Deck 14: The Foreign Sector

Question 1

Which of the following leads to a positive receipt in Canada's balance-of-payments accounts?

A)Canada reduces tariffs on imported goods while tariffs in other countries remain unchanged
B)a Canadian company pays a dividend to a Swiss stockholder
C)new export sales are made by Canadian telecommunications companies
D)Russian vodka becomes increasingly popular in Canada
E)Canadians buy more Japanese companies' shares

Answer 1

C

Question 2

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-In the balance-of-payments of Canada,merchandise imports are recorded as:

A)a positive entry
B)a financial account entry
C)a current account entry
D)changes in official reserves
E)transfers

Answer 2

a current account entry

Question 3

Which of the following leads to a negative payment in Canada's balance-of-payments accounts?

A)Kawasaki builds a motorcycle manufacturing plant in Vancouver
B)Canadian tourists travel in large numbers to China
C)a wealthy Iranian builds a mansion in Montreal
D)Zaire pays interest on its debt to Canada
E)a French consumer buys a Canadian-made telephone

Answer 3

B

Question 4

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Canada had a current account:

A)surplus of $3 billion
B)surplus of $7 billion
C)deficit of $7 billion
D)surplus of $11 billion
E)deficit of $11 billion

Question 5

Canadian import transactions create a monetary:

A)inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts
B)inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts
C)outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts
D)outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts
E)circular flow with no effect on the balance of payments

Question 6

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Canada had a balance of trade:

A)surplus of $3 billion
B)surplus of $9 billion
C)surplus of $15 billion
D)deficit of $9 billion
E)deficit of $15 billion

Question 7

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-The balance on Canada's non-merchandise transactions was a deficit of:

A)$17 billion
B)$20 billion
C)$24 billion
D)$16 billion
E)$3 billion

Question 8

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Canada had a balance-of-payments:

A)deficit of $9 billion
B)surplus of $11 billion
C)deficit of $11 billion
D)surplus of $15 billion
E)surplus of $9 billion

Question 9

Which of the following creates a negative payment in Italy's balance-of-payments accounts?

A)a French resident buys a bond issued by an Italian manufacturer
B)a Canadian-based company pays dividends to an Italian shareholder
C)a Canadian student takes a summer trip to Rome
D)a Canadian importer buys 500 cases of Italian table wine
E)an Italian company buys software from a Canadian business

Question 10

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Which of the following will directly alter Canada's balance of trade?

A)a transaction of Canadian dollars that increases official international reserves
B)a decrease in merchandise exports
C)an increase in transfers
D)a decrease in capital outflows
E)an increase in investment income flowing into Canada

Question 11

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-In a nation's balance of payments,which one of the following items is always recorded as a positive entry?

A)merchandise imports
B)the effect of changes in foreign currency reserves on the flow of Canadian dollars
C)capital flows
D)exports of services
E)investment income

Question 12

Which of the following would call for a monetary inflow into the Canadian economy?

A)travel abroad by Canadians
B)the sale of insurance by Canadian firms to Brazilian shippers
C)Canadian government transfers to low income countries
D)Canadian imports of German automobiles
E)an interest payment by the Canadian federal government to a British bondholder

Question 13

The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars.

$\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$

-Zabella's balance of trade shows a:

A)$5 billion deficit
B)$5 billion surplus
C)$10 billion surplus
D)$10 billion deficit
E)$15 billion deficit

Question 14

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Canada had a merchandise trade:

A)surplus of $137 billion
B)surplus of $9 billion
C)deficit of $9 billion
D)surplus of $3 billion
E)deficit of $3 billion

Question 15

Canadian export transactions create a monetary:

A)outflow from the Canadian economy and a negative payment in Canada's balance-of-payments accounts
B)outflow from the Canadian economy and a positive receipt in Canada's balance-of-payments accounts
C)inflow into the Canadian economy and a negative payment in Canada's balance-of-payments accounts
D)inflow into the Canadian economy and a positive receipt in Canada's balance-of-payments accounts
E)circular flow with no effect on the balance of payments

Question 16

The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars.

$\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$

-Zabella's capital account and financial account balance shows a:

A)deficit of $10 billion
B)surplus of $5 billion
C)deficit of $28 billion
D)surplus of $28 billion
E)surplus of $10 billion

Question 17

The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars.

$\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$

-Zabella is experiencing a merchandise trade:

A)deficit of $10 billion
B)surplus of $5 billion
C)surplus of $10 billion
D)deficit of $5 billion
E)deficit of $15 billion

Question 18

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-If a nation's merchandise exports are $55 billion,while its merchandise imports are $50 billion,we can conclude with certainty that this nation is experiencing a:

A)merchandise trade surplus
B)balance-of-payments surplus
C)positive current account balance
D)positive balance of trade
E)positive capital account balance

Question 19

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-In the balance-of-payments of Canada,portfolio investment inflows are recorded as:

A)a positive entry
B)a current account entry
C)changes in official reserves
D)investment income
E)transfers

Question 20

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero). All amounts are in billions of dollars

$\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$

-Which of the following is not included in the current account of a nation's balance of payments?

A)merchandise exports
B)merchandise imports
C)investment income
D)service exports
E)capital and financial inflows

Question 21

If the equilibrium exchange rate changes so that more British pounds are required to buy a Canadian dollar,then:

A)Canadians will buy fewer British goods and services
B)the pound has appreciated in value
C)fewer Canadian goods and services will be demanded by the British
D)the dollar has depreciated in value
E)the Canadian interest rate necessarily rises

Question 22

If a nation's current account balance is -$20 billion,while its capital and financial account balance is +$17.5 billion,we can conclude with certainty that this nation is experiencing a:

A)merchandise trade deficit
B)merchandise trade surplus
C)reduction in its stock of foreign currency reserves
D)balance-of-payments surplus
E)deficit on its non-merchandise transactions

Question 23

Assume that,under a system of flexible exchange rates,Mexicans decide to increase their financial investment in Canada.As a result:

A)Canadians will want to buy fewer Mexican products at the new exchange rate
B)the peso and the Canadian dollar will both depreciate in value
C)the peso and the Canadian dollar will both appreciate in value
D)the peso will depreciate and the Canadian dollar will appreciate in value
E)there will be no change in the values of the two currencies

Question 24

Depreciation of the Canadian dollar will tend to:

A)decrease the prices of both Canadian imports and exports
B)increase the prices of both Canadian imports and exports
C)decrease the prices of the products that Canadians import, but increase the prices to foreigners of the products that Canadians export
D)increase the prices of the products that Canadians import, but decrease the prices to foreigners of the products that Canadians export
E)have no effect on the prices of Canadian imports and exports

Question 25

Given a change in demand from D₀ to D₁ and in supply from S₀ to S₁,Canada could maintain the value of Canadian dollars in terms of pounds by:

A)shifting the supply curve farther to the right through the use of domestic expansionary policies
B)maintaining a balance-of-payments surplus
C)using official international reserves to cover the Canadian dollars shortage of cd
D)using official international reserves to cover the Canadian dollars surplus of cd
E)shifting the demand curve farther to the left through the use of contractionary policies

Question 26

Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Ceteris paribus,under a system of flexible exchange rates,we can expect the British demand for Canadian dollars to:

A)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to appreciate vis-a-vis the pound
B)decrease, the supply of Canadian dollars for pounds to decrease, and the dollar to either appreciate or depreciate vis-a-vis the pound
C)decrease, the supply of Canadian dollars for pounds to increase, and the dollar to depreciate vis-a-vis the pound
D)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to depreciate vis-a-vis the pound
E)increase, the supply of Canadian dollars for pounds to decrease, and a Canadian balance of payments surplus to develop

Question 27

Assume the hypothetical exchange rates of $1 = 140 yen and 1 Mexican peso = $0.10.We can conclude that:

A)1 yen = 280 pesos
B)1 yen = 14 pesos
C)1 peso = $0.50
D)1 peso = 1400 yen
E)1 peso = 14 yen

Question 28

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is:

A)$0.005
B)$0.05
C)$0.50
D)$5.00
E)$0.0005

Question 29

If the price of yen in terms of Canadian dollars rises,then:

A)the yen price of dollars also rises
B)the dollar depreciates relative to the yen
C)the yen depreciates relative to the dollar
D)the yen price of dollars rises then falls
E)the yen price of dollars stays the same

Question 30

A shift of the demand curve from D₀ to D₁ and the supply curve from S₀ to S₁ might be the result of a(n):

A)relative decline of interest rates in Britain
B)lower inflation rate in Canada than in Britain
C)improvement in the quality of Canadian products
D)relative decline in interest rates in Canada
E)belief by speculators that the value of the Canadian dollar will soon rise

Question 31

The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars.

$\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$

-Zabella is experiencing a balance-of-payments:

A)surplus of $5 billion
B)surplus of $10 billion
C)deficit of $10 billion
D)deficit of $15 billion
E)deficit of $5 billion

Question 32

Under a system of fixed exchange rates,the shift in demand from D₀ to D₁ and in supply from S₀ to S₁ will cause:

A)no change in Canada's stocks of international monetary reserves
B)a British balance-of-payments deficit
C)a Canadian balance-of-payments deficit
D)a Canadian balance-of-payments surplus
E)an immediate fall in the value of the Canadian dollar

Question 33

In considering pounds and Canadian dollars,we can say that when the price of pounds in terms of Canadian dollars rises:

A)the price of Canadian dollars in terms of pounds will fall
B)the price of Canadian dollars in terms of pounds will also rise
C)the price of Canadian dollars in terms of pounds may either fall or rise
D)Canadian net exports to Britain will tend to fall
E)there is no change in the price of Canadian dollars in terms of pounds

Question 34

In the balance-of-payments of Canada,the government purchase of Canadian dollars through the sale of official reserves of foreign currencies is recorded as:

A)a current account entry
B)a negative entry
C)transfers
D)investment income
E)a positive entry

Question 35

If the rate of exchange for a British pound is $2 in Canadian currency,the rate of exchange for the Canadian dollar:

A)is 1/2 pound
B)is 2 pounds
C)is $0.5
D)is $2
E)cannot be determined from the information given

Question 36

Under a system of flexible exchange rates,the shift in demand from D₀ to D₁ and in supply from S₀ to S₁:

A)will ultimately cause Canada's exports to decline and its imports to rise
B)causes the dollar to appreciate
C)causes the pound to depreciate
D)causes the dollar to depreciate
E)has no effect on the values of the two currencies

Question 37

Under a system of flexible (floating)exchange rates,a higher Canadian trade deficit with Mexico will tend to cause:

A)the Canadian government to ration pesos to Canadian importers
B)a flow of gold from Canada to Mexico
C)an increase in the price of Canadian dollars, in terms of Mexican pesos
D)a decrease in the price of Canadian dollars, in terms of Mexican pesos
E)a flow of gold from Mexico to Canada

Question 38

If the exchange rate changes so that fewer euros can be bought with a Canadian dollar,then:

A)the euro has depreciated in value
B)Canadians will buy fewer European goods and services
C)fewer Canadian goods and services will be demanded by Europeans
D)the dollar has appreciated in value
E)trade between Canada and Europe will be unaffected

Question 39

Appreciation of the Japanese yen will:

A)intensify any existing disequilibrium in Japan's balance of payments
B)make Japan's exports less expensive and its imports more expensive
C)make Japan's exports and imports both less expensive
D)make Japan's exports and imports both more expensive
E)make Japan's exports more expensive and its imports less expensive

Question 40

The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars.

$\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$

-The changes in official reserves account indicates that Zabella:

A)added $5 billion to its stock of foreign currencies through sales of Zabellan dollars
B)imported more merchandise than it exported
C)reduced its stock of foreign currencies by $5 billion through purchases of Zabellan dollars
D)experienced a balance-of-payments surplus
E)exported more merchandise than it imported

Question 41

Under a system of flexible exchange rates,an increase in the international value of a nation's currency will:

A)cause a surplus of its currency
B)contribute to disequilibrium in its balance of payments
C)cause interest rates in that nation to rise
D)cause its exports to rise
E)cause its imports to rise

Question 42

The current system of exchange rates can best be described as:

A)flexible exchange rates
B)gold standard
C)rigidly fixed exchange rates
D)a crawling peg system
E)a managed float system

Question 43

According to Jane Jacobs,cities achieve long-lasting prosperity mainly by:

A)producing items previously imported from outside the city's borders.
B)concentrating on the production of a few export items
C)raising their populations through a generous system of social services
D)ensuring that local businesses are adequately taxed
E)subsidising local businesses

Question 44

A government may be able to keep the international value of its currency low by:

A)selling its currency in the foreign exchange market
B)buying its currency in the foreign exchange market
C)selling foreign currencies in the foreign exchange market
D)increasing its domestic interest rates
E)selling more exports to its trading partners

Question 45

For Jane Jacobs,corporate mergers and acquisitions:

A)are an important way that free-enterprise economies ensure efficiency in their corporate sectors
B)are economically beneficial as long as they involve businesses in different industries
C)are economically beneficial as long as they involve businesses that were previously rivals
D)are an example of a monstrous hybrid in which businesspeople begin acting like rulers
E)promote efficiency as long as they involve businesses that were previously connected through the exchange of intermediate products

Question 46

Under the managed float system of exchange rates:

A)all exchange rates vary with changes in the market price of gold
B)industrialized nations meet once each year to negotiate readjustments in their exchange rates
C)exchange rates are essentially flexible, but governments intervene to offset short-run or "disorderly" fluctuations in rates
D)exchange rates are adjusted at the discretion of international monetary authorities
E)exchange rates are based on quantities of gold

Question 47

A recession in Canada would most likely:

A)reduce a Canadian trade deficit
B)increase a Canadian trade deficit
C)increase the economic growth of our trading partners
D)increase domestic interest rates
E)cause a federal budget surplus

Question 48

A government can keep the international value of its currency high by:

A)selling its currency in the foreign exchange market
B)reducing its domestic interest rates
C)buying its currency in the foreign exchange market
D)running a balance of payments surplus
E)loosening any barriers that stop residents from trading the currency on the foreign exchange market

Question 49

If Canada has full employment and the Canadian dollar dramatically depreciates in value,we can expect:

A)both our imports and our exports to rise
B)both our imports and our exports to fall
C)our exports to fall and our imports to rise
D)unemployment to occur
E)inflation to occur

Question 50

An expanding Canadian current account deficit:

A)increases aggregate demand in Canada
B)indirectly leads to higher Canadian indebtedness to other nations
C)tends to produce domestic inflation
D)indirectly results in greater Canadian-owned foreign assets
E)increases aggregate supply in Canada

Question 51

With a system of flexible exchange rates,an increase in demand for a country's currency will cause:

A)a temporary excess supply of the currency
B)a temporary excess demand of the currency
C)a drop in the value of the country's currency
D)an ongoing balance of payments deficit
E)an ongoing balance of payments surplus