Question 1

Appreciation of the Swiss franc will:

Accepted Answer

A)  intensify an existing disequilibrium in France's balance of payments.
B)  make France's exports less expensive and its imports more expensive.
C)  make France's exports more expensive and its imports less expensive.
D)  make France's exports and imports both more expensive.E) B) and D)
F) A) and C)

Question 2

Under the managed floating system of exchange rates:

Accepted Answer

A)  all exchange rates vary with changes in the free-market prices of gold.
B)  industrialized nations meet once each year to negotiate readjustments in their exchange rates.
C)  exchange rates are essentially flexible, but governments intervene to offset "disorderly" fluctuations in rates.
D)  exchange rates are adjusted at the discretion of the IMF.E) A) and B)
F) All of the above

Question 3

If the rate of exchange for a British pound is $4, the rate of exchange for the dollar:

Accepted Answer

A)  is ¼ of a British pound.
B)  is 4 British pounds.
C)  is $.25.
D)  cannot be determined from the information given.E) A) and D)
F) A) and B)

Question 4

In considering British pound and dollar, the rates of exchange for the pound and the dollar:

Accepted Answer

A)  are directly related.
B)  are inversely related.
C)  are unrelated.
D)  move in the same direction.E) All of the above
F) A) and B)

Question 5

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 realized a balance of payments deficit.

Accepted Answer

A) True 
 B)False

Question 6

The following table shows the balance of payments statement of Canada for 2014.All the figures are in billions of dollars.  Refer to the above information.In 2014, Canada's balance of services was:

Accepted Answer

A)  $3 billion.
B)  -$9 billion.
C)  $15 billion.
D)  -$6 billion.E) A) and B)
F) A) and C)

Question 7

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.In 2014, Zabella's balance on the capital account shows a:

Accepted Answer

A)  deficit of $10 billion.
B)  surplus of $5 billion.
C)  deficit of $28 billion.
D)  surplus of $13 billion.E) All of the above
F) None of the above

Question 8

The several financial crises in which country required a massive financial bailout by the International Monetary Fund.

Accepted Answer

A)  Russia
B)  Canada
C)  China
D)  United StatesE) None of the above
F) All of the above

Question 9

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 realized a $1 billion surplus on goods and services.

Accepted Answer

A) True 
 B)False

Question 10

In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

Accepted Answer

A)  the pound rate of exchange for the dollar will fall.
B)  the pound rate of exchange for the dollar will also rise.
C)  the pound rate of exchange for the dollar may either fall or rise.
D)  Canadian net exports to Britain will tend to fall.E) C) and D)
F) B) and D)

Question 11

Suppose one Canadian dollar would buy 262 yen in 2005.However, it would buy only 123 yen in 2012.Relative to the yen, the value of the dollar:

Accepted Answer

A)  increased by about 25 percent.
B)  decreased by about 50 percent.
C)  decreased by about 75 percent.
D)  decreased by about 100 percent.E) A) and C)
F) A) and D)

Question 12

The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra.Assume that a system of flexible exchange rates is in place.  Refer to the above table.The exchange rate is:

Accepted Answer

A)  4 libras for one dollar.
B)  .30 libras for one dollar.
C)  .40 libras for one dollar.
D)  none of the above.E) All of the above
F) C) and D)

Question 13

When the people involved in an exchange are from countries that use different currencies, an intermediate asset transaction has to take place:

Accepted Answer

A)  the seller must convert her currency into the currency that the buyer uses and accepts.
B)  the buyer must convert her currency into the currency that the seller uses and accepts.
C)  the buyer and seller should engage in barter trade.
D)  both buyer and seller should exchange their currencies to gold.E) All of the above
F) A) and D)

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) A) and D)

Question 15

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 C)
F) None of the above

Question 16

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, foreigners made a smaller volume of investments in Transylvania than Transylvanians invested abroad.

Accepted Answer

A) True 
 B)False

Question 17

Evidence of a chronic balance of payments deficit is:

Accepted Answer

A)  a decline in amount of the nation's currency held by other nations.
B)  an excess of exports over imports.
C)  diminishing reserves of foreign currencies.
D)  an increase in the international value of the nation's currency.E) None of the above
F) A) and C)

Question 18

Suppose the current account balance of an economy is -$50 billion and the capital account balance of the economy is $61 billion.Given the information, it can be said that the balance in the official settlement account is:

Accepted Answer

A)  -$11 billion.
B)  $11 billion.
C)  -$111billion.
D)  $111 billion.E) All of the above
F) C) and D)

Question 19

The sum of a nation's current account balance and its capital account balance in any year is always equal to zero.

Accepted Answer

A) True 
 B)False

Question 20

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

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) None of the above
F) All of the above

Exam 18: B: The Balance of Payments and Exchange Rates

Suppose the current account balance of an economy is -$50 billion and the capital account balance of the economy is $61 billion.Given the information, it can be said that the balance in the official settlement account is:

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If the rate of exchange for a British pound is $4, the rate of exchange for the dollar:

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

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In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

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The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra.Assume that a system of flexible exchange rates is in place. Refer to the above table.The exchange rate is:

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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, foreigners made a smaller volume of investments in Transylvania than Transylvanians invested abroad.

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The sum of a nation's current account balance and its capital account balance in any year is always equal to zero.

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Appreciation of the Swiss franc will:

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Evidence of a chronic balance of payments deficit is:

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In considering British pound and dollar, the rates of exchange for the pound and the dollar:

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

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Suppose one Canadian dollar would buy 262 yen in 2005.However, it would buy only 123 yen in 2012.Relative to the yen, the value of the dollar:

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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.In 2014, Zabella's balance on the capital account shows a:

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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 realized a balance of payments deficit.

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Under the managed floating system of exchange rates:

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Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland:

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The several financial crises in which country required a massive financial bailout by the International Monetary Fund.

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When the people involved in an exchange are from countries that use different currencies, an intermediate asset transaction has to take place:

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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 realized a $1 billion surplus on goods and services.

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The following table shows the balance of payments statement of Canada for 2014.All the figures are in billions of dollars. Refer to the above information.In 2014, Canada's balance of services was:

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