Answer to Question #37266 in Macroeconomics for many

Question

1. In the balance of payments accounts, investments by foreigners into an economy are recorded in that country’s capital account as:
(a) debits.
(b) credits.
(c) settlement payments.
(d) offset by capital outflows.
2. If outflows of financial capital assets [ex: stocks and bonds] exceed inflows of financial capital assets, the balance on the capital account will be:
(a) positive credits
(b) negative credits.
(c) positive debits
(d) zero, by definition.
(e) offset by future inflows.
3. The value of one currency relative to another is called the
(a) terms of trade.
(b) exchange rate.
(c) swap parameter.
(d) arbitrage ratio.
(e) currency coefficient.
4. If one U.S. dollar exchanges for 100 yen, one yen exchanges for:
(a) 100 dollars.
(b) 50 lira, if one dollar exchanges for 2 lira.
(c) 1/100 pound, if one dollar exchanges for 1/2 pound.
(d) 1/20 franc, if one dollar exchanges for 5 franc
(e) 5 rupees if one dollar exchanges for 20 rupees

5. A surplus of a country's currency in international markets for foreign exchange tends to:
(a) lead to a balance of trade surplus for the country.
(b) generate balance of trade deficits for the country
(c) mean that currency will flow into the country under a floating exchange rate system.
(d) mean that the country's currency is underpriced in foreign exchange markets.
6. A pegged exchange rate that overvalues a country's currency:
(a) is only possible in a flexible exchange rate system.
(b) makes imports cheap in the domestic market and exports more costly in world markets
(c) gives domestic producers an edge over imports in the domestic market.
(d) makes capital outflows inevitable.
7. Under a purely flexible exchange rate system, the primary mechanism for dealing with temporary disequilibria in balances of payments is a:
(a) domestic gold standard.
(b) rigid system of exchange controls.
(c) currency flow from surplus to deficit countries.
(d) macro-adjustments system.
(e) depreciation or appreciation of exchange rates
8. The rate at which foreign exchange can be bought today is known as
(a) the forward rate
(b) the spot rate
(c ) Hedging
(d) none of the above

9. If the Mexican peso appreciates relative to the US dollar (hence, relative to the Belizean
dollar also)
(a) Belizeans will purchase more Mexican goods and service
(b) Belizeans will purchase fewer goods and services
(c) Mexican will purchase less Belizean goods and service
(d) none of the above

10. Annual differences between central government outlays and receipts are:
(a) public debt.
(b) budget deficits or surpluses.
(c) trade deficits.
(d) budget constraints

11. When the government finances a deficit by selling securities:
(a) the resulting higher interest rate may crowd out private investment.
(b) taxes must be raised to cover the debt.
(c) intergenerational income is unaffected if foreigners buy the bonds.
(d) the macro-economy usually collapses into a recession.

12. An internally held public debt tends to impose a:
(a) distributional burden on some members of society.
(b) net burden on the community.
(c) larger burden than an external debt.
(d) net benefit to future generations.

13. "As interest rates rose by record leaps this week, the dollar continued its slide." What is most likely going on here?
(a) the rise in interest rates is decreasing exports
(b) the rise in interest rates is decreasing capital inflows
(c) the slide in the dollar must be causing the Fed to increase interest rates
(d) the slide in the dollar is increasing the cost of living and so increasing interest rates

14. A country with an undervalued currency
(a) is hurting exporters (b) will have a balance of payments deficit
(c) will accumulate reserves of foreign currency
(d) will experience downward pressure on its exchange rate

15. The existence of the international sector causes fiscal policy to
(a) be weaker, but only under fixed exchange rates
(b) be stronger, but only under fixed exchange rates
(c) be stronger, but only under flexible exchange rates
(d) be completely ineffective, but only under a fixed exchange rate

16. Under flexible exchange rates a small open economy should
(a) lose control of its monetary policy (b) be insulated from its trading partners' inflation
(c) tend to experience the inflation of its trading partners
(d) find that changes in its interest rates match changes in its trading partner's interest rates

17. A country that is buying its own currency to maintain a given exchange rate
(a) has a flexible exchange rate ( b) has an undervalued currency
(c) has a balance of payments surplus (d) is automatically decreasing its money supply

18. If the Fed is buying $US in the foreign exchange market to maintain the value of the $US, then
(a) the U.S. dollar is undervalued (b) the U.S. money supply is shrinking
(c) the US has a balance of payments surplus (d) U.S. foreign exchange reserves are rising

19. "But adopting fixed exchange rates entails a steep price, namely, that the government is prohibited from using ________to fight slumps. The upshot is a neat illustration of the "no-free-lunch" maxim so beloved by economists." The blank is best filled in with
a) fiscal policy b) tariff policy c) monetary policy d) supply-side policy

20. If we are at full employment and the rate of growth of our money supply increases, in the long run we should expect
a) a fall in bond prices and our exchange rate
b) an increase in bond prices and our exchange rate
c) an increase in bond prices and a fall in our exchange rate
d) a fall in bond prices and an increase in our exchange rate

21. In countries experiencing hyperinflation we should see
a) low interest rates and a depreciating currency
b) high interest rates and a depreciating currency
c) low interest rates and an appreciating currency
d) high interest rates and an appreciating currency

22. "In 1993, for example, the peso declined 0.6% whereas consumer prices rose 9.8% in Mexico versus just 2.5% in the United States. This led to an ______ of the peso, causing a current account _____, contributing to the forces causing the Mexican financial crisis of December 1994." The blanks are best filled with
a) undervaluation; deficit b) undervaluation: surplus
c) overvaluation; deficit d) overvaluation; surplus

23. "The central bank, which handles the reserve fund for the government, sells reserves and buys dollars when it wants to ....." This clipping is best completed with
a) prevent the dollar from falling b) prevent the dollar from rising
c) increase its foreign exchange reserves
d) fix the exchange rate in the face of a balance of payments surplus

24. "The central bank, fearing inflation, has kept interest rates up. However, to offset the upward pressure those rates are putting on the currency, it has also been....." Complete this clipping.
a) selling bonds to foreigners
b) buying dollars on the foreign exchange market
c) selling dollars on the foreign exchange market

25. "Indeed, the yen may have to stay strong for two years or more, many experts say, to have much impact on American-Japanese trade." This is because of
a) the J curve b) capital inflows
c) high U.S. interest rates d) high Japanese interest rates

26. The saving rate is equal to
(a) current income minus spending on current needs.
(b) saving divided by income.
(c ) income minus consumption.
(d) the change in saving that corresponds to a change in income.
(e) saving divided by consumption.

27. Saving to meet long-term objectives is called
(a) life-cycle saving.
28 precautionary saving
(c) bequest saving.
(d) wealth creating saving.
(e) efficient saving .

28. Saving for the purpose of leaving an inheritance is called
(a) life-cycle saving. .
(b) precautionary saving. .
(c ) bequest saving. .
(d) wealth creating saving.

29. A country’s trade balance and net capital inflows
(a) are always equal.
(b) always move in the same direction
(c) always move in opposite directions
(d) must sum to zero
(e) measure the same thing

30. Middle-class families that were once content with medium-priced cars, but now feel the need to drive expensive cars to keep up with community standards illustrate which of the following effects?
(a) Demonstration effect
(b) Wealth effect
(c ) Consumption effect
(d) Self-control effect
(e) Income effect

Answer 1

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