Deck 18: International Finance.

Question 1

Which of the following events would not be recorded in the U.S. balance of payments?

A) the increase in the money supply of a foreign nation
B) Oxfam America, a U.S. relief agency, sending rice to drought victims in sub-Saharan Africa
C) Bangladesh receiving a loan from the United States to complete an infrastructural project
D) the Pentagon stationing troops in Saudi Arabia
E) the United States exporting computer software and importing oil from Iraq

Answer 1

the increase in the money supply of a foreign nation

Question 2

In the balance-of-payments account, the outflow of payments to the rest of the world, are entered as _____

A) credits.
B) debits.
C) payments.
D) investments.
E) unilateral transfers.

Answer 2

debits.

Question 3

In 2016, the U.S. merchandise trade deficit with China was _____

A) $11 billion.
B) $347 billion.
C) $80 billion.
D) $100 billion.
E) $230 billion.

Answer 3

$347 billion.

Question 4

A nation's merchandise trade balance reflects _____

A) trade in tangible products.
B) the value of exports of services.
C) the value of imports of services.
D) the same information as its balance of payments.
E) trade in tangibles and intangibles.

Question 5

Spending on U.S. merchandise imports is a _____ in the balance-of-payments account.

A) credit
B) debit
C) payment
D) investment
E) unilateral transfer

Question 6

The merchandise trade balance measures _____

A) the value of goods exported by different states within the country.
B) the value of all services exported minus the value of all services imported.
C) the value of all services imported minus the value of all services exported.
D) the value of all tangible products exported minus the value of all tangible products imported.
E) the value of all tangible products imported minus the value of all tangible products exported.

Question 7

Revenue from U.S. merchandise exports is a _____ in the U.S. balance-of-payments account.

A) credit
B) debit
C) payment
D) investment
E) unilateral transfer

Question 8

The balance of payments summarizes the transactions that occur during a given time period between _____

A) the local governments of a country and the federal government of the country.
B) the producers and consumers of all goods and services within a country.
C) individuals, firms, and government of one country and individuals, firms, and governments of the other countries.
D) two firms that operate in two different states in a country.
E) the firms in a country and the government of the country.

Question 9

Which of the following is true about the U.S. trade balance during the 1960s?

A) Imports and exports were equal.
B) Exports exceeded imports.
C) Imports exceeded exports.
D) When the economy expanded, the demand for imports increased.
E) When the economy expanded, the trade balance worsened.

Question 10

In 2016, America's imports from China were about _____ its exports to China.

A) two times
B) three times
C) four times
D) six times
E) ten times

Question 11

The merchandise trade balance does not include _____

A) exports of refrigerators.
B) imports of automobiles.
C) exports of agricultural products.
D) shipping and insurance services.
E) imports of food items with heavy tariffs.

Question 12

A more descriptive phrase for the balance-of-payments account would be _____

A) balance of economic transactions.
B) balance of trade debits.
C) balance of trade credits.
D) balance-of-investment transactions
E) unilateral transfer balance

Question 13

What summarizes the transactions that occur during a given time period between residents of that country and residents of other countries?

A) the balance of payments
B) the merchandise trade balance
C) the financial account
D) the trade deficit
E) the current account

Question 14

In the balance-of-payments account, the receipts from the rest of the world are entered as _____.

A) credits.
B) debits.
C) payments.
D) investments.
E) unilateral transfers.

Question 15

Which account equals the value of merchandise exports minus the value of merchandise imports?

A) the balance of payments
B) the merchandise trade balance
C) the financial account
D) the trade deficit
E) the current account

Question 16

A nation has a favorable balance of trade when _____

A) it has a surplus in its balance of payments.
B) it has a deficit in its balance of payments.
C) the value of its imports is greater than the value of its exports.
D) merchandise exports exceed merchandise imports.
E) it has high tariffs.

Question 17

A nation has an unfavorable balance of trade when _____

A) it has a surplus in its balance of payments.
B) it has a deficit in its balance of payments.
C) the value of its imports is greater than the value of its exports.
D) merchandise exports exceed merchandise imports.
E) it has high tariffs.

Question 18

The value of a country's exports is listed in its balance-of-payments account as a(n) _____

A) credit.
B) debit.
C) payment.
D) investment.
E) unilateral transfer.

Question 19

Which of the following is not true about the U.S. trade balance since 1976?

A) Imports and exports have been equal.
B) Exports exceeded imports.
C) Imports exceeded exports.
D) When the economy expanded, the demand for imports increased.
E) When the economy expanded, the trade balance worsened.

Question 20

Which account records current flows of funds into and out of the country?

A) the balance of payments
B) the merchandise trade balance
C) the financial account
D) the trade deficit
E) the current account

Question 21

The current account reflects _____

A) trade in only tangible products.
B) trade in goods as well as services.
C) trade in services only.
D) the purchase of securities from foreigners.
E) the sale of securities to foreigners.

Question 22

The balance on goods and services is _____

A) the same as the merchandise trade balance since services cannot be traded.
B) equivalent to the trade balance.
C) the value of all tangible and intangible products exported minus the value of all tangible and intangible products imported.
D) the value of all tangible products exported minus the value of all tangible products imported.
E) the value of all tangible products imported minus the value of all tangible products exported.

Question 23

Which of the following statements defines trade balance?

A) The trade balance is the sum of the services balance, the current account balance, and the capital account balance.
B) The trade balance is merchandise exports minus merchandise imports.
C) The trade balance is the sum of the current account balance and the capital account balance.
D) The trade balance is foreign purchases of domestic assets minus domestic purchases of foreign assets.
E) The trade balance is the sum of the services balance and the capital account balance.

Question 24

Table 18.1
$$\begin{array}{l}\text { Table } 18.1\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & + 1000 \\\hline \text { Merchandise imports } & + 3000 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & + 1500 \\\hline \text { Service imports } & + 1000 \\\hline \text { Goods and services balance } & 100 \\\hline \text { Net investment income from abroad } & - 1,000 \\\hline \text { Net unilateral transfers } & \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.1, which shows a Balance of Payments account. What is the merchandise trade balance?

A) ?$1,500
B) ?$2,000
C) ?$2,400
D) ?$2,420
E) $500

Question 25

Which of the following is not considered a unilateral transfer?

A) income earned from foreign investments
B) foreign aid
C) personal gifts to friends or family abroad
D) institutional charitable donations
E) government transfers to foreign residents

Question 26

In 2016, the U.S. merchandise trade deficit with Canada was _____

A) $11 billion.
B) $347 billion.
C) $80 billion.
D) $100 billion.
E) $230 billion.

Question 27

Table 18.a
$$\begin{array}{l}\text { Table 18.a }\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & 500 \\\hline \text { Merchandise imports } & 200 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & 400 \\\hline \text { Service imports } & 600 \\\hline \text { Goods and services balance } & \\\hline \text { Net investment income from abroad } & 50 \\\hline \text { Net unilateral transfers } & - 90 \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.1, which shows a balance-of-payments account. What is the goods and services balance?

A) $300
B) $100
C) ?-$300
D) ?$100
E) $60

Question 28

Table 18.1
$$\begin{array}{l}\text { Table } 18.1\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & + 1000 \\\hline \text { Merchandise imports } & + 3000 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & + 1500 \\\hline \text { Service imports } & + 1000 \\\hline \text { Goods and services balance } & 100 \\\hline \text { Net investment income from abroad } & - 1,000 \\\hline \text { Net unilateral transfers } & \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.1, which shows a Balance of Payments account. What is the goods and services balance?

A) ?$1,500
B) ?$2,000
C) ?$2,400
D) ?$2,420
E) $500

Question 29

Which of the following is true of unilateral transfers in the U.S. balance of payments?

A) Unilateral transfers have been positive since World War II.
B) Unilateral transfers have been negative since World War II.
C) Unilateral transfers have been negative every year since World War II, except during the war in Iraq.
D) The United States places tight restrictions on its currency being sent out of the country.
E) Developing countries ordinarily place no restrictions on its currency being sent to the United States.

Question 30

Which of the following is not classified as a service in the current account?

A) transportation
B) insurance
C) tour guidance
D) computer software development
E) unilateral transfers

Question 31

Net unilateral transfers in the United States have been _____

A) positive every year since 1950.
B) negative every year since 1950.
C) positive every year since 1950, except in 1991 during the Persian Gulf War.
D) negative every year since 1950, except in 1991 during the Persian Gulf War.
E) positive about half the time and negative about half the time since 1950.

Question 32

When net unilateral transfers are added to the net exports of goods and services, the result is called the _____

A) merchandise trade balance.
B) official reserve transactions account.
C) balance of payments.
D) balance on capital account.
E) balance on current account.

Question 33

Table 18.1
$$\begin{array}{l}\text { Table } 18.1\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & + 1000 \\\hline \text { Merchandise imports } & + 3000 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & + 1500 \\\hline \text { Service imports } & + 1000 \\\hline \text { Goods and services balance } & 100 \\\hline \text { Net investment income from abroad } & - 1,000 \\\hline \text { Net unilateral transfers } & \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.1, which shows a balance-of-payments account. What is the current account balance?

A) ?$1,500
B) ?$2,000
C) ?$2,400
D) ?$2,420
E) $500

Question 34

Table 18.a
$$\begin{array}{l}\text { Table 18.a }\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & 500 \\\hline \text { Merchandise imports } & 200 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & 400 \\\hline \text { Service imports } & 600 \\\hline \text { Goods and services balance } & \\\hline \text { Net investment income from abroad } & 50 \\\hline \text { Net unilateral transfers } & - 90 \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.a, which shows a balance-of-payments account. What is the merchandise trade balance?

A) $300
B) $100
C) ?-$300
D) ?$100
E) $60

Question 35

The debit side of the current account includes the imports of _____

A) goods only.
B) goods and services.
C) services only.
D) services and resources only.
E) financial assets.

Question 36

The merchandise trade balance _____

A) reflects trade in intangibles like insurance and tourism.
B) includes personal gifts to friends abroad.
C) records the flow of financial assets like stocks and bonds.
D) equals the value of imports in goods and services minus the value of exports in goods and services.
E) equals the value of tangible products exported minus the value of tangible products imported.

Question 37

In 2016, the United States had the largest merchandise trade deficit with _____

A) the European Union.
B) Canada.
C) China.
D) Mexico.
E) Brazil.

Question 38

Table 18.a
$$\begin{array}{l}\text { Table 18.a }\\\begin{array} { | l | c | } \hline \text { Current Account } & ( \$ ) \\\hline \text { Merchandise exports } & 500 \\\hline \text { Merchandise imports } & 200 \\\hline \text { Merchandise trade balance } & \\\hline \text { Service exports } & 400 \\\hline \text { Service imports } & 600 \\\hline \text { Goods and services balance } & \\\hline \text { Net investment income from abroad } & 50 \\\hline \text { Net unilateral transfers } & - 90 \\\hline \text { Current account balance } & \\\hline\end{array}\end{array}$$

-Refer to Table 18.a, which shows a balance-of-payments account. What is the current account balance?

A) $300
B) $100
C) ?$300
D) ?$100
E) $60

Question 39

Which of the following is not considered a unilateral transfer?

A) foreign aid from one government to another
B) income earned from foreign investments
C) personal gifts to friends in foreign countries
D) donations to foreign countries from non-government domestic charities
E) government transfers to foreign residents

Question 40

A country's investment earnings from foreign assets minus foreigners' earnings from their assets in the country is called _____

A) the merchandise trade balance.
B) net unilateral transfers abroad.
C) the balance on goods and services.
D) net investment income from abroad.
E) the financial account balance.

Question 41

In the balance of payments accounts, there will be a surplus in the financial account of a country if _____

A) it sells more goods to foreign countries than it imports.
B) it buys more goods from foreign countries than it exports.
C) it sells more assets to individuals in other countries than the assets it buys from them.
D) it buys more assets from individuals in other countries than the assets it sells to them.
E) it imports less machinery than it exports.

Question 42

Foreign exchange is foreign money _____

A) used as an entry in the current account.
B) used to price of foreign goods.
C) used as an entry in the capital account.
D) used as an entry in the balance of trade.
E) needed to carry out international transactions.

Question 43

An exchange rate is _____

A) the rate at which goods are traded between countries.
B) the rate at which the central bank of a country gives loans to commercial banks.
C) the rate at which commercial banks give loans to individuals.
D) the price of one currency in terms of another.
E) the price at which one good trades for another within a country.

Question 44

The foreign exchange rate is _____

A) an entry in the current account.
B) the price of a foreign good in the world market.
C) an entry in the capital account.
D) an entry in the balance of trade.
E) the cost of one currency in terms of another.

Question 45

A statistical discrepancy _____

A) is always positive but less than 1.
B) is always negative and greater than −1.
C) must be reduced to zero and eliminated from the balance of payments before the records become official.
D) is a residual factor that indicates the net error in the balance of payments data.
E) is a record of all transactions between residents of two countries over a specified period.

Question 46

The current account records _____

A) last year's flows of funds into and out of the country.
B) the current flows of imports and exports of goods and services, net income earned by residents from foreign assets, and net transfer payments.
C) all the foreign direct investment received by a country in a year.
D) the purchases of financial assets, such as stocks and bonds, by the residents of a country in a year.
E) the purchases of all real assets, such as land and housing, by the citizens of a country in a year.

Question 47

Which of the following is a credit item in the U.S. balance of payments?

A) imports of cars from Japan
B) a purchase of an American car by a Japanese citizen
C) a purchase of Chinese assets by an American citizen
D) an American firm's purchase of steel from a European steel mill
E) an increase in American tourists abroad

Question 48

Which of the following would be represented as a debit in the U.S. balance of payments?

A) a U.S. purchase of cars from Italy
B) a U.S. sale of beef to Israel
C) transfers received by the U.S. government from foreign governments
D) gifts received by U.S. residents from friends abroad
E) income received by U.S. residents from overseas investments

Question 49

The exchange rate is the _____

A) opportunity cost of producing exportable goods in a country.
B) total monetary value of exports minus imports.
C) amount of a country's currency that can be exchanged for one ounce of gold.
D) sum of net unilateral transfers.
E) price of one country's currency in terms of another country's currency.

Question 50

A drop in the dollar price of British pounds implies that _____

A) fewer U.S. dollars are needed to buy British pounds.
B) more dollars are needed to buy British pounds.
C) the pound has appreciated.
D) the dollar has depreciated.
E) British goods are now more expensive to Americans.

Question 51

If the U.S. dollar appreciates, this implies that _____

A) the value of the U.S. dollar has decreased.
B) the value of foreign currency in terms of U.S. dollars has increased.
C) fewer U.S. dollars are required to purchase foreign exchange.
D) more U.S. dollars are required to purchase foreign exchange.
E) exports will rise immediately.

Question 52

The statistical discrepancy in the balance of payments is _____

A) always positive.
B) always negative.
C) always zero.
D) positive, negative, or zero.
E) indeterminate.

Question 53

A German national who exchanges euros for dollars at a U.S. airport is _____

A) contributing to U.S. exports of merchandise.
B) lending dollars to Germany.
C) participating in the foreign exchange market.
D) engaging in speculative activities.
E) engaging in illegal activities.

Question 54

The trade balance of the country of Utopia would be in deficit only if _____

A) its import of services exceed its export of services.
B) its merchandise exports exceed its merchandise imports.
C) its merchandise imports exceed its merchandise exports.
D) foreign investors invest in domestic assets.
E) the citizens of Utopia purchase foreign securities to earn a high return and diversify their investment.

Question 55

If foreigners increase their ownership of U.S. assets, this would help to offset _____

A) a deficit in the U.S. current account.
B) a deficit in the U.S. capital account.
C) a surplus in the U.S. current account.
D) a surplus in the U.S. capital account.
E) a surplus in the overall balance of payments.

Question 56

Which of the following is a credit item in the U.S. balance of payments?

A) U.S. companies selling merchandise abroad
B) foreign companies selling merchandise to U.S. consumers
C) U.S. consumers sending money to foreign companies
D) immigrants to the United States sending money back to their families in their native countries
E) immigrants to the United States sending gifts back to their families in their native countries

Question 57

If $1 equals 2 euros, then 1 euro equals _____

A) $4.00.
B) $2.00.
C) $0.50.
D) $1.00.
E) $0.25.

Question 58

In order for the balance of payments to balance, the _____

A) current account balance must equal the capital account balance.
B) sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a negative value.
C) sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must have a positive value.
D) sum of the current account balance, the capital account balance, the net flow of international reserves, and the statistical discrepancy must equal zero.
E) the sum of the current account balance, the capital account balance, and the net flow of international reserves must be greater than the statistical discrepancy.

Question 59

A country runs a deficit in its current account if _____

A) it consumes less goods and services compared to what it produces.
B) the interest and dividends earned by its residents on foreign assets exceed the interest and dividends earned by foreigners who invest in domestic assets.
C) it follows the double-entry bookkeeping requirement that total debits must equal total credits.
D) foreign currency received from exports and transfers exceeds the foreign exchange needed to pay for imports and to make unilateral transfers.
E) foreign currency received from exports and transfers is less than the foreign exchange needed to pay for imports and to make unilateral transfers.

Question 60

The exchange rate is the _____

A) ratio of exports to imports.
B) interest rate the U.S. government charges on international loans.
C) percentage of domestic goods that are exported.
D) cost of one nation's currency in terms of another nation's currency.
E) rate that central banks charge commercial banks for currency exchanges.

Question 61

When supply and demand analysis is used to study the exchange rate, foreign exchange is treated just like _____

A) a normal good.
B) a debt.
C) fiat money.
D) commodity money.
E) an investment.

Question 62

If the U.S. dollar depreciates in the foreign exchange market, American exports will _____ and American imports will _____.

A) be more expensive; be more expensive
B) be more expensive; be less expensive
C) be less expensive; be less expensive
D) be less expensive; be more expensive
E) decrease; increase

Question 63

Which of the following statements is true?

A) The demand for foreign currency in the United States increases as the volume of imports increases.
B) The demand for foreign currency in the United States increases as the volume of exports increases.
C) The demand for foreign currency in the United States decreases with a decrease in the inflation rate abroad.
D) The demand for foreign currency in the United States decreases as foreign interest rates rise.
E) The demand for foreign currency in the United States is unaffected by U.S. demand for foreign goods and services.

Question 64

Suppose U.S. consumers start buying more English shoes and fewer American shoes. Which of the following will be a likely impact on the foreign exchange market?

A) U.S. demand for British pounds will increase.
B) U.S. demand for British pounds will decrease.
C) U.S. demand for British pounds will increase, but the demand for foreign exchange will decrease.
D) U.S. demand for British pounds will decrease, but the demand for foreign exchange will increase.
E) There would be no effect on the demand for foreign exchange in the United States.

Question 65

The exchange rate is _____

A) the price of foreign exchange determined by the interaction of supply and demand.
B) an interest rate for foreign loans determined by the interaction of supply and demand.
C) fixed by the International Monetary Fund.
D) always fixed for any two currencies by the two nations involved, regardless of any agreements made with other nations.
E) fixed by GATT.

Question 66

The demand curve for euros shows _____

A) a direct relationship between the dollar price of the euro and the quantity of euros demanded.
B) an inverse relation between the dollar price of the euro and the quantity of euros demanded.
C) that the higher the dollar price of the euro, the greater the quantity of euros demanded.
D) that the more expensive it is to buy euros, the larger the quantity of European goods demanded by Americans.
E) that the dollar price of the euro is fixed by the European Union.

Question 67

The demand curve for foreign exchange _____

A) slopes downward.
B) slopes upward.
C) is horizontal, because no individual country can influence the price of foreign exchange.
D) is vertical, because no individual country can influence the price of foreign exchange.
E) may slope downward or upward depending on the volume of imports and exports of the trading countries.

Question 68

If the dollar per pound exchange rate falls from $1.50 per pound to $1.25 per pound, ______

A) U.S. imports of British goods will increase.
B) U.S. exports of goods to Great Britain will increase.
C) U.S. exports of services to Great Britain will fall because the price of the pound has increased.
D) British demand for American goods will remain unchanged, but American demand for British goods will fall.
E) U.S. demand for British goods will remain unchanged, but British demand for American goods will increase.

Question 69

If the U.S. dollar depreciates relative to the Swiss franc, then _____

A) Swiss goods become more expensive in the United States.
B) U.S. goods become more expensive in Switzerland.
C) Swiss investors will pay more Swiss francs to buy one unit of U.S. dollar.
D) the U.S. import of Swiss goods will increase.
E) the U.S. dollar per Swiss franc exchange rate will decrease.

Question 70

If the U.S. dollar appreciates relative to the Brazilian real, then _____

A) the U.S. dollar per real exchange rate will increase.
B) U.S. goods become less expensive in Brazil.
C) Brazilian goods become more expensive in the United States.
D) Brazilian investors will pay fewer reals to buy one unit of U.S. dollar.
E) the United States will import more goods and services from Brazil.

Question 71

If the U.S. dollar depreciates, it means that _____

A) the value of the U.S. dollar has increased.
B) the value of foreign exchange has decreased.
C) fewer U.S. dollars are required to purchase foreign exchange.
D) more U.S. dollars are required to purchase foreign exchange.
E) exports will fall.

Question 72

The demand for U.S. dollars by foreign nations increases as _____

A) more Americans travel abroad.
B) foreigners increase their purchase of American goods.
C) Americans increase their purchase of foreign goods.
D) Americans increase their investments in foreign stocks or bonds.
E) Americans send more gifts abroad.

Question 73

If the exchange rate changes from 75 cents per euro to $1 per euro, the euro has _____

A) appreciated, since its value has increased.
B) appreciated, since the price of U.S. dollars has increased.
C) appreciated, making U.S. goods more expensive in European nations.
D) depreciated, since its value has declined.
E) depreciated, since its value has increased.

Question 74

If the exchange rate changes from 1 euro per U.S. dollar to 1.2 euros per U.S. dollar, the euro has _____

A) appreciated, since its value has increased.
B) appreciated, since the price of U.S. dollars has increased.
C) appreciated, making U.S. goods cheaper in European countries.
D) depreciated, since its value has declined.
E) depreciated, since its value has increased.

Question 75

As the price of foreign exchange decreases relative to the U.S. dollar, the _____

A) products made in the United States become cheaper for foreigners.
B) goods made in foreign countries become cheaper for Americans.
C) amount of foreign currency required to purchase a unit of U.S. dollar increases.
D) U.S. demand curve for foreign exchange shifts to the right.
E) supply curve of foreign exchange to U.S. markets decreases.

Question 76

If the U.S. demand for British pounds increases, then _____

A) the dollar price of British pounds will increase.
B) the dollar price of British pounds will decrease.
C) the exchange rate between dollars and pounds will be less than the equilibrium exchange rate.
D) the pound will fall in value vis-à-vis the dollar.
E) there will be no change in either the value of the dollar or the pound.

Question 77

If the exchange rate changes from 20 cents per franc to 18 cents per franc, the U.S. dollar has _____

A) appreciated, since its value has increased.
B) appreciated, since its value has declined.
C) depreciated, making French goods more expensive in the United States.
D) depreciated, since its value has declined.
E) depreciated, since its value has increased.

Question 78

For the United States, a drop in the price of foreign exchange means that _____

A) fewer U.S. dollars are needed to purchase foreign currency.
B) more U.S. dollars are needed to purchase foreign currency.
C) imports will become more expensive worldwide.
D) exports will become cheaper worldwide.
E) transaction costs in international markets will decrease.

Question 79

Imagine that there are only two nations in the world, the United States and Mexico. If Americans buy more goods made in Mexico, other things constant, the _____

A) U.S. demand curve for Mexican pesos will shift rightward.
B) U.S. demand curve for Mexican pesos will shift leftward.
C) U.S. supply curve of Mexican pesos will shift leftward.
D) U.S. supply curve of Mexican pesos will shift rightward.
E) U.S. supply curve of Mexican pesos will become perfectly inelastic.

Question 80

If the U.S. dollar appreciates in the foreign exchange market, then _____

A) American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans.
B) American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans.
C) more U.S. dollars will be required to buy a foreign currency.
D) U.S. exports will increase.
E) neither the price of U.S. exports nor the price of U.S. imports will change.