorded as a:

Correct AnswerverifiedShow Answer

Depreciation of the Canadian dollar will tend to:

Correct AnswerverifiedShow Answer

International financial transactions mostly fall into two broad categories:

Correct AnswerverifiedShow Answer

Which one of the following will not directly affect Canada's balance on current account?

Correct AnswerverifiedB

Using Image 18.2 Global Perspective, In October 2017, one Canadian dollar bought:

Correct AnswerverifiedShow Answer

A nation's merchandise balance of trade is equal to its exports less its imports of:

Correct AnswerverifiedShow Answer

Refer to the above diagram where D and S are Canada's demand for and supply of Swiss francs.At the equilibrium exchange rate, E, Canada's balance of payments is in equilibrium.Given a change in demand from D to D' Canada could maintain the dollar price of francs by:

Correct AnswerverifiedShow Answer

A system of fixed exchange rates is more likely to give rise to exchange controls than is a system of flexible exchange rates.

Correct AnswerverifiedShow Answer

The current exchange-rate system is an "almost" flexible exchange-rate system.

Correct AnswerverifiedShow Answer

Suppose the current account balance of an economy is -$50 billion and the stock of official international reserves is -$11 billion.Given the information, it can be said that the balance in the capital account is:

Correct AnswerverifiedShow Answer

A nation which imports more goods and services than it exports is necessarily realizing an international balance of payments deficit.

Correct AnswerverifiedShow Answer

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Correct AnswerverifiedShow Answer

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True

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C

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B

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