Deck 32: Appendix

Question 1

The entire flow of U.S. dollars and foreign currencies into and out of the country constitutes our ____________.

Answer 1

What the entire flow of home and foreign currencies into and out of the country constitutes is required to be stated.
The balance of payments is a record of all currencies flows into and out of the country. Therefore, the correct answer is balance of payments.

Question 2

Circle the letter that corresponds to the best answer.
We became a debtor nation in ____

A) 1975
B) 1980
C) 1985
D) 1990

Answer 2

When the import of a country is much higher than their exports there is outflow of currency from domestic country to foreign countries. This imbalance or trade deficit is properly known as trade imbalance.
In the 2 nd half of 19 centaury US borrow lumpsum amount from European nations to finance their infrastructure, plants and equipment. The US quickly shifted from being the largest creditor to the largest debtor of World.
In 1985 US became a net debtor nation.
Hence, option a, b, and d are incorrect.
US become the classic debtor to fulfill their industrial need from 1985.
Hence,
is correct.

Question 3

Use the exchange rates listed in Figure 6 of the chapter to find how much it would cost in U.S. dollars and cents to make the purchases listed in problems 1-4.
A Toyota Corolla priced at 1.4 million yen.

Answer 3

Using the given exchange rate, it is required to be stated how much it would cost in USD to buy a car priced 1.4 million yen.
As per the given exchange rate, the exchange rate of $1 is 99.4 yen. This means 99.4 yen are equivalent to $1. Therefore,
Therefore, it would cost $14,084.51 to buy a car priced 1.4 million yen.

Question 4

What is meant by our balance of payments? Explain what current account and capital account are.

Question 5

Most all the dollars that foreigners have earned from trading with the United States have been ____________ in the form of ____________.

Question 6

In 2011 our net foreign debt was over $ ________ trillion.

A) 2
B) 4
C) 6
D) 8
E) 10

Question 7

A carton of Canadian paper priced at $9.00 Canadian.

Question 8

What is the gold standard? How does it work?

Question 9

The basis for international finance is the exchange of ____________.

Question 10

Which one of the following is the most accurate statement?

A) The American empire, like the Romans, the Spanish, and the British before us, uses its military might to force other nations to provide us with low-cost goods.
B) No one would ever suggest that there is such a thing as an American empire.
C) We have become very dependent on our trading partners, who have been willing to accept U.S. dollars to finance our trade deficits.
D) Although our international trade position has deteriorated in recent years, we can continue on this course indefinitely.

Question 11

A British book priced at 12 pounds.

Question 12

Why does the dollar fluctuate with other currencies?

Question 13

A nation is on the gold standard when it ____________.

Question 14

During the 1980s and 1990s, _______

A) both American investment abroad and foreign investment in the United States increased
B) both American investment abroad and foreign investment in the United States decreased
C) American investment abroad increased and foreign investment in the United States decreased
D) American investment abroad decreased and foreign investment in the United States increased

Question 15

A German camera priced at 250 euros.

Question 16

How did the United States go from being the world's largest creditor nation to the world's largest debtor?

Question 17

To be on the gold standard, a nation must maintain a fixed ratio between its gold stock and ____________.

Question 18

The world's leading debtor nation is ___

A) Argentina
B) Brazil
C) Mexico
D) the United States

Question 19

Use the exchange rates listed in Figure 6 to find how much it would cost in the currency specified to make the purchases listed in problems 5-8.
A DVD priced at $10 is sold in Mexico City.

Question 20

Can there be a deficit on Current Account and a deficit on Capital Account at the same time? Explain.

Question 21

Under the gold standard, if country J imports more than it exports, it has to ship ____________ to the trading partners with whom it has trade deficits. This will depress country J's ____________, and its price level will ____________.

Question 22

Which statement is true?

A) Foreigners own most of the assets in the United States.
B) We own more assets in foreign countries than foreigners own in the United States.
C) Foreigners are driving up interest rates in the United States.
D) None of these statements is true.

Question 23

Windows Vista priced at $100 is sold in China.

Question 24

For several months before your vacation trip to Germany you find that the exchange rate for the dollar has increased relative to the euro. Are you pleased or saddened? Explain.

Question 25

Under the gold standard, if country K's price level declines, its imports will ____________ and its exports will ____________.

Question 26

Which statement is the most accurate?

A) As a percentage of GDP, the United States has the highest current account surplus of any nation.
B) As a percentage of GDP, the United States has the highest current account deficit of any nation.
C) Our current account deficit has been rising for the last 10 years.
D) Our current account deficit indefinitely cannot be sustained.

Question 27

A Cadillac priced at $20,000 is sold in London.

Question 28

If the dollar depreciates relative to the Japanese yen, will the Sony DVD player you wanted become more or less expensive? What effect will this have on the number of Sony DVD players that Americans buy?

Question 29

Today exchange rates are set by ____________ and ____________.

Question 30

An American importer of Italian shoes would pay in ___.

A) dollars
B) gold
C) euros
D) lira

Question 31

A bottle of Viagra priced at $40 is sold in Berlin.

Question 32

Explain why a currency depreciation leads to an improvement in a nation's balance of trade.

Question 33

If Tim Matray wanted to buy wine from a French merchant, he would pay her with ____________.

Question 34

The total of our current and capital accounts ___.

A) will always be zero
B) will always be negative
C) will always be positive
D) may be positive or negative

Question 35

A country had exports of $100 billion, imports of $90 billion, net transfers from abroad of -$10 billion, and - $5 billion of net income from foreign investments. What is the country's current account balance?

Question 36

What is a foreign exchange rate? Provide a few examples.

Question 37

The main difference between our being a debtor nation in the 19th century and our being a debtor nation since the early 1980s was that in the 19th century we ran up a debt by buying ____________ goods; since the early 1980s we have run up a debt buying ____________ goods.

Question 38

Statement 1. We have been running large balance of payments deficits in recent years.
Statement 2. The most widely used currency in the world is the euro.

A) Statement 1 is true and statement 2 is false.
B) Statement 2 is true and statement 1 is false.
C) Both statements are true.
D) Both statements are false.

Question 39

Brazil ran a current account deficit of $55 billion. What is its balance on the capital account?

Question 40

How is the exchange rate determined in a freely floating rate system?

Question 41

Today international finance is based on ___.

A) the gold standard
B) mainly a relatively free-floating exchange rate system
C) fixed rates of exchange

Question 42

If you could buy a market basket of goods and services in the United States for $1,000 and those same goods and services cost you $1,200 after you converted your dollars into euros, (a) is the euro undervalued or overvalued relative to the dollar? (b) by what percent?

Question 43

Who demands Japanese yen? Who supplies yen?

Question 44

The international gold standard worked well until ___.

A) World War I
B) 1940
C) 1968
D) 1975

Question 45

If you could buy a market basket of goods and services in the United States for $10,000 and those same goods and services cost you $7,000 in Russia after you converted your dollars into rubles, (a) is the ruble undervalued or overvalued relative to the dollar? (b) by what percent?

Question 46

Practical Application: Foreigners are buying up hundreds of billions of dollars a year in American assets. In what ways should this be a matter of concern to Americans?

Question 47

If we were on an international gold standard, ___.

A) inflations would be eliminated
B) recessions would be eliminated
C) trade deficits and surpluses would be eliminated
D) no nation would ever have to devaluate its currency

Question 48

How many South African rand can we get for 1 Canadian dollar?

Question 49

Practical Application: Anne Hilbert has been hired by a Washington think tank to predict the trend over the next decade in the weighted average exchange value of the U.S. dollar. Its record from 1994 through early 2013 is shown in Figure 5; she needs to provide evidence to back up her conclusion.

Question 50

Which of the following is false?

A) The gold standard will work only when the gold supply increases as quickly as the world's need for money.
B) The gold standard will work only if all nations agree to devaluate their currencies simultaneously.
C) The gold standard will work only if participating nations are willing to accept periodic inflation.
D) The gold standard will work only if participating nations are willing to accept periodic unemployment.

Question 51

How many Canadian dollars can we get for 1 South African rand?

Question 52

Web Activity: Jennifer Saxton bought a microwave oven made in China for $200. How much would she have paid in Chinese yuan? Go to www.x-rates.com/calculator.html

Question 53

The gold exchange standard was in effect from ___.

A) 1900 to 1944
B) 1944 to 1973
C) 1955 to 1980
D) 1973 to the present

Question 54

How many Mexican pesos can we get for 1 Indian rupee?

Question 55

Web Activity: Melissa Larmon bought a German camera for 300 euros. How much would she have paid in U.S. dollars? Go to www.x-rates.com/calculator.html

Question 56

The United States began to consistently run current account deficits since ________

A) 1961
B) 1975
C) 1981
D) 1991
E) 2001

Question 57

How many Indian rupees can we get for 1 Mexican peso?

Question 58

Today currency exchange rates are set mainly by ___.

A) the International Monetary Fund
B) the U.S. Treasury
C) bilateral agreements between trading nations
D) supply and demand

Question 59

The most important influence on the exchange rate between two countries is ___.

A) the relative price levels of the two countries
B) the relative growth rates of the two countries
C) the relative level of interest rates in both countries
D) the relative wage rates of both countries

Question 60

Devaluation would tend to ___.

A) make the devaluating country's goods cheaper
B) make the devaluating country's goods more expensive
C) have no effect on the value of the devaluating country's goods

Question 61

Which is the most accurate statement?

A) Since the euro was introduced it has lost almost half its value.
B) The euro has facilitated trade among the members of the euro zone.
C) The euro is now the world's most important reserve currency.
D) The euro circulates as currency in most of the countries of the world.

Question 62

The main reason why we are the world's largest debtor nation is ____.

A) our military spending
B) our trade deficit
C) inflation
D) high taxes

Question 63

Which statement is the most accurate?

A) Since our current account deficit is matched by our capital account surplus, we have no problem with respect to our international transactions.
B) Foreigners invest all the dollars they receive from our capital account deficit to buy American assets.
C) Our current account deficits are declining and should disappear before the year 2020.
D) A declining dollar makes foreign investment in dollar-denominated assets much less attractive to foreigners.

Question 64

Which of these is the most accurate statement?

A) There is no basis for the claim that the United States is living beyond its means.
B) Our current account deficit is not a serious problem.
C) Our trade deficit is a major economic problem.
D) Since 2002 the dollar has been rising against most major currencies.

Question 65

If you were going to spend time in Italy, France, and Germany, you would be paying for things with ___.

A) lira, francs, and marks
B) dollars
C) euros
D) gold

Question 66

Which is the most accurate statement?

A) Our balance on the current account is negative.
B) Since our balance of payments is always zero, there is little to worry about.
C) The income Americans receive from their foreign investments is much greater than the income foreigners receive for their American investments.
D) Because our imports are much greater than our exports, the federal government is forced to make up the difference.

Question 67

Suppose the world was on the gold standard. If Peru ran persistent trade deficits, ___.

A) Peru would be able to continue doing so with no consequences
B) Peru's money stock would decline, its prices would fall, and its trade deficit disappear
C) Peru would soon suffer from inflation
D) Peru would raise tariffs and prohibit the shipment of gold from the country

Question 68

According to the "Big Mac Index," ___.

A) the U.S. dollar is too highly valued relative to virtually all other currencies
B) the U.S. dollar is valued too low relative to virtually all other currencies
C) you will be able to buy a Big Mac much more cheaply in China or Russia than in the United States
D) you will have to pay much more for a Big Mac in China or Russia than you would in the United States

Question 69

Which statement is the most accurate? In early 2013 there was strong evidence that the ______

A) yuan and yen were overvalued against the dollar
B) yuan and yen were undervalued against the dollar
C) yuan was undervalued against the yen
D) yen was undervalued against the yuan

Question 70

Running mounting current account deficits is analogous to ___.

A) running up debt on a credit card
B) taking money out of one pocket and putting it in another
C) owing money to ourselves
D) borrowing money that never has to be repaid

Question 71

If a Japanese DVD player priced at 12,000 yen can be purchased for $60, the exchange rate is

A) 200 yen per dollar.
B) 20 yen per dollar.
C) 20 dollars per yen.
D) 200 dollars per yen.
E) none of the above.

Question 72

Suppose that last month the U.S. dollar was trading on the foreign-exchange market at 0.85 euros per dollar. Today the U.S. dollar is trading at 0.88 euros per dollar.

A) The dollar has depreciated and the euro has appreciated.
B) The euro has depreciated and the dollar has appreciated.
C) Both the euro and the dollar have appreciated.
D) Neither the euro nor the dollar have depreciated.