Foreign Exchange and the Balance of Payments 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. A chief economist finds a steady trend of imports from other countries becoming more expensive and the onset of inflation. Which item is MOST likely responsible for these economic events?

Question 2 2. The U.S. is attempting to bolster trade with several Asian countries. Our incoming goods appear to be less expensive, suggesting that the local currency _____.

Question 3 3. A government official recognizes that an overseas country's currency has decreased in value relative to U.S. currency. Therefore, one can conclude that:

Question 4 4. From a trade perspective, balanced trade and money flows would suggest:

Question 5 5. A growing economy imports $10 billion and exports $12 billion. What is this country's trade balance?

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Question 6 6. What is a possible economic strategy for a country to broaden the price appeal of their exports?

Question 7 7. American automobile manufacturers are noticing a decrease in their exports to the European market. What rationale BEST explains this outcome?

Question 8 8. A country's economic advisers are attempting to make their exports appealing via lowered prices, boost tourism to their country, and attract foreign investors. What economic pathway would they MOST likely consider?

Question 9 9. What type of fiscal policy will cause a decrease in the value of the dollar relative to the exchange rate?

Question 10 10. Interest rates are an element of fiscal policy that can affect the exchange rate. Which additional item can affect the exchange rate?

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Question 11 11. Which item is MOST likely to be affected by both fiscal and monetary policies?

Question 12 12. You have just arrived at your overseas destination and your first task is to visit the currency exchange. The exchange rate between the dollar and the foreign currency is 1 to .50. You hand the attendant a $100 bill. How much of the foreign currency will you receive back given the current exchange rate?

Question 13 13. A country is spending $1 billion annually on growing its economy, compared to savings of $500 million in the same time period. What type of current account balance does this suggest?

Question 14 14. A particular candidate's reelection campaign centers on detailing to her constituents the sum of the balance of trade, which she is unhappy with. What economic term is she referring to?

Question 15 15. Several European countries have just submitted their balance of payments upon request by a U.S. diplomat. What is recorded on this document?

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Question 16 16. As an economics student, you are trying to figure out the reason behind why foreign exports appear to be so cheap relative to domestic goods. What is a potential explanation for this?

Question 17 17. _____ transactions are often referred to as foreign or international trade and involve the inflow and outflow of money.

Question 18 18. Which of the following statements about the financial/capital account is NOT true?

Question 19 19. If a country had $1 million in exports and $1.5 million in imports, what would the trade balance be?

Question 20 20. If more Americans want to suddenly purchase goods in Mexico, what likely happens?

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Question 21 21.

The same pair of shoes can be imported from different countries. The prices of the shoes in Japan, Mexico, England, and India are 3330 Yen, 646 Pesos, 28 Pound Sterling, and 2535 Rupees respectively. The exchange rates are 111 Yen, 17 Pesos, 0.8 Pound Sterling and 65 Rupees to 1 U.S. dollar.

The cheapest pair of shoes can be purchased from:

Question 22 22. All of the following are types of exchange rates that countries can use, except:

Question 23 23. 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 24 24. When the American dollar buys more than its equivalent in another currency, it is considered to be _____ the other currency.

Question 25 25. Predict the effect on the exchange rate when the Federal Reserve uses monetary policy to increase income or available money.

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Question 26 26. Which two components make up the balance of payments account?

Question 27 27. Which of the following does NOT impact the trade balance of a country?

Question 28 28. When are exchange rates determined by demand and supply forces?

Question 29 29. If U.S. exports to Japan increased, what most likely happened?

Question 30 30. If the exchange rate between the U.S. dollar and Mexican Peso is 13 Pecos to 1 U.S. dollar, how many dollars would a gallon of ice cream costing 52 pesos be?

Foreign Exchange and the Balance of Payments 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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