THE BALANCE OF PAYMENTS, EXCHANGE RATES, AND TRADE DEFICITS Chapter 21

THE BALANCE OF PAYMENTS, EXCHANGE

RATES, AND TRADE DEFICITS

Chapter 21

Taylor Economics – Chapter 21

Copyright © Houghton Mifflin Company. All rights reserved.

1. U.S. exports:a.Increase the foreign demand for dollarsb.Increase the domestic demand for dollarsc.Increase the foreign supply of dollarsd.Decrease the domestic supply of foreign

currency



1. U.S. exports:a.Increase the foreign demand for dollarsb.Increase the domestic demand for dollarsc.Increase the foreign supply of dollarsd.Decrease the domestic supply of foreign

currency



2. If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is:

a.$1.40b.$2.00c.$2.25d.$6.00



2. If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is:

a.$1.40b.$2.00c.$2.25d.$6.00



3. Other things being equal, an increase in the U.S. rate of inflation is likely to cause an increase in the:

a.Quantity of exportsb.Quantity of importsc.Demand for U.S. dollarsd.International value of the U.S. dollar



3. Other things being equal, an increase in the U.S. rate of inflation is likely to cause an increase in the:

a.Quantity of exportsb.Quantity of importsc.Demand for U.S. dollarsd.International value of the U.S. dollar



4. One reason for the persistent trade deficits in the United States during the late 1990s and early 2000s was:

a.Action taken to raise tariffs in the United States

b.A declining U.S. saving ratec.Slower economic growth in the

United Statesd.Increased direct foreign investment

in the United States



4. One reason for the persistent trade deficits in the United States during the late 1990s and early 2000s was:

a.Action taken to raise tariffs in the United States

b.A declining U.S. saving ratec.Slower economic growth in the United

Statesd.Increased direct foreign investment in

the United States



5. The current account in a nation's balance of payments includes:

a.its goods exports and imports, and its services exports and imports.

b.foreign purchases of domestic assets.c.purchases of foreign assets.d.all of these



5. The current account in a nation's balance of payments includes:

a.its goods exports and imports, and its services exports and imports.

b.foreign purchases of domestic assets.

c.purchases of foreign assets.d.all of these



6. In the balance of payments of the United States, U.S. goods imports are recorded as a:

a.positive entry.b.capital account entry.c.current account entry.d.official reserves entry



6. In the balance of payments of the United States, U.S. goods imports are recorded as a:

a.positive entry.b.capital account entry.c.current account entry.d.official reserves entry



7. If the rate of exchange for a pound is $4, the rate of exchange for the dollar is:

a.1/4 pound.b.4 pounds.c.$.25.d.$1.00.



7. If the rate of exchange for a pound is $4, the rate of exchange for the dollar is:

a.1/4 pound.b.4 pounds.c.$.25.d.$1.00.



8. If the dollar depreciates relative to the Russian ruble, the ruble:

a)will be less expensive to Americans.b)may either appreciate or depreciate relative

to the dollar.c)will appreciate relative to the dollar.d)will depreciate relative to the dollar.



8. If the dollar depreciates relative to the Russian ruble, the ruble:

a)will be less expensive to Americans.b)may either appreciate or depreciate

relative to the dollar.c)will appreciate relative to the dollar.

d)will depreciate relative to the dollar.



9. Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may:

a)initiate protectionist trade policies.b)run short of international monetary

reserves.c)be forced to invoke contractionary

monetary and fiscal policies.d)do all of these.



9. Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may:

a)initiate protectionist trade policies.b)run short of international monetary

reserves.c)be forced to invoke contractionary

monetary and fiscal policies.d)do all of these.



10. Present consumption supported by large trade deficits may come at the expense of:

a.permanent debt to foreign interests.b.permanent foreign ownership of formerly

U.S. owned assets.c.large sacrifices of future consumption.d.all of these.



10. Present consumption supported by large trade deficits may come at the expense of:

a.permanent debt to foreign interests.b.permanent foreign ownership of formerly U.S. owned assets.

c.large sacrifices of future consumption.

d.all of these.

Documents

THE BALANCE OF PAYMENTS, EXCHANGE RATES, AND TRADE DEFICITS Chapter 21