Hello! Need help with the MCQ Questions Page 371, Questions 1 - 25. Please, list the letter that best answers the question AND give a brief explanation as to why. Explanations can include mathematics, fully labeled graphs, sentences.

AP Exam Practice Questions Multiple-Choice Questions 3. Which of the following relationships between the 1. Which of the following transactions is counted in the current account (CA) and the capital and financial account (CFA) must be true? U.S. balance of trade? a. CA - CFA = 0 a. A French importer buys a case of California wine. b. CA + CFA = 0 b. An American working for a Brazilian company c. CA = CFA deposits her paycheck. d. CA = 1/CFA c. An American buys a bond from a Kenyan company. e. (CA)(CFA) = 1 d. An American charity sends money to an Iraqi aid agency. 4. Which of the following is a reason for capital to flow e. A Chinese national buys stock in a U.S. company. into a country? a. a rapidly growing economy 2. The difference between a country's exports and imports b. government budget surpluses of goods is that country's c. higher savings rates a. balance of payments on its current account. d. lower interest rates b. balance of payments on its financial account. e. a relatively high supply of loanable funds c. balance of payments on its capital account. d. merchandise trade balance. e. balance of payments on goods and services. Macro . Unit 6 Review 3712. Assume the two countries, Xenia and Yania, have flexible 23. Assume the aggregate price level in Mexico increases exchange rates. The currency in Xenia is the xen dollar relative to the aggregate price level in Canada. What (XD), and the currency in Yania is the yan dollar (YD). will happen to the exchange rate between Mexico and a. Assume the current account in Yania is in deficit and Canada (expressed as Mexican pesos per Canadian the price level declines. Use a correctly labeled dollar)? of the foreign exchange market to show the effect on a. It will increase the value of the YD. b. It will decrease. b. Will the current account deficit in Yania increase, c. It will remain unchanged. decrease, or remain unchanged? Explain. (5 points) d. It will depreciate. e. The effect on the exchange rate cannot be 3. Assume the economy of the country of Mininia is in a determined. recession. 24. Which of the following will result from the imposition a. Use a correctly labeled graph of AD, SRAS, and LRAS to illustrate each of the following: of an import quota? a. an increase in government revenue i. the equilibrium output and price level, labeled Y, b. an increase in imports and PL c. a decrease in domestic supply ii. the long-run equilibrium output, labeled Y d. an increase in domestic demand b. Show the effect of an expansionary fiscal policy on e. an increase in domestic price your graph from part a. Label the new output level ), 25. Assume the U.S. dollar (USD) is exchanged for the c. Draw a correctly labeled graph of the foreign Australian dollar (AUD). If GDP in Australia increases, exchange market for the country's currency, the what will happen to each of the following? mina, relative to the U.S. dollar. International d. How will the value of the mina be affected by the Demand for USD Demand for AUD Value of AUD change in output shown on your graph from a. no change decreases depreciates part b? Show the effect on your graph from part c b. increases no change depreciates and explain. (8 points) c. no change decreases appreciates d. decreases no change depreciates e. increase increases appreciates Free-Response Questions U.S. dollars ). a. Assemor there graph. b. How Will the change in U.S. dollar? Assume that zero. Base will the Cunt balance move to a surplus move to a deficit, or stay the same? Explain. (5 point 374 Macro . Unit 6 International Trade and FinanceRefer to the following graphs and information for Questions 5-7. market? 8. Which of the following is traded in a foreign each Suppose that Northlandis and Southlandia are the only two a. imported goods only trading countries in the world, that each nation runs a balance b. exported goods only of payments on both the current account and the capital and c. both imported and exported goods financial account equal to zero, and that each nation sees the d. international stocks and bonds other's assets as identical to its own e. currency (a) Northlandia 9. Which of the following will occur in the fore Interest exchange market as a result of capital inflow to rate, r United States? the 12% a. a decrease in the demand for dollars 10 b. a decrease in the dollar exchange rate c. an increase in the supply of dollars d. appreciation of the dollar DLF e. a decrease in the quantity of dollars exche 10. The price in a foreign exchange market is af 0 100 200 300 400 500 600 700 800 900 1,000 a. real interest rate. Quantity of loanable funds b. nominal interest rate. c. tariff. (b) Southlandia d. exchange rate. Interest e. discount rate. rate, r SIF 12% Refer to the following graph and information for Questwent 1 1-12 10 The graph shows the foreign exchange market for the bern, the currency used in the country of Albernia. Exchange rate DIF (U.S. dollars per bern) 0 100 200 300 400 500 600 700 800 900 1,000 Quantity of loanable funds 5. Given the situation depicted in the graphs, which of the 1.50 following will happen? a. The interest rate in Northlandia will rise. b. The interest rate in Southlandia will fall. c. Capital will flow into Northlandia d. Capital will flow into Southlandia. e. Southlandia will experience a balance of trade deficit. Quantity of berns 6. Which of the following will happen in Southlandia? 1 1. Given the equilibrium exchange rate on the graph, a. The quantity of loanable funds supplied will which of the following is true regarding the bern? decrease. a. It takes $1.50 to buy a bern. b. The supply of loanable funds will increase. b. It takes $0.75 to buy a bern. c. The demand for loanable funds will decrease. c. It takes $0.67 to buy a bern. d. The supply of loanable funds will decrease. d. It takes 1.50 bern to buy a dollar. e. The interest rate will decrease. e. It takes 0.75 bern to buy a dollar. 7. If the international equilibrium interest rate is 8%, 12. How could depreciation of the bern be shown on the which of the following will be true? graph? a. Southlandia will experience a capital outflow of $250. a. a movement of the equilibrium exchange rate to 2 b. Southlandia will experience a capital outflow of $700. b. a movement of the equilibrium exchange rate to I c. Northlandia will experience a capital outflow of $250. c. a decrease in the equilibrium quantity of berns d. Northlandia will experience a capital outflow of $300. d. a rightward shift of the demand for berns e. The international equilibrium quantity of loanable e. a leftward shift of the supply of berns funds will be $1,200. 372 Macro . Unit 6 International Trade and FinanceA Real exchange rates are adjusted for international differences in 19. Which of the following is true of tariffs? a. exchange rates. a. They are limits on the quantity of a good that can be b. aggregate price levels. imported. c GDP per capita. b. They account for over 10% of federal government d. capital flows. revenue in the United States. e. income, c. They can result in trade wars between countries. 4. Which of the following is true if two countries have d. They do not protect domestic industries from competition. purchasing power parity? a. The two countries' real GDP per capita is the same. e. They decrease the price of goods. b. The two countries' imports equal their exports. 20. A goal of protectionism is to . The nominal exchange rate ensures that goods cost a. generate revenue for the federal government. the same amount in each country. b. lower the price of goods for domestic consumers. d. There are no capital inflows or outflows between the c. increase world output through specialization and two countries. comparative advantage. e. The countries' exchange rates do not appreciate or d. decrease competition for domestic industries. depreciate. e. raise the price of imported goods 15. When a government lets exchange rates be determined Questions 21 and 22 refer to the following graph. by foreign exchange markets, it is called Exchange rate a. an exchange rate regime. (euros per U.S. dollar) b. a fixed exchange rate. c. a floating exchange rate. d. a market exchange rate. Suso e. a foreign exchange control. 16. Governments intervene to keep the value of their XR E1 currency down in order to a. make domestic goods cheaper in the world market. XR2 E2 b. decrease the price of imported goods. c. promote capital inflows. d. decrease exports. D usoz e. reduce aggregate demand. 7. A decrease in domestic interest rates will necessarily Quantity of U.S. dollars have which of the following effects in the foreign 21. Which of the following could cause the movement from exchange market? DUSDI to DUSD2? a The supply of the domestic currency will decrease. a. More Americans travel to Europe. b. The demand for the domestic currency will decrease. b. The aggregate price level in the United States falls. c. The exchange rate will increase. c. Exports from the United States increase. d. The quantity of the domestic currency exchanged d. Interest rates in the United States rise. will rise. e. Europe goes into a recession. e. The quantity of the domestic currency exchanged 22. When the exchange rate moves from XR, to XR2, the will fall. U.S. dollar has 18. An import quota on a good will do which of the a. appreciated. following? b. depreciated. a It will raise revenue for the government. c. revalued. b. It will reduce the domestic price of the good. d. become more valuable. c. It will raise the international price of the good. e. caused the relative price level in the United States d. It will reduce the quantity of the good sold to rise. domestically. e. It will decrease domestic production of the good. Macro . Unit 6 Review 373