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Foreign Exchange and the Balance of Payments: Help and Review Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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Question 1 1. When are exchange rates determined by demand and supply forces?

Question 2 2.

Given the following, what is the balance of payments?

Foreign Investment in Domestic sector = $1,000,000

Domestic Investment in Foreign sector = $500,000

Exports = $1,000,000

Imports = $2,000,000

Question 3 3. Which of the following statements is true?

Question 4 4. If a country had $1 million in exports and $1.5 million in imports, what would the trade balance be?

Question 5 5.

Consider a scenario where there has been a decrease in the exchange rate of the American dollar.

How will the inflation and import prices vary?

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Question 6 6. If the American dollar rose in value in relation to the Japanese Yen, what would likely be the effect?

Question 7 7. How can a fiscal policy affect exchange rates?

Question 8 8. If more Americans want to suddenly purchase goods in Mexico, what likely happens?

Question 9 9. What are goods that are produced in a foreign country but sold in a home country called?

Question 10 10. An increase in the value of a domestic currency will mainly affect _____.

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Question 11 11. What is most likely to happen with a strong dollar?

Question 12 12. Identify the situation where a weak currency, or lower exchange rate, can be beneficial.

Question 13 13. When the American dollar buys more than its equivalent in another currency, it is considered to be _____ the other currency.

Question 14 14. How is domestic currency related to exports?

Question 15 15. Which of the following statements about the financial/capital account is NOT true?

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Question 16 16. Why did the U.S. trade deficit start to grow in the 1990s?

Question 17 17. What would you expect if there is an increase in exchange rate?

Question 18 18. Which of the following is NOT associated with foreign trade?

Question 19 19. When expansionary monetary policy leads to a decrease in interest rates, the exchange rate _____.

Question 20 20.

Assume the following exchange rates:

1 Dollar = 102 Japanese Yen

1 Dollar = 0.6 British Pound

1 Dollar = 0.91 Swiss Franc

1 Dollar = 13 Pesos

Which of the following is the least amount of money?

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Question 21 21. Why is the balance of payments useful for understanding the state of the economy?

Question 22 22. Which exchange rate would most likely be used for a good or service that will be delivered at a future date?

Question 23 23. _____ are payments made by those in the domestic economy to purchase financial and physical assets in other countries.

Question 24 24. Latervia is a very small country that has exports of $100,000, imports of $20,000, net income from abroad $250,000, and net current transfers $200,000. What is Latervia's current account?

Question 25 25. What is true about contractionary monetary or fiscal policy?

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Question 26 26. All of the following are true, EXCEPT that the current account _____.

Question 27 27. Which two components make up the balance of payments account?

Question 28 28. All of the following are types of exchange rates that countries can use, except:

Question 29 29. Why does Saudi Arabia have a large trade surplus?

Question 30 30. Which of the following is FALSE concerning trade?

Foreign Exchange and the Balance of Payments: Help and Review Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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