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Ch. 38 exercise MC 1.In worldwide financial transactions, what are the only two points that individuals and firms have the right to exchange? A. Currency and real assets. B. Services and also manufactured goods. C. Preexisting assets and currently created goods and also services. D. Currency and also currently developed goods and services.2.If a nation has a existing account deficit and also it does not have to make any type of inpayments or outpayments of main reserves, it must have a: A. Surplus in that capital and also financial account. B. Balance of payments deficit. C. Balance of payments surplus. D. Deficit in the capital and also financial account.3.In the U.S. Balance the payments, international purchases of assets in the United claims are a: A. Foreign currency outflow. B. Foreign money inflow. C. Present account item. D. Debit, or outpayment.4.Which the the complying with combinations is plausible, as it relates to a nation"s balance that payments? A. Existing account = $ + 40 billion; capital account = $ - 10 billion; jae won account = $ - 50 billion. B. Present account = $ + 50 billion; funding account = $ - 20 billion; financial account = $ + 30 billion. C. Present account = $ + 10 billion; resources account = $ + 40 billion; jae won account = $ + 50 billion. D. Current account = $ + 30 billion; resources account = $ - 20 billion; jae won account = $ - 10 billion.5.There must always be a balance that a nation"s: A. Items exports and gold imports. B. Total international payments. C. Imports and exports of goods and services. D. Net transfers and net investment income.6.If a nation"s items exports room $55 billion, while its goods imports space $50 billion, we have the right to conclude through certainty that this nation has a: A. Balance of profession (goods) surplus. B. Balance of payment surplus. C. Hopeful balance on current account. D. Optimistic balance top top goods and services.7.It might be misleading to brand a trade deficit together unfavorable or adverse because: A. The multiplier walk not apply to a profession deficit. B. A profession deficit boosts a nation"s aggregate output and also employment. C. A nation"s consumers advantage from a trade deficit during the duration it occurs. D. A trade deficit precludes inflation.8.A deficit ~ above the existing account: A. Normally reasons a surplus on the capital and financial account. B. Normally reasons a deficit top top the capital and also financial account. C. Has actually no relationship to the capital and also financial account. D. Method that a nation is making global transfers. Price the inquiry on the communication of the following 2010 balance of payment data (+ and hypothetical nation of Zabella. All numbers are in billions that dollars.9.) because that theRefer to the over data. Zabella has actually a balance of profession (goods): A. Deficit that $10 billion. B. Surplus of $5 billion. C. Surplus of $10 billion. D. Deficit of $5 billion.10. Describe the above data. Zabella"s balance top top goods and also services mirrors a: A. $5 billion deficit. B. $5 exchange rate surplus. C. $10 exchange rate surplus. D. $15 billion deficit. 11. Describe the over data. Zabella"s balance on jae won account mirrors a: A. Deficit that $10 billion. B. Surplus of $5 billion. C. Deficit of $28 billion. D. Surplus of $13 billion. 12. Refer to the over data. Zabella"s balance ~ above capital and financial account mirrors a: A. Deficit the $5 billion. B. Excess of $10 billion. C. Deficit of $10 billion. D. Excess of $5 billion. The plus items listed below are "export-type" entries and also the minus items space "import-type" entries in the balance that payments for the hypothetical nation of Zippo.13. Refer to the above information. The gaue won account items because that Zippo are: A. 1, 2, 3, and 4. B. 1, 3, 4, 5, 7, and 9. C. 6 and 8. D. 1, 2, 4, 7, and 9. 14. In the balance of payments of the unified States, U.S. Products imports are taped as a: A. Confident entry. B. Resources account entry. C. Existing account entry. D. Gaue won account entry. 15. Which one of the following, other things equal, will directly transform the United claims balance the trade? A. Boost in the balance on capital account B. A decrease in U.S. Goods exports C. Boost in network transfers D. A decrease in U.S. To buy of assets overseas 16. Mean the balance ~ above the financial account is + $200 billion and also the balance ~ above the funding account is + $2 billion. The dimension of the existing account is: A. + $200 billion. B. -$ 202 billion. C. - $198 billion. D. + $2 billion. 17. Mean the balance on the gaue won account is -$300 billion and the balance ~ above the capital account is +$5 billion. The dimension of the existing account is: A. +$295 billion. B. $295 billion. C. +$305 billion. D. +$5 billion. 18. A balance-of-payments deficit occurs: A. Once a nation must make an inpayment of official reserves to its capital and financial account. B. Anytime a nation has a goods and services deficit. C. At any time a nation has a goods and services surplus. D. When a nation must do an outpayment of main reserves indigenous its capital and also financial account. 19. The complying with are hypothetical exchange rates: 2 euros = 1 pound; $1 = 2 pounds. We deserve to conclude that: A. $1 = 4 euros. B. $1 = .5 euros. C. 1 euro = $.50. D. 1 euro = $2. 20. If the price of exchange because that a pound is $4, the price of exchange for the dissension is: A. 1/4pound. B. 4 pounds. C. $.25. D. $1.00. 21. The U.S. Supply of Japanese yen is: A. Downsloping because a lower dollar price that yen method U.S. Items are cheaper come the Japanese. B. Upsloping due to the fact that a greater dollar price the yen means U.S. Items are cheaper come the Japanese. C. Upsloping because a reduced dollar price that yen way U.S. Items are cheaper to the Japanese. D. Downsloping since a higher dollar price of yen way U.S. Goods are cheaper to the Japanese. The following diagram is a functional exchange market for international currency: 22. Refer to the above diagram. At the price $.80 because that 1 euro: A. The quantity of euros demanded equates to the quantity supplied. B. The dollar-euro exchange rate is unstable. C. The disagreement price the 1 euro equals the euro price the 1 dollar. D. There will be a surplus of euros in the international exchange market. 23. Refer to the over diagram. Other things equal, a leftward shift of the it is provided curve would: A. Evaluate the euro. B. Reason a shortage the euros. C. Rise the equilibrium amount of euros. D. Evaluate the dollar.24. Describe the above diagram. The initial demand for and also supply the pesos are shown by D1 and also S1. The exchange price will be: A. M dollars for one peso. B. B pesos for one dollar. C. A dollars because that one peso. D. C dollars for one peso. 25. Refer to the over diagram. The initial need for and also supply of pesos are shown by D1 and also S1. Intend the United says reduces the imports of mexico goods, shifting its demand for pesos from D1 to D2. If the United claims was operation under a device of exchange controls, the U.S. Government would: A. Discover that, at the managed exchange rate, pesos would be in surplus. B. Be confronted with deteriorating terms of trade. C. Be confronted with the problem of rationing BG pesos come U.S. Importers who desire BF pesos. D. Be confronted with the problem of rationing BF pesos to U.S. Importers who want BG pesos. 26. Describe the over diagram. The initial need for and supply of pesos are shown by D1 and also S1. Mean the United says reduces that imports of mexican goods, moving its need for pesos from D1 come D2. If the unified States and Mexico to be both ~ above the global gold standard: A. Gold would flow from Mexico come the joined States. B. The exchange price would rise from B dollars equates to 1 peso come C dollars equals 1 peso. C. Yellow would flow from the United states to Mexico. D. The exchange rate would loss from B dollars equals 1 peso come A dollars amounts to 1 peso. 27. Describe the over diagram. The initial need for and supply the pesos are displayed by D1 and also S1. Intend the United claims reduces its imports of mexican goods, moving its demand for pesos from D1 to D2. Under a mechanism of freely floating exchange rates: A. Gold would flow from Mexico to the joined States. B. The peso price of dollars would climb from B pesos equates to $1 to A pesos equates to $1. C. A difficulty of rationing a shortage that pesos would certainly arise in the unified States. D. The dollar price the pesos would boost to C dollars equates to 1 peso. 28. Under a mechanism of easily flexible (floating) exchange, prices a U.S. Profession deficit v Mexico will often tend to cause: A. The unified States federal government to ration pesos come U.S. Importers. B. A circulation of yellow from the United states to Mexico. C. Rise in the peso price that dollars. D. Boost in the dollar price of pesos. 29. If in a mechanism of fixed exchange prices the dissension price the euros is above the sector equilibrium level: A. Gold will flow from the United states to Europe. B. There will certainly be a excess of euros. C. The unified States government will need to ration euros to U.S. Importers. D. There will be a shortage that euros. Price the concern on the communication of the following table which shows the dissension price that libras, the money used in the hypothetical nation of Libra. Assume the a device of freely floating exchange rates is in place.30. Describe the above table. The equilibrium dissension price that libras is: A. $5. B. $4. C. $3. D. $2. 31. According to the purchasing power parity theory of exchange rates: A a dollar, as soon as converted to various other currencies in ~ the prevailing floating exchange rate, has the exact same . Purchasing strength in various countries. B. In equilibrium, national currencies have actually equal worth in regards to gold. C the higher a nation"s price level in regards to its very own currency, the better is the quantity of foreign . Exchange that can obtain for a unit of its currency. D. Nominal currency values will tend to equalize (become 1 = 1) in the long run. 32. The idea that openly floating exchange rates equate the buying power of nationwide currencies is called: A. The equation of exchange. B. The balance of payments. C. Say"s Law. D. The purchasing strength parity theory. 33. Assume the Japan and South Korea have actually flexible exchange rates. Other things equal, if economic growth is more rapid in Japan 보다 in south Korea: A. Gold bullion will circulation out of Japan. B. The Japanese yen will depreciate. C. The South korean won will depreciate. D. The yen and won exchange rate will remain constant. 34. Describe the over diagram wherein D and S are the joined States" need for and supply that Swiss francs. At the equilibrium exchange rate, E, the united States" balance of payments is in equilibrium. A shift of the demand curve to D" might be the an outcome of: A. A relative decrease in interest prices in Switzerland. B. A palliation in the united States" loved one price level. C. A recession in the United states which slowly its price of growth. D. A relative decline in interest prices in the joined States. 35. Refer to the above diagram where D and also S room the joined States" demand for and also supply that Swiss francs. In ~ the equilibrium exchange rate, E, the united States" balance of payments is in equilibrium. Under a system of fixed exchange rates, the shift in demand from D to D" will certainly cause: A. The United says to boost its share of global monetary reserves. B. A Swiss balance of payments deficit. C. A U.S. Balance of payments deficit. D. A U.S. Balance of payments surplus. 36. If the United says has complete employment and the dollar significantly depreciates in value, we can expect (other things equal): A. Both U.S. Imports and U.S. Exports come rise. B. Both U.S. Imports and also U.S. Exports to fall. C. U.S. Exports to fall and also U.S. Imports come increase. D. Inflation to occur. 37. Suppose interest rates autumn sharply in the joined States however are unchanged in an excellent Britain. Various other things equal, under a mechanism of freely floating exchange rates we have the right to expect the need for pounds in the United states to: A. Decrease, the it is provided of pounds to increase, and the dollar come appreciate family member to the pound. B. Increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate family member to the pound. C. Increase, the it is provided of pounds come decrease, and the dollar come depreciate relative to the pound. D. Decrease, the supply of pounds come increase, and the dollar come depreciate loved one to the pound. 38. I think that, under a system of floating exchange rates, Mexicans decide to rise their invest in the unified States. Together a result: A. The peso and the dollar will both depreciate. B. The peso and the dollar will certainly both appreciate. C. The peso will depreciate and also the dollar will appreciate. D. The peso will appreciate and also the dollar will depreciate. 39. In saying the the existing system of floating exchange rates is managed we mean that: A. Countries that allow their exchange rate to move openly will lose their borrowing privileges with the IMF. B. The worth of any type of IMF member"s money can just vary 2 percent from its par value. C. IMF officials determine exchange prices on a day-to-day basis. D. The main banks the various countries sometimes buy and sell international exchange to alter undesirable fads in exchange rates. 40. The exchange rate system right now used by the industrially advanced nations is: A. The yellow standard. B. The Bretton Woods system. C. The managed float. D. A fixed price system. 41. Under the regulated floating system of exchange rates: A. Every exchange rates vary with transforms in the free-market prices of gold. B. Established nations satisfy once every year to negotiate readjustments in their exchange rates. C. Exchange prices are essentially flexible, yet governments interference to counter disorderly fluctuations in rates. D. Exchange rates are adjusted at the discretion the the IMF. 42. Which one of the adhering to is not among the so-called G8 nations? A. Japan B. Canada C. United claims D. China 43. Mean the G8 countries decide that the disagreement is too strong (high in value) family member to the yen. These nations might: A. Use official reserves the yen come buy dollars. B. Use main reserves the dollars to buy yen. C. Encourage Japan come print an ext yen. D. Encourage the United says to increase interest rates. 44. 2 of the implications of big U.S. Profession deficits because that the United claims are: A. Decreased present consumption and also decreased indebtedness come foreigners. B. Reduced budget plan deficits and decreased indebtedness to foreigners. C. Lessened current intake and greater saving. D. Increased current consumption and also increased indebtedness come foreigners. 45. In terms of individual nations, the largest U.S. Profession deficit is with: A. Japan. B. Mexico. C. China. D. Canada. 46. (Last Word) currency speculators assist international trade by: A. Soaking up exchange rate risk that others execute not desire to bear. B. Enhancing the volatility of exchange rates. C. Do the need for imports less elastic. D. Cultivating barter. 47. I m sorry of the complying with is no a problem of the international gold standard? A. A nation must be willing to accept really wide fluctuations in its exchange rate. B. A nation must enable gold come be openly exported and imported. C. A country must be willing to convert gold into record money and vice versa in ~ a stipulated rate. D. A country must specify its financial unit in regards to a specific quantity of gold. 48. Under an global gold standard: A. A nation"s exchange rate is essentially fixed. B. Domestic output and also the price level will autumn in those nations receiving worldwide gold flows. C. A nation"s balance of payments excess will be repair by one outflow that gold. D. A nation"s balance of payment deficit will be corrected by one inflow that gold. 49. Under a gold traditional a balance of payments disequilibrium would certainly be corrected instantly by: A. The depreciation of that country"s currency. B. An increase in the gold content of that nation"s financial unit. C. The evaluation of that country"s currency. D. An outflow or inflow of gold. 50. The Bretton Woods system of exchange prices relied on: A. Easily floating exchange rates. B. Fixed exchange prices with no device for changing them. C. Fixed or pegged exchange rates, v occasional orderly adjustments to the rates. D. The United claims to collection and regular review global exchange rates. Ch. 38 practice MC crucial 1. C 2. A 3. B 4. D 5. B 6. A 7. C 8. A 9. C 10. B 11. A 12. A 13. C 14. C 15. B 16. B 17. A 18. A 19. A 20. A 21. B 22. A 23. A 24. B 25. A 26. A 27. B 28. D 29. B 30. B 31. A 32. D 33. B 34. D 35. C 36. D 37. C 38. C 39. D 40. C 41. C 42. D 43. B 44. D 45. C 46. A 47. A 48. A 49. D 50. C Ch. 38 practice MC an overview Category AACSB: analytic AACSB: Reflective reasoning Blooms: Level 1 remember Blooms: Level 2 know Blooms: Level 3 use Blooms: Level 4 analyze Difficulty: 1 simple Difficulty: 2 tool Difficulty: 3 hard Learning Objective: 38-01 describe how currencies of various nations are exchanged when global transactions take place. Finding out Objective: 3802 analysis the balance sheet the joined States supplies to account for the worldwide payments the makes and also receives. Discovering Objective: 38-03 discuss how exchange rates are determined in money markets. Discovering Objective: 38-04 explain the difference in between flexible exchange rates and fixed exchange rates. Learning Objective: 38-05 recognize the causes and aftermath of recent record-high U.S. Trade deficits.

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McConnell - thing 38 Topic: Balance of payment Topic: Bretton Woods device (Web content only) Topic: current exchange rate system: regulated float Topic: solved exchange rates Topic: flexible exchange rates Topic: Gold standard (Web content only) Topic: international financial transactions Topic: recent U.S. Trade deficits Type: Graph Type: Table# of inquiries 19 31 7 17 14 12 7 31 12 1 17 21 9 2 56 17 1 5 4 17 3 1 2 8 6