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

Question 3 3. 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 4 4. 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 5 5. 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 6 6. Which item is MOST likely to be affected by both fiscal and monetary policies?

Question 7 7. What type of fiscal policy will cause a decrease in the value of the dollar relative to the exchange rate?

Question 8 8. A growing economy imports $10 billion and exports $12 billion. What is this country's trade balance?

Question 9 9. From a trade perspective, balanced trade and money flows would suggest:

Question 10 10. A government official recognizes that an overseas country's currency has decreased in value relative to U.S. currency. Therefore, one can conclude that:

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Question 11 11. 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 12 12. 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 13 13. American automobile manufacturers are noticing a decrease in their exports to the European market. What rationale BEST explains this outcome?

Question 14 14. 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 15 15. What is a possible economic strategy for a country to broaden the price appeal of their exports?

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Question 16 16. Several European countries have just submitted their balance of payments upon request by a U.S. diplomat. What is recorded on this document?

Question 17 17. 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 18 18.

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

Question 20 20. All of the following are types of exchange rates that countries can use, except:

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Question 21 21. What is true about contractionary monetary or fiscal policy?

Question 22 22. What is the rate at which one currency is converted in another called?

Question 23 23. Which of the following is NOT associated with foreign trade?

Question 24 24. Which of the following does NOT impact the trade balance of a country?

Question 25 25.

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

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Question 26 26. What are goods that are produced in a foreign country but sold in a home country called?

Question 27 27. Identify the situation where a weak currency, or lower exchange rate, can be beneficial.

Question 28 28. Which exchange rate would most likely be used for a good or service that will be delivered at a future date?

Question 29 29. Predict the effect on the exchange rate when the Federal Reserve uses monetary policy to increase income or available money.

Question 30 30. Which of the following statements is true?

Foreign Exchange and the Balance of Payments Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next question. You can skip questions if you would like and come back to them later with the "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. You will lose your work if you close or refresh this page. Good luck!

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