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118.
In recent years, the United States has had large
119.
Relatively rapid U.S. growth between 2002 and 2006 contributed to large U.S. trade
deficits by
120.
As a result of the 2007–2009 recession,
41-62
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 41-06 Identify the causes and consequences of recent U.S. trade deficits.
Test Bank: I
T o p i c : Recent U.S. Trade Deficits
121.
Which of the following statements is most accurate about the U.S. current account since the
Great Recession (the period covering 2009–2015)?
122.
Two of the implications of large U.S. trade deficits for the United States are
123.
Mainly because of large current account deficits, the United States
41-63
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Accessibility : Keyboard Navigation
Blooms: Remember
Dif f i cult y : 01 Easy
Learning Objective: 41-06 Identify the causes and consequences of recent U.S. trade deficits.
Test Bank: I
T o p i c : Recent U.S. Trade Deficits
124.
One of the consequences of the U.S. trade deficit is that
125.
In terms of individual nations, the largest U.S. trade deficit is with
126.
The world's largest debtor nation in terms of debt owed to foreign citizens and governments
is
41-64
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written consent of McGraw-Hill Education.
C.
Japan.
D. the United States.
127.
The United States' current account deficit reached a new high in
128.
The large trade deficit that the United States has with China persists in part because
129.
Which of the following has contributed to large U.S. trade deficits in recent years?
130.
Present consumption supported by large trade deficits may come at the expense of
131.
(Consider This) Which of the following statements is most accurate about China’s pegging
of its currency against the U.S. dollar in the 2000s?
41-66
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 41-04 Describe the differences between flexible and fixed exchange rates,
including how changes in foreign exchange reserves bring about automatic changes in the
domestic money supply under a fixed exchange rate.
Test Bank: I
T o p i c : Fixed Exchange Rates
132.
(Consider This) Which of the following has been a consequence of China pegging its
currency against the U.S. dollar throughout the 2000s?
133.
(Last Word) Which of the following is a disadvantage of belonging to a common currency?
134.
(Last Word) Which nations stand to lose the most from belonging to a common currency?
41-67
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
currency area
B.
those who engage in the largest amount of foreign trade
C.
those with the largest economies of the nations in the currency area
D.
those with the least restrictive laws and lowest production costs
135.
(Last Word) Nations belonging to a common currency
True / False Questions
136.
U.S. exports increase and U.S. imports decrease the supplies of foreign monies owned by
U.S. banks.
41-68
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
T o p i c : Flexible Exchange Rates
137.
Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound
price of dollars will fall.
138.
If the price of British pounds, measured in terms of U.S. dollars, is rising, then the price of
U.S. dollars, measured in terms of British pounds, is also rising.
139.
Under freely flexible (floating) exchange rates, a U.S. trade deficit with Japan will
eventually cause the dollar price of yen to rise.
140.
If the dollar depreciates, U.S. exports will eventually rise and U.S. imports will eventually
fall.
141.
A system of fixed exchange rates is more likely to result in exchange controls than is a
system of flexible (floating) exchange rates.
142.
A nation that imports more goods and services than it exports is necessarily realizing an
international balance of payments deficit.
41-70
143.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. In 2008, Transylvania imported more products than it exported.
144.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. Transylvania had a $2 billion balance of trade (goods) surplus in 2008.
41-71
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
FALSE
145.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. In 2008 Transylvania realized a $1 billion surplus on goods and services.
146.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. In 2008 Transylvania was a net recipient of transfers from the rest of the
world.
147.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. Foreigners made a larger volume of asset purchases in Transylvania in 2008
than Transylvanians made asset purchases abroad.
41-73
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 41-02 Analyze the balance sheet the United States uses to account for the
international payments it makes and receives.
Test Bank: I
T o p i c : The Balance of Payments
Type: Table
148.
(1) Goods Exports
+$15
(2) Goods Imports
-17
(3) Service Exports
+5
(4) Service Imports
−2
(5) Net Investment Income
-5
(6) Net Transfers
+4
(7) Foreign Purchases of Assets
+5
(8) Purchases of Foreign Assets
-11
(9) Balance on Capital Account
+1
The table shows a 2008 balance of payments statement for Transylvania. All figures are in
billions of dollars. Transylvania realized a financial and capital account deficit in 2008.
149.
The United States has had significant trade and current account surpluses in recent years.
150.
A current account deficit will reduce U.S. foreign indebtedness.
Multiple Choice Questions
151.
Refer to the diagram. The initial demand for and supply of pesos are shown by D1 and S1.
Suppose the United States reduces its imports of Mexican goods, shifting its demand for pesos
from D1 to D2. If the United States and Mexico were both on the international gold standard,
41-75
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written consent of McGraw-Hill Education.
standard and Bretton Woods.
Test Bank: I
T o p i c : The Gold Standard and Bretton Woods
Type: Graph
152.
Under the gold standard,
153.
Which of the following is not a condition of the international gold standard?
154.
Under an international gold standard,
41-76
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
flows.
C.
a nation's balance of payments surplus will be corrected by an outflow of gold.
D.
a nation's balance of payments deficit will be corrected by an inflow of gold.
155.
Under an international gold standard,
156.
Under an international gold standard,
41-77
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written consent of McGraw-Hill Education.
standard and Bretton Woods.
Test Bank: I
T o p i c : The Gold Standard and Bretton Woods
157.
Under a gold standard, a balance of payments disequilibrium would be corrected
automatically by
158.
Under an international gold standard, a flow of gold from country A into country B would
be halted by
159.
The basis for the Bretton Woods international monetary system was
41-78
160.
The Bretton Woods system of exchange rates relied on
161.
The Bretton Woods system of exchange rates
True / False Questions
162.
Under the international gold standard, exchange rates fluctuate without restraint to correct
any international disequilibrium by affecting the relative attractiveness of domestic and foreign
goods.
163.
If the United States and France are both on the international gold standard and U.S. exports
to France exceed United States imports from France, gold will flow from the United States to
France.
164.
U.S. exports create a
41-80
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written consent of McGraw-Hill Education.
Test Bank: II
T o p i c : International Financial Transactions
165.
U.S. exports represent two flows,
166.
U.S. imports
167.
U.S. businesses are demanders of foreign currencies because they need them to
