1. Markets in which the currencies of different countries across the world are traded are called:
a.
stock markets.
b.
foreign exchange markets.
c.
loanable funds markets.
d.
commodity markets.
e.
money markets.
2. _____ is a specific location in New York City where contracts to deliver agricultural and metal products are bought and
sold.
a.
The U.S. Department of Commerce
b.
The New York Stock Exchange
c.
The Commodity Exchange
d.
The Barclays Bank
e.
The U.S. Commodity Futures Trading Commission
MACR.BOYE.16.06.01 – ch. 06, 1
The Foreign Exchange Market
3. Which of the following correctly describes a foreign exchange market?
a.
A place where foreign goods are bought and sold in any country
b.
A market in which foreign tourists can buy domestic goods
c.
A global market in which people exchange one currency for another
d.
A place where contracts to deliver agricultural products across countries are exchanged
e.
A market where the central banks of different countries exchange government bonds
MACR.BOYE.16.26 – ch. 06, 1
United States – International Trade and Finance
The Foreign Exchange Market
4. Currency and bank deposits that are denominated in foreign money are called:
a.
traveler’s checks.
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
b.
international funds.
c.
foreign exchange.
d.
foreign remittances.
e.
international bonds.
5. A majority of international transactions involve the buying and selling of _____.
a.
b.
c.
d.
e.
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
6. An exchange rate can be described as:
a.
the price of a foreign currency as determined by the World Bank.
b.
the price of one country’s currency in terms of another country’s currency.
c.
the dollar value of imports and exports undertaken in the world economy during a year.
d.
the price of foreign currency as established by the relative amount of tourism.
e.
the dollar value of U.S. international trade.
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
7. On December 29th, the cost of a skiing trip to Finse, Norway, was 6,500 krone. Two weeks later, the American dollar
appreciated against the Norwegian krone. If the price of the trip in Norway remains the same, _____.
a.
an American skier living in Florida will now view this trip as cheaper compared to before
b.
an American skier living in Florida will now view this trip as highly expensive compared to before
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
c.
an American skier living in Florida will now view this trip as of the same value as before
d.
an American skier living in Florida will now value this trip less as compared to before
e.
an American skier living in Florida will no longer take this trip
8. If the U.S. dollar price of the New Zealand dollar (NZD) is $0.5709, then the NZD price of one U.S. dollar will be:
a.
1.5709 NZD.
b.
1.75 NZD.
c.
1.6711 NZD.
d.
0.5709 NZD.
e.
1.75 NZD.
MACR.BOYE.16.26 – ch. 06, 1
United States – Reflective Thinking
The Foreign Exchange Market
9. If one U.S. dollar = 11.76 Mexican pesos [Ps], then the reciprocal exchange rate is:
a.
1 Ps = $11.76.
b.
$1 = Ps 3.92.
c.
$1 = Ps 0.008.
d.
$1 = Ps 0.085.
e.
1 Ps = $0.085.
MACR.BOYE.16.26 – ch. 06, 1
United States – Reflective Thinking
The Foreign Exchange Market
10. If the price in U.S. dollars for one Singapore dollar is 0.625 U.S. dollars, then the price in Singapore dollars for one
U.S. dollar is:
a.
1.0 Singapore dollars.
b.
0.625 Singapore dollars.
MACR.BOYE.16.26 – ch. 06, 1
United States – Reflective Thinking
The Foreign Exchange Market
c.
1.6 Singapore dollars.
d.
0.375 Singapore dollars.
e.
2.66 Singapore dollars.
11. If the current dollars/peso exchange rate is $0.10 per peso, so that 10 pesos buy you a dollar, then how many dollars
do you need to buy something that costs 50 pesos?
a.
$50
b.
$5
c.
$15
d.
$0.50
e.
$1.50
b
Moderate
MACR.BOYE.16.26 – ch. 06, 1
Knowledge
12. The Wall Street Journal publishes an exchange rate of US$/C$ = 0.714, where US$ represents the U.S. dollar and C$
represents the Canadian dollar. What does this mean?
a.
The Canadian dollar price of one U.S. dollar is US$0.714.
b.
The Canadian dollar price of one U.S. dollar is C$0.714.
c.
The U.S. dollar price of one Canadian dollar is C$1.40.
d.
The U.S. dollar price of one Canadian dollar is US$1.40
e.
The U.S. dollar price of one Canadian dollar is US$0.714.
Challenging
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
Application
Revised
13. The demand for foreign currency in the United States is based on the demand for:
a.
domestic goods and services.
b.
domestic exports.
c.
gold.
Moderate
MACR.BOYE.16.26 – ch. 06, 1
United States – Reflective Thinking
The Foreign Exchange Market
Knowledge
Revised
d.
foreign goods and services.
e.
U.S. dollars.
14. Given an exchange rate of 120 yen = $1, what is the U.S. dollar price of 1 yen?
a.
$0.025
b.
$0.0083
c.
$120
d.
$0.0012
e.
$1
b
Moderate
MACR.BOYE.16.26 – ch. 06, 1
United States – Reflective Thinking
The Foreign Exchange Market
Application
Revised
15. If the exchange rate between the Canadian dollar [C$] and the U.S. dollar [$] on January 6, 2010 is C$/$ = 1.03, then
the exchange rate $/C$ will be:
a.
0.67.
b.
0.79.
c.
0.97.
d.
1.97.
e.
1.33.
Moderate
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
Application
Revised
16. If the price of a digital SLR camera in Japan is ¥55,000, and the exchange rate is 93 ¥/$, calculate the dollar price of
the digital SLR camera in Japan.
a.
$603.29
b.
$397.48
c.
$886.82
d.
$591.40
d
Easy
MACR.BOYE.16.26 – ch. 06, 1
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
e.
$101
17. On a given day, the exchange rate for one U.S. dollar is 1.2 Canadian dollars and 0.5 British pounds. Exactly six
months later, the exchange rate for one U.S. dollar is 1.1 Canadian dollars and 0.7 British pound. From the information
given, we can say that:
a.
the dollar has appreciated relative to Canadian dollars and depreciated relative to British pounds.
b.
the dollar has appreciated relative to British pounds and depreciated relative to Canadian dollars.
c.
the dollar has appreciated relative to both British pounds and Canadian dollars.
d.
the dollar has depreciated relative to both British pounds and Canadian dollars.
e.
there is no change in the relative value of the U.S. dollar.
b
Moderate
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
Application
Revised
18. If the exchange rate between the Canadian dollar (C$) and the U.S. dollar ($) changes from 1C$ = $1.30 to 1C$ =
$1.05 we can say that:
a.
the U.S. dollar has depreciated with respect to all the currencies across the world.
b.
the Canadian dollar has appreciated with respect to the U.S. dollar.
c.
the U.S. dollar has appreciated with respect to the Canadian dollar.
d.
the Canadian dollar has depreciated with respect to all the currencies across the world.
e.
the Canadian dollar has appreciated with respect to all the currencies across the world.
Challenging
United States – Reflective Thinking
The Foreign Exchange Market
Application
19. A rise in the value of a currency in relation to another currency in the international market is called:
a.
appreciation.
b.
depreciation.
c.
devaluation.
d.
conservation.
e.
redenomination.
d
Challenging
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
Application
20. The domestic currency value of the foreign currency price of a product is equal to:
a.
the reciprocal exchange rate between the domestic and foreign currency.
b.
the reciprocal of the foreign currency price of the product.
c.
the difference between the foreign currency price of the product and the exchange rate between the domestic
and foreign currency.
d.
the foreign currency price of the product multiplied by the exchange rate between the domestic and foreign
currency.
e.
the reciprocal exchange rate between the domestic and foreign currency divided by the foreign currency price
of the product.
d
Moderate
MACR.BOYE.16.06.01 – ch. 06, 1
United States – Analytic – BB-Legal
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
New
21. The average household in Australia spends AUD 560 on groceries per month. What would this grocery bill amount to
in U.S. dollars if the current exchange rate is AUD 1.55 per dollar?
a.
$868.00
b.
$560.00
c.
$447.91
d.
$361.29
e.
$222.00
d
Challenging
MACR.BOYE.16.27 – ch. 06, 2
United States – International Trade and Finance
United States – Reflective Thinking
The Foreign Exchange Market
Application
Revised
22. A dress manufactured in Hagen, Germany, costs 195 euros. What is the U.S. dollar value of the same dress if the
exchange rate is $0.89 per euro?
a.
$173.55
b.
$165.43
c.
$219.10
Easy
MACR.BOYE.16.27 – ch. 06, 2
United States – Analytic – BB-Legal
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
d.
$187.61
e.
$195.00
23. Assume that the Danish krone [DKK] price of one British pound is DKK 10.5. If it costs 45 pounds per day to rent a
car in London and DKK 480.5 to do so in Copenhagen, which of the following is true?
a.
The cost of renting a car is the same in both cities.
b.
The cost of renting a car is DKK 8 less in London.
c.
The cost of renting a car is DKK 45.76 less in London.
d.
The cost of renting a car is DKK 10.67 more in Copenhagen.
e.
The cost of renting a car is DKK 4.28 less in London.
Challenging
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
Application
24. A hamburger costs $1.79 in New York and €2.54 in Paris. If the exchange rate is $0.93 per euro, what price difference
exists in terms of the European currency?
a.
The hamburger sells for €0.13 less in New York.
b.
The hamburger sells for €0.13 more in New York.
c.
The hamburger sells for €0.62 less in Paris.
d.
The hamburger sells for €0.62 more in Paris.
e.
The hamburger sells for the same price in both cities.
d
Challenging
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
Application
25. A computer sells for $800 in the United States and for 600 British pounds in England. Given an exchange rate of 0.65
British pounds = $1, how do the computer prices of these countries compare?
a.
The computer sells for the same price in both countries.
b.
The computer costs $923 more in the United States.
c.
The computer costs $95 more in England.
Moderate
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
Application
d.
The computer costs $124 less in the United States.
e.
The computer costs $124 less in England.
26. An increase in the foreign price of the U.S. dollar is called:
a.
depreciation of the U.S. dollar.
b.
appreciation of the U.S. dollar.
c.
appreciation of the foreign currency.
d.
readjustment of the U.S. dollar.
e.
readjustment of the foreign currency.
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
27. An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following,
except:
a.
a decrease in the dollar prices paid by U.S. importers.
b.
an increase in the cost of vacations in Florida for Japanese tourists.
c.
foreign holidays for U.S. residents to be less expensive.
d.
an increase in the foreign currency prices paid for U.S. exports.
e.
an increase in the demand for U.S. exports.
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
28. The domestic currency of a country depreciates in value when:
a.
there is an increase in the foreign currency price of the domestic currency.
b.
its value falls in relation to another currency.
c.
the government of the country revaluates the domestic currency.
d.
its value rises in relation to another currency.
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
e.
there is a fall in the domestic demand for foreign currency.
29. Which of the following will increase the demand for U.S. products in the international market?
a.
An increase in the average price level in the U.S.
b.
A depreciation of foreign currency
c.
A depreciation of the U.S. dollar
d.
A tariff imposed by the U.S. on imported goods
e.
A rise in the domestic demand for goods and services
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
30. If the dollar price of one South African rand (ZAR) increases from $0.076 in 1999 to $0.083 in 2003, we can say that
the reciprocal exchange rate moved from:
a.
$1 = ZAR 13.2 in 1999 to $1 = ZAR 12.0 in 2003.
b.
$1 = ZAR 12.0 in 1999 to $1 = ZAR 13.2 in 2003.
c.
$1 = ZAR 0.076 in 1999 to $1 = ZAR 0.083 in 2003.
d.
ZAR 1 = $0.083 in 1999 to ZAR 1 = $0.076 in 2003.
e.
$1 = ZAR 176 in 1999 to $1 = ZAR 183 in 2003.
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
31. Assume that the exchange rate moves from $1 = €1.2 to $1 = €0.97. This change in exchange rate indicates that:
a.
the euro has depreciated in value.
b.
the price of a holiday in Europe has become less expensive for U.S. residents.
c.
the U.S. dollar price of European chocolate has fallen.
d.
the U.S. dollar has appreciated in value.
e.
the euro has appreciated in value.
MACR.BOYE.16.06.02 – ch. 06, 2
The Foreign Exchange Market
32. The balance of payments is:
a.
the difference between the dollar value of exports and the dollar value of imports.
b.
the same as the merchandise account.
c.
a summary statement of all international trade transactions of one country with the rest of the world.
d.
a summary statement of all domestic exchanges of goods and services between producers and buyers.
e.
a record of the amount of U.S. dollars held abroad.
Challenging
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
33. When one country buys more from another country than it sells to the country, it is said to be experiencing:
a.
economic dualism.
b.
double counting.
c.
symmetrical trade.
d.
internationalization.
e.
bilateral trade deficit.
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
34. Which of the following is true of the balance of payments accounts?
a.
It records only the trade in tangible assets between any two nations.
b.
It is a record of a country’s merchandise trade.
c.
It records the total external debt used to finance government budget deficits.
d.
It is recorded biannually in most developed countries.
e.
It records a country’s trade in goods, services, and financial assets with the rest of the world.
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
35. Double-entry bookkeeping for the balance of payments requires that:
a.
the current account always equal the balance of payments.
b.
every transaction be recorded as a credit and a debit at the same time.
c.
total credits always exceed total debits.
d.
every transaction be recorded as either a credit or a debit.
e.
total debits always exceed total credits.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
36. Double-entry bookkeeping is a system of accounting in which:
a.
it is ideal for credits to be greater than debits.
b.
it is ideal for debits to be greater than credits.
c.
each transaction is recorded in the same account twice.
d.
only foreign and domestic accounts are used.
e.
the debit total must equal the credit total for the transactions as a whole.
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
37. Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:
a.
have a negative effect on Japan’s balance of trade in merchandise.
b.
have a negative effect on the U.S. balance of trade in merchandise.
c.
have a positive effect on the U.S. balance of trade in merchandise.
d.
bring money into the United States.
e.
have no effect on Japan’s balance of trade in merchandise.
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
38. Which of the following will be recorded as a credit entry in the U.S. balance of trade in merchandise account?
a.
A U.S. car manufacturer selling a car to a resident of India.
b.
A French wine manufacturer selling wines to a distributor in Seattle.
c.
A U.S. investor investing in Japanese stocks.
d.
A U.S. steel manufacturer importing iron ore from Zambia.
e.
A U.S. resident buying diamonds from a diamond manufacturer in Kenya.
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
39. Which of the following will be recorded as a debit entry in the balance of trade in merchandise account?
a.
A U.S. car manufacturer selling a car to a resident of India.
b.
A pub owner in Liverpool importing vodka from a U.S. manufacturer.
c.
A U.S. textile manufacturer buying rawmaterial from farmers in Indonesia.
d.
A Chinese car manufacturer importing car engines and other spare parts from a U.S. manufacturer.
e.
A fashion designer from Michigan exporting readymade garments to a dealer in Copenhagen.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
40. The balance of payments is an accounting statement known as a:
a.
trial balance.
b.
depreciation account.
c.
balance sheet.
d.
trade account.
e.
reconciliation statement.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
41. All of the following components add up to the current account, except:
a.
unilateral transfers.
b.
statistical discrepancies.
c.
services.
d.
merchandise.
e.
investment income.
b
Easy
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
Knowledge
42. The four main components of the current account are:
a.
services, financial assets, unilateral transfers, and debits.
b.
net exports, unilateral transfers, services, and domestic bank deposits abroad.
c.
government asset holdings abroad, foreign official assets, private bank deposits abroad, and merchandise.
d.
unilateral transfers, merchandise, services, and investment income.
e.
capital exports, services, merchandise, and royalties.
d
Moderate
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
43. Which of the following would not be a part of the merchandise trade balance?
a.
Exports of consumer durables
b.
Merchandise imports
c.
International freight costs
d.
Computer hardware exports
e.
Sale of domestically produced cars to foreigners
Moderate
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
Knowledge
44. The purchase of French wine by U.S. consumers will be accounted as:
a.
a deficit in the services account.
Revised
b.
a credit in the merchandise account.
c.
a debit in the services account.
d.
a surplus in the services account.
e.
a debit in the merchandise account.
45. Which of the following is included in a nation’s current account?
a.
Purchases of foreign assets
b.
Borrowings from abroad
c.
Foreign purchases of U.S. financial assets
d.
Investment income receipts
e.
Purchases of foreign real property
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
46. A U.S. tourist travels to Italy and spends $900 during the trip. How is this activity recorded in the U.S. current
account?
a.
Unilateral transfers account is credited for $900.
b.
Unilateral transfers account is debited for $900.
c.
Merchandise account is credited for $900.
d.
Services account is debited for $900.
e.
Merchandise account is debited for $900.
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
47. Which of the following will be included in the services account of a country?
a.
Imports of goods from a foreign country
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
b.
Gifts to the residents of a foreign country
c.
Exports of goods to a foreign country
d.
Purchase of land in a foreign country
e.
Transportation costs involved in international travel
48. Which of the following will be included as a unilateral transfer in the balance of payments account of a country?
a.
Transportation costs involved in traveling from a foreign country to the domestic country
b.
A foreign worker in the domestic country sending money to his home country
c.
Compensation earned by foreign workers in the domestic country
d.
Royalties paid to residents working in a foreign country
e.
Income paid on foreign-owned investments in the domestic country
MACR.BOYE.16.06.03 – ch. 06, 3
The Balance of Payments
49. Which of the following statements about the U.S. balance of payments in 2013 is true?
a.
In the third quarter of 2013, the services account recorded a deficit of $25 million.
b.
In the third quarter of 2013, the current account showed a surplus of $174,091 million.
c.
In the third quarter of 2013, the merchandise account showed a surplus of $179,457 million.
d.
In the third quarter of 2013, the merchandise account showed a deficit of $179,457 million.
e.
In the third quarter of 2013, the services account recorded a deficit of $38,175 million.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
50. Which of the following would be included in the financial account of the U.S. balance of payments?
a.
The U.S. government’s foreign aid
b.
The purchase of a stock in a U.S. corporation by a foreigner
MACR.BOYE.16.06.03 – ch. 06, 3
The Balance of Payments