ECON335 Final

The payments that migrant workers send back to their home countries are called

Remittances

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

Purchases by foreign travelers visiting the country

Which of the following capital transaction items is entered as a debit in the U.S. balance of payments?

A French resident transfers $100 from his account at Wells Fargo Bank in San Francisco to his Credit Suisse account in Basel.

____ are money-like assets that are held by governments and that are recognized by governments as fully acceptable for payments between them

Official international reserve assets

The net value of flows of goods, services, income, and unilateral transfers is described as the

current account balance

The net value of flows of financial assets and similar claims (excluding official international reserve asset flows) is called the:

financial account balance

Which of the following would tend to contribute to a U.S. current account surplus?

The United States cuts back on American military personnel stationed in Japan.

In the balance of payments, the statistical discrepancy is used to

ensure that the sum of the components of the balance of payments is 0

The current account balance does NOT equal:

the difference between government saving and government investment

A large, persistent current account deficit signals what about the health of an economy?

The potential for an economic crisis in the future related to government debt accumulation or other problems that limit saving

What part of the current account is approximately equal to the current account for most developed countries?

Net exports

In September 2005, exports of goods from the U.S. decreased $3.3 billion to $73.4 billion, and imports of goods increased $3.8 billion to $144.5 billion. This increased the deficit in:

the current account

Rapid increases in the U.S. exports of goods and services will result in a(n) _____ foreign currency and a(n) _____ the U.S. dollars in the foreign exchange market.

increase in the supply of; increase in the demand for

A decrease in German residents' willingness to invest in dollar-denominated assets will shift the demand curve for

Dollars to the left

In a floating exchange rate system, the dollar per pound exchange rate is determined by:

the interaction of the demand and supply of pounds in the foreign exchange market.

Shifts in demand away from French products and toward the U.S. products (caused by forces other than changes in the exchange rate) would result in extra attempts to:

sell Euros and buy dollars

In a/an _____ exchange rate system the government or central bankers intervene to keep the

exchange rate virtually steady

fixed

Which of the following groups is most likely to benefit from a strengthening of the U.S. dollar against other major currencies?

U.S. consumers

Under a fixed exchange rate system, a fall in the market price (the exchange rate value) of a currency is called a(n) _____ of that currency

devaluation

Under a floating exchange rate system, an increase in the international demand for electronic appliances manufactured in Japan will result in:

An appreciation of the yen vis-à-vis other currencies.

What is a disadvantage of dollarizing a country’s currency?

Dollarization prevents a country from printing currency to generate tax revenue.

What is an advantage of choosing to dollarize a country’s currency?

Dollarization allows a country to have a stable currency even if the government has had irresponsible government and management in the past.

Tariffs and quotas are placed by the U.S. government on all imports into the country.

decrease U.S. imports and thus decrease the demand for foreign currency. This, in turn, would lead to an appreciation of the dollar vis-à-vis other currencies.

Demand by foreign consumers for the U.S. exports falls and the U.S. demand for imports rises

By itself, decreased demand by foreign consumers for the U.S. exports would decrease demand for U.S. dollars and lead to a depreciation of the dollar vis-à-vis other currencies. By itself, an increased U.S. demand for import would increase demand for foreign currency, so, the foreign currency would appreciate and the dollar would depreciate. The two changes together therefore would depreciate the dollar