1. Whenever there is a surplus in the Current Account, the Financial Account:

will be in deficit.

will be in surplus.

will be balanced.

could be in deficit, surplus, or balanced.

2. What would be the "statistical discrepancy" for a Current Account balance of -$85 billion and a Financial Account balance of $80 billion?

$165 billion

$5 billion

$0

-$85 billion

-$165 billion

3. If your aunt in Italy gives you $5,000 to complete your American education, this will be entered on the U.S. balance of payments account as a:

devaluation, since the net value of the American capital stock will be reduced by the amount of your debt.

non-entry, since it will affect Italy's payments but not those of the United States.

debit (-).

credit (+).

4. In terms of U.S. dollars, if one Euro () costs $1.15, and one Pound () costs $1.30, and one Yen () costs $0.01, which currency is the strongest of those four?

Dollar

Pound

Euro

Yen

5. Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 110 yen to the dollar. If it then changes to 150 yen to the dollar, the price of U.S. goods for Japanese citizens will:

rise.

fall.

change in an indeterminate direction.

stay the same.

6. The type of demand that we have for a foreign currency is called:

indeterminate demand

shifting demand

derived demand

dollar demand

inherant demand

7. Suppose that the exchange rate between British pounds and U.S. dollars is originally $1.25 per pound. If it then changes to $2.00 per pound, U.S. imports of British goods will tend to:

change in an indeterminate direction.

fall.

rise.

stay the same.

8. If Chinese citizens decide to buy more products from the U.S., in the foreign exchange market, this would:

increase the supply of the U.S. dollar

increase the supply of the Chinese currency (Yuan)

have no effect on the currencies.

increase the demand for the Chinese currency (Yuan)

9. If Scottish clothing from Great Britain featuring the Loch Ness Monster becomes more popular in the U.S., in the foreign exchange market, this would:

increases the supply of British pounds.

have no effect on the currencies.

increase the demand for British pounds.

increase demand for U.S. dollars

10. As a result of the increase in popularity of Scottish clothing in the U.S., compared to the British pound, the U.S. dollar will:

there would be an indeterminate effect on the exchange value of the dollar relative to the British pound.

not change

appreciate (become stronger)

depreciate (become weaker)