Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
103. Suppose interest rates fall sharply in the United States but are unchanged in Great
Britain. Other things equal, under a system of freely floating exchange rates we can expect the
demand for pounds in the United States to:
104. Assume that, under a system of floating exchange rates, Mexicans decide to increase
their investments in the United States. As a result:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
105. Which of the following problems will most likely occur with a system of flexible
exchange rates?
106. In saying that the present system of floating exchange rates is managed we mean that:
107. The exchange rate system currently used by the industrially advanced nations is:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
108. Under the managed floating system of exchange rates:
109. A government may be able to reduce the international value of its currency by:
110. The current system of exchange rates can best be described as:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
111. Which of the following lists of exchange-rate systems is arranged in proper historical
order, from earliest to most current?
112. Which one of the following is not one of the so-called G8 nations?
113. The Group of Eight (G8) nations which periodically have jointly intervened to influence
the value of the dollar include:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
114. Suppose the G8 nations decide that the dollar is too strong (high in value) relative to the
yen. These nations might:
115. In recent years, the United States has had large:
116. In recent years, the United States has had large:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
117. Relatively rapid U.S. growth between 2001 and 2007, contributed to large U.S. trade
deficits by:
118. Two of the implications of large U.S. trade deficits for the United States are:
119. Mainly because of large current account deficits, the United States:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
120. One of the consequences of the U.S. trade deficit is that:
121. In terms of individual nations, the largest U.S. trade deficit is with:
122. The world’s largest debtor nation in terms of debt owed to foreign citizens and
governments is:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
123. The United States’ current account deficit reached a new high in:
124. The large trade deficit that the U.S. has with China persists in part because:
125. Which of the following has contributed to large U.S. trade deficits in recent years?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
126. Present consumption supported by large trade deficits may come at the expense of:
127. (Last Word) People who buy foreign currency for the sole goal of selling it at a profit are
called:
128. (Last Word) Currency speculators aid international trade by:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
129. (Last Word) Firms engaged in international trade can reduce exchange-rate risk by:
130. U.S. exports increase and U.S. imports decrease the supplies of foreign monies owned by
U.S. banks.
131. Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the
pound price of dollars will fall.
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
132. 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.
133. Under freely flexible (floating) exchange rates a U.S. trade deficit with Japan will
eventually cause the dollar price of yen to rise.
134. If the dollar depreciates, U.S. exports will eventually rise and U.S. imports will
eventually fall.
135. A system of fixed exchange rates is more likely to result in exchange controls than is a
system of flexible (floating) exchange rates.
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
136. A nation that imports more goods and services than it exports is necessarily realizing an
international balance of payments deficit.
Answer the question on the basis of the following 2008 balance of payments statement for
Transylvania. All figures are in billions of dollars.
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
138. Refer to the above data. Transylvania had a $2 billion balance of trade (goods) surplus in
2008.
139. Refer to the above data. In 2008 Transylvania realized a $1 billion surplus on goods and
140. Refer to the above data. In 2008 Transylvania was a net recipient of transfers from the
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
141. Refer to the above data. Foreigners made a larger volume of asset purchases in
142. Refer to the above data. Transylvania realized a financial and capital account deficit in
2008.
143. Refer to the above data. If Transylvania was on a system of freely floating exchange
rates, its balance of payments position would cause the international value of its currency to
depreciate.
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
144. The United States has had significant trade and current account surpluses in recent
years.
145. A current account deficit will reduce U.S. foreign indebtedness.
146. Under the gold standard:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
147. Which of the following is not a condition of the international gold standard?
148. Under an international gold standard:
149. Under an international gold standard:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
150. Under an international gold standard:
151. Under a gold standard a balance of payments disequilibrium would be corrected
automatically by:
152. Under an international gold standard a flow of gold from country A into country B would
be halted by:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
153. The basis for the Bretton Woods international monetary system was:
154. The Bretton Woods system of exchange rates relied on:
155. The Bretton Woods system of exchange rates:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
156. 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.
157. 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.