Final AP class 😋🥺

If the current exchange rate of the Mexican peso and the Brazilian real is 0.20 real per peso, and the equilibrium exchange rate is 0.18 real per peso, which of the following describes the foreign exchange market for the Mexican peso?

There is a surplus of pesos and the peso will depreciate.

Country X's government increases its spending without raising taxes. Which of the following is true about the effect on Country X's real interest rates and its subsequent effect on Country X's net exports?

real interest rates - increase

net exports - decrease

If the real interest rate in the United States increases relative to that of the rest of the world, capital should flow

into the United States and the dollar will appreciate

A depreciation of the United States dollar in foreign exchange markets will result in which of the following?

An increase in aggregate demand because imports will decrease.

If the price of the Swedish krona changes from 12 Japanese yen per krona to 13 Japanese yen per krona, then which of the following describes the change in the yen and the change in the cost of Swedish goods to residents of Japan?

Yen- Depreciation

Change in Cost of Swedish Goods to Residents of Japan- Increase

The value of a country's currency will tend to appreciate if

demand for the country's exports increases

Which of the following is likely to occur following the depreciation of the United States dollar ?

United States exports will increase

Assume country x has the following international transactions, in billions of dollars, during a given period of time. What is the balance on the current account, in billions of dollars, for the period?

+70

A country can have increased surplus in its balance of trade as a result of

Declining imports and rising exports

An increase in Canada's real interest rates relative to real interest rates in the rest of the world will lead to which of the following in Canada?

Financial capital inflow

England and France are trading partners. If England's currency, the pound sterling, depreciates relative to Frances currency, the euro, which of the following will happen?

Aggregate demand will increase in England

An increase in Japan's demand for United States goods would cause the value of the dollar to

Appreciate because Japan would be buying more United States dollars.

If real interest rates in the United states fall relative to real interest rates in Great Britain, which of the following will occur ?

the british pound will appreciate relative to the dollar.

If the value of the United States dollar increases on the foreign exchange market, which of the following is most likely to occur in the short run?

Aggregate demand will decrease

The exchange rate is 1.2 euros per United States dollar. If a restaurant meal costs 30 euros in Paris, France, what is its dollar cost to a United states tourist ?

$25

If a country has a current account deficit, which of the following must be true ?

It must show a surplus in its capital account

When Country X's central bank engages in monetary policy actions that lead to a decrease in interest rates, the international value of country X's currency and country X's exports and imports will most likely change in which of the following ways?

Currency: Decrease

Exports: Increase

Imports: Decrease

The graph above shows the foreign exchange market for United states dollars in terms of Japanese yen. Assume that there is an increase in United states consumers preference for Japanese automobiles. Which of the following changes will most likely take place in the market for dollars ?

The supply of dollars will increase

A country can have an increased surplus in its balance of trade as a result of

declining imports and rising exports

Which of the following will increase the United States trade deficit ?

United States firms buying technologically advanced computers from Germany

The diagram shows the United States dollar-Chinese yuan foreign exchange market. If the current rate is 6 yuan per dollar, which of the following describes the current state of the market and how the value of the dollar will change in a flexible exchange-rate system ?

There is a shortage of dollars and the dollar will appreciate

The price of a Japanese-made pen in Japan is ¥500. If at the current exchange rate a German buyer can buy the pen in Japan for ¥100, then which of the following is the exchange rate between the two currencies ?

¥5/€

Which of the following monetary policy actions by the federal reserve would result in an appreciation of the United States dollar ?

an open market sale of government bonds.

The table gives the values of selected accounts in a nation's balance of payments in millions of dollars.

Based on the table, which of the following describes the balance in the current account and in the capital and financial account?

The current account is in deficit and the capital and financial account is in surplus.

The table gives the values of selected accounts in a nations balance of payments in millions of dollars. Based on the table, the nations trade balance is equal to which of the following?

$100 million

Assume that country x and country y are trading partners. If the average income in country x increases, which of the following will occur in the foreign exchange market ?

the demand for country Y's currency will increase, and country X's currency will depreciate.

An increase in the international value of the United States dollar will most likely benefit

retired United States citizens living overseas on their social security checks

If the United States government increases deficit spending, which of the following will occur as a result of a change in the interest rate?

the united states dollar will appreciate in foreign exchange markets.

Which of the following will cause the United States dollar to depreciate relative to the euro?

An increase in household income in the United States

The purchase of United States government bonds by Japanese investors will be included in japans

financial account (formerly called capital account)

If the real interest rate in the United States rise relative to rates in other countries, what will happen to the international value of the United States dollar and United States net exports ?

Value of the dollar: appreciate

Net exports: decrease

If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?

Demand for United States dollars and supply of euros

Which of the following would be a current account transaction ?

A United States firm sells $500 million of its products to a Chinese company.

When country X has a trade deficit, which of the following is necessarily true

The value of Country X's imports exceeds the value of its exports

Suppose that country A is experiencing high inflation relative to country B, which is enjoying steady growth with a stable price level. Which of the following would occur in the foreign exchange market?

A depreciation of Country A's currency

Which of the following is true in the short run if consumers buy more imported goods and fewer domestic goods ?

The trade balance moves toward deficit, and equilibrium income decreases.

An increase in United States imports will result in which of the following in foreign exchange markets?

Increased United States demand for foreign currencies

The price of one nations currency expressed in terms of another nations currency is called

exchange rate

If foreign financial investors no longer see country A as a safe haven, which of the following will most likely occur in the short run?

country A's currency will depreciate

An increase in a governments deficit spending will most likely affect a nation in an open economy in which of the following ways ?

The economy will experience financial capital inflows, and its currency will appreciate.

Which of the following will most likely cause a depreciation in a country's currency ?

an increase the country's price lebel

Assume that the inflation rate in Country X is very high relative to the inflation rates in all of its trading partners. Which of the following is likely to happen to Country X's currency on the foreign exchange market?

The demand curve for the currency will shift to the left, and the currency will depreciate.

Which of the following will lead to a depreciation of a nations currency ?

Decreased real interest rates in the nation compared with the rest of the world

Which of the following best explains the change in the international value of a peso caused by a shift of the demand curve from D0 to D1 in the dollar-peso foreign exchange market ?

The peso has depreciated because Americans demand for Mexican goods and services decreased

The diagram shows an economy's long-run aggregate supply, short-run aggregate supply, and aggregate demand. Assume the country's economy is currently at short-run equilibrium. Which of the following is a monetary policy action the country's central bank can use to restore full employment, and what is the consequent effect on the value of the country's currency in foreign exchange markets ?

An open market purchase of government bonds, which will cause currency depreciation

Assume that the United States current account balance is zero. If the United states dollar appreciates against the Japanese yen, then demand for United States exports will

increase and result in a surplus in the United States financial account

Use the graph to answer the question. If one Indian rupee is exchanged for three Japanese yen in the foreign exchange market, which of the following describes the foreign exchange market for Indian rupees ?

There is a shortage of 40 rupees.

Country A both imports and produces tea. If Country A imposes a tariff on imported tea, which of the following will occur?

Employment in the domestic tea industry will increase

If other things are held constant, an increase in United States imports will

tend to cause the dollar to depreciate because the world supply of dollars will rise

Which of the following is true if exchange rates are freely floating ?

The free market forces of demand and supply determine the equilibrium exchange rates

Assume a country has an open economy and a flexible exchange rate system. An increase in the country's government budget deficit would most likely cause

An increase in real interest rate and a decrease in net exports

Assume that the world operates under a flexible exchange rate system. If the central bank of Mexico increases its money supply but other countries do not change theirs, Mexico's inflation rate and the international value of the Mexican peso will most likely change in which of the following ways?

Inflation rate: increase

International Value of Peso: Depreciate

Which of the following will lead to an increase in United States net exports ?

Depreciation of the United States dollar on the foreign exchange market

Tariffs are different from assigned import quotas in that tariffs will

generate additional revenue for the domestic government

Following a decrease in the real interest rate, there is an increase in financial capital outflows from country A. The increase in capital outflows will most likely have which of the following effects on country A's net exports and aggregate demand?

Net exports: increase

Aggregate demand: increase

Which of the following is most likely to benefit from an appreciation in the United states dollar in the short run?

United States tourists traveling to foreign countries

In a flexible system of exchange rates, an open market sale of bonds by the Federal Reserve will most likely change the money supply, the interest rate, and the value of the United States dollar in which of the following ways?

Money Supply: Decrease
Interest Rate: Increase
Value of the Dollar: Increase

Assume that the Federal Reserve pursues a contractionary monetary policy. Based on the resulting change in the interest rate, what will happen to the international value of the dollar, United States imports, and United States exports?

International Value of the Dollar: increase
United States Imports: increase
United States Exports:decrease

Assume that Canadian consumers increase their demand for Mexican financial assets. How would the international supply of Canadian dollars, the value of the Mexican peso relative to the Canadian dollar, and Canadian net exports to Mexico change?

Supply of Canadian Dollars: increase

Value of Peso: Increase

Canadian Net Exports: Increase

An appreciation of the United States dollar on the foreign exchange market could be caused by a decrease in which of the following?

The United States consumer price index

Which of the following is likely to result in an inflow of financial capital to country Z?

Increased sales of government bond by the central bank of country Z

If country x imposes a tariff on its imports how will the supply of its currency and its exchange rate be affected in foreign exchange market

Supply= Decrease,

Currency=Appreciate

With an increase in investment demand in the United States, the real interest rate rises. In this situation, the most likely change in the capital stock in the United States and in the international value of the dollar would be which of the following ?

Capital stock: increase

International value: increase

If the value of the United States dollar increases on the foreign exchange market, which of the following is most likely to occur in the short run

Aggregate demand will increase

Which of the following transactions would increase the current account surplus in Japans balance of payments accounts ?

A Japan- based company sells roasted coffee to Canada

The equilibrium real interest rate in Britain increases to 8 percent while the equilibrium real interest rate in Australia remains at 4 percent. As a result, financial capital will flow from

Australia to Britain, decreasing the interest rate in Britain and increasing the interest rate in Australia

Which of the following is true of a current account deficit ?

it is financed by a surplus in the financial (capital) account

Which of the following would decrease the United states net exports to South Korea ?

south korean computer companies sell more computers to the united states.

Which of the following transactions is included in the financial account of country X's balance of payments accounts ?

an individual and country x buys new government bonds issued by country e.

Assuming fixed exchange rates, if country Z's rate of inflation increases relative to its trading partners, Country Z's imports and exports will most likely change in which of the following ways?

imports :increase

exports : decrease

A contractionary monetary policy by the Canadian central bank will likely affect international financial capital flows and the Canadian dollar in which of the following ways in the short run?

Financial capital flows to Canada will increase, and the Canadian dollar will appreciate.

Which of the following would cause the United states dollar to increase in value compared to the Japanese yen?

An increase in interest rates in the United States

Which of the following is an example of foreign direct investment ?

A United States automobile manufacturer building a steel plant in Russia

When the United States dollar appreciates against the euro, which of the following will most likely happen ?

united states tourists will pay fewer dollars for trips to europe.

An increase in the international value of the United States dollar will tend to cause

United States exports to fall

If country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

Alpha's currency will have depreciated relative to Beta's currency.

Assume that Canada imports more goods and services than it exports. Which of the following is true of the Canadian balance of payments accounts ?

The trade balance must be negative

The implementation of an expansionary monetary policy by the Canadian central bank will result in which of the following changes in the short run?

interest rate Decrease/

canadian dollar depreciate

If the real interest rate in country x increases relative to the real interest rate in country y and there are no trade barriers between the two countries, then for country x which of the following will be true of its capital flow, the value of its currency and its exports ?

Capital Flow = inflow

Currency = appreciation

Exports = decrease

If a country has a deficit in its current account, there will be a

Surplus in the financial account (formerly called capital account)

Which of the following is most likely to cause an increase in the international value of the United States dollar ?

Higher United States real interest rates

In an open economy, an increase in government budget deficit tends to cause the international value of a country's currency and its trade deficit to change in which of the following ways?

appreciate becomes larger

An increase in a country's current account surplus will result in which of the following in the short run?

An increase in the country's net financial capital outflows

The real interest rate in country x is 3 percent and is 7 percent in country y. Which of the following correctly predicts the effect of the differences in interest rates between the two countries ?

Country Y will experience financial capital inflows, and Country Y's currency will appreciate.

Assume that the supply of loanable funds increases in country x. The international value of country x's currency and country x's exports will most likely change in which of the following ways ?

International value of Country X's currency: Decrease
Country X's exports: Increase

An increase in which of the following would reduce the United States balance-of-trade deficit ?

the value of foreign currency relative to the United States dollar

In a nations currency appreciates relative to that of its trading partners, what will happen to the nations exports, imports and aggregate demand ?

Exports- Decrease
Imports- Increase
Aggregate Demand- Decrease

If the international value of the United States dollar depreciates in comparison with the Japanese yen, which of the following is most likely to occur?

United States exports to Japan will increase

If the federal reserve undertakes a policy to reduce interest rates, international capital flows will be affected in which of the following ways?

Short-run capital inflows to the United States will decrease.

In the foreign exchange market, the exchange rate is defined as

the price of one currency in terms of another currency

The table below gives the number of Japanese yen needed to buy a United states dollar and the number of Japanese yen to buy a euro. Given the currency values, which of the following must be true ?

The current account is in deficit and the capital and financial account is in surplus.

If Mexicans increase their investment in the United States, the supply of Mexican pesos to the foreign exchange market and the dollar price of the peso will most likely change in which of the following ways?

Supply of Pesos = increase

Dollar Price of Peso = decrease

If higher United States interest rates cause foreign demand for the dollar to increase, which of the following will occur to the international value of the dollar and to United States exports?

The international dollar: increase

Exports: decrease

Assume that the united states central bank sells government bonds on the open market. How will the sale affect the value of the united states dollar on the foreign exchange market and united states exports?

Value of the united states dollar- increase

Exports- decrease

If the central bank of country z wishes to increase the value of its currency on foreign exchange markets, it can do which of the following ?

raise interest rates in country Z.

Under a flexible exchange-rate system, the Indian rupee will appreciate against the Japanese yen when

real interest rates in India increase relative to those in Japan

If the exchange rate between the United States dollar and the British pound changes from $2 per £1 to $3 per £1, and domestic prices in both countries stayed the same, then the United States dollar would

Appreciate, making United States imports from Britain more expensive

Which of the following is recorded in w country's current account?

The value of consumer goods produced abroad and purchased by the country's residents

If consumers in Canada increase their demand for

Products that are manufactured in India, which of the following will occur ?

India financial capital inflow will increase