1. Factor income sent from country X and received by residents of country Z will be recorded in Country X's

a. financial account

b. national savings

c. gross domestic product

d. capital inflows

e. current account

2. The equilibrium exchange rate in the foreign exchange market is determined when

a. the supply of foreign exchange remains constant

b. the demand for foreign exchange remains constant

c. the demand for foreign exchange becomes equal to the supply of foreign exchange

d. the demand for foreign exchange is greater than the supply of foreign exchange

e. the demand for foreign exchange is less than the supply of foreign exchange

3. Which of the following factors will cause the net exports of a country to decrease?

a. Appreciation of currency

b. A decrease in the interest rate

c. Depreciation of the currency

d. Decline in domestic incomes

e. High inflation

4. Suppose country A increases its investment to country B to a large extent, then what impact will it have on the balance of payment account of country B?

a. There will be financial capital outflows.

b. There will be financial capital inflows.

c. There will be an increase in the export of goods.

d, There will be a decrease in the import of goods.

e. There will be an increase in remittances from abroad.

5. Assume the equilibrium exchange rate for one peso is 0.5 U.S. dollar. If it is exchanged for 2 U.S. dollars instead, then which of the following is true about the foreign exchange market for pesos?

a. The supply of dollars will be greater than the demand for pesos.

b. The supply of pesos will be greater than the demand for pesos.

c. The supply of pesos will be less than the demand for pesos.

d. The supply of pesos will be equal to the demand for pesos.

e. The supply of dollars will be equal to the demand for dollars.

6. Use the data table to answer the question that follows.

Exports	$550 billion
Imports	$350 billion
Bonds purchased from abroad	$250 billion
Financial capital inflow	$50 billion

From the data given in the table, which one of the following statements is true?

a. The country has a balance of trade surplus.

b. The country has a balance of trade deficit.

c. The country's balance of payments is in disequilibrium.

d. The country's current account balance is zero.

e. The country's financial account is in surplus.

7. A depreciation of the Mexican peso in foreign exchange markets will result in which of the following, ceteris paribus?

a. Mexico's aggregate demand will decrease because exports will increase.

b. Mexico's aggregate demand will increase because net imports will decrease.

c. Mexico's aggregate demand will decrease because net exports will increase.

d, Mexico's aggregate demand will increase because exports will decrease.

e. Mexico's aggregate demand will decrease because imports will decrease.

8. If a smartphone costs $5,000 in the United States, and if it costs 4,000 euros in France (assuming there to be no taxes), then what is the exchange rate for 1 U.S. dollar in terms of euros?

a. 0.80 euro

b. 1.20 euros

c. 1 euro

d. 0.20 euro

e. 2.20 euros

9. A country in short-run equilibrium is suffering from a recessionary or output gap. Which of the following monetary policies would help to lower unemployment, and what would be the impact of that policy on the value of the country's currency in foreign exchange markets?

a. Decreasing the money supply, which will cause appreciation

b. Increasing the required reserve ration, causing currency appreciation

c. Selling bonds on the open market, causing currency appreciation

d. Purchasing bonds on the open market, causing currency depreciation

e. Decreasing the discount rate, causing currency appreciation

10. Use the graph to answer the question that follows.