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

Question 2 2. From a trade perspective, balanced trade and money flows would suggest:

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. 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 5 5. 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 _____.

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Question 6 6. 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 7 7. Several European countries have just submitted their balance of payments upon request by a U.S. diplomat. What is recorded on this document?

Question 8 8. _____ transactions are often referred to as foreign or international trade and involve the inflow and outflow of money.

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

Question 12 12. Which item is MOST likely to be affected by both fiscal and monetary policies?

Question 13 13. 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 14 14. What is a possible economic strategy for a country to broaden the price appeal of their exports?

Question 15 15. American automobile manufacturers are noticing a decrease in their exports to the European market. What rationale BEST explains this outcome?

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

Question 19 19. When are exchange rates determined by demand and supply forces?

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

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Question 21 21. If U.S. exports to Japan increased, what most likely happened?

Question 22 22.

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

Question 24 24. Why did the U.S. trade deficit start to grow in the 1990s?

Question 25 25. How can a fiscal policy affect exchange rates?

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Question 26 26. Which of the following is NOT a component of the current account?

Question 27 27. If more Americans want to suddenly purchase goods in Mexico, what likely happens?

Question 28 28. Which of the following statements regarding an exchange rate is not true?

Question 29 29. How is domestic currency related to exports?

Question 30 30. _____ are payments made by those in the domestic economy to purchase financial and physical assets in other countries.

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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