Chapter 32

Question 1

As the dollar is devaluated

Answer 1

D. inflationary pressures are incresed and our standard of living is reduced.

Question 2

Ove the last decade, foreigners have been exercising

Answer 2

B. an increaseing influence over interest rates in the US

Question 3

In 2007, we had a current account_______ and a capital account_______.

Answer 3

B. deficit; surplus

Question 4

During the 1980’s, foreigners expanded their role in the United States as

Answer 4

A. both creditors and owners

Question 5

Which statement is false about trade?

Answer 5

C. We have been on the international gold standard since 1933.

Question 6

Our basic problem with respect to our balance of trade is that

Answer 6

A. we consume too much and save too little

Question 7

Since 1900, international finance has been based on all of these except

Answer 7

B. the silver standard

Question 8

If we were on an international gold standard

Answer 8

A. trade imbalances would automatically be corrected

Question 9

The main reason for balance of payments deficits has been

Answer 9

C. our negative balance of trade

Question 10

A US importer of French wine would pay in

Answer 10

C. Euros

Question 11

The total of our current plus capital accounts

Answer 11

A. will always be zero.

Question 12

If we were on an international gold standard

Answer 12

C. trade deficits and surpluses would be eliminated

Question 13

Devaluation would tend to

Answer 13

A. make the devaluation country’s goods cheaper

Question 14

APpreciation of the Canadian dollar will

Answer 14

C. make Canada’s exports more expensive and its imports less expensive

Question 15

Floating exchange rates

Answer 15

A. float according to the laws of supply and demand

Question 16

Between the end of WWII and 1971, the US dollar was

Answer 16

A. the only major currency in the world convertible into gold for purposes of international payments

Question 17

If US demand for imports increase it would be expected that the value of the dollar in international currency markets would tend to

Answer 17

C. decline

Question 18

The foreign exchange rate refers to

Answer 18

C the amount of one currency that must be paid to obtain one usnit of another currency

Question 19

In order to fiance the US current account deficit, we must

Answer 19

C. run a surplus in the capital account

Question 20

When the current account is in deficit, the capital account must

Answer 20

D. have an equal and offsetting surplus

Question 21

A depreciation of the dollar will

Answer 21

C. increase the amounts of US dollars demanded by foreigners

Question 22

Under a system of freely flexible(floating) exchange rates an American trade deficit with Mexico will tend to cause

Answer 22

D. an increase in the dollar price of the pesos

Question 23

Since 1995, our current account deficit has incrased every year except

Answer 23

D. 2000 and 2007

Question 24

Nationa which experience relatively high rates of inflation

Answer 24

B. will experience a reduction in the value of their currencies in the foreign exchange markets

Question 25

If the US government were to impose a 20% tariff on all foreign imports, this would likely lead to ____ in demand for foreign currencies, causing the dollar to ______.

Answer 25

C. a decrease; appreciated