Question 1 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.

Question 2 Which of the following statements regarding the balance of payments accounting system for a country is accurate with market determined exchange rates?

A) The current account will always be balanced.

B) The capital and financial accounts will always be balanced.

C) Net unilateral transfers are excluded from the current account.

D) Money that flows into a country is a debit and out of a country is a credit.

E) The sum of the current accounts and the capital and financial accounts should be zero.

Question 3 Which of the following will be true if the currency of a country depreciates?

A) Net exports will remain unaffected, and aggregate demand will decrease.

B) Net exports will increase, and aggregate demand will remain unaffected.

C) Net exports will increase, and aggregate demand will increase.

D) Net exports will decrease, and aggregate demand will increase.

E) Net exports will decrease, and aggregate demand will decrease.

Question 4 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 Question 5 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

Question 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