Question 1 Use the graph to answer the question that follows. Real interest S rate D' q q Quantity of loanable funds If the graph above represents a change in the loanable funds market in the United States, what will be the impact on U.S. net exports? O Capital flows from the U.S. and the dollar depreciates, causing net exports to decrease. OCapital flows from the U.S. and the dollar depreciates, causing net exports to increase. Capital flows into the U.S. and the dollar depreciates, causing net exports to decrease. Capital flows into the U.S. and the dollar appreciates, causing net exports to decrease. Capital flows into the U.S. and the dollar appreciates, causing net exports to increase.Question 2 In which scenario will there be a shortage of yen in the foreign exchange market for the yen? O When there is excess demand for yen at a lower than equilibrium exchange rate O When there is excess supply of yen at a lower than equilibrium exchange rate When there is excess demand for yen at a higher than equilibrium exchange rate When there is excess supply of yen at a higher than equilibrium exchange rate When demand for yen is equal to the supply of yen in the foreign exchange market Question 3 Following expansionary monetary policy, Country A currently has a real interest rate of 4 percent, while Country B has a real interest rate of 8 percent. This difference will O lead to financial capital outflows from Country A, causing its currency to appreciate lead to financial capital inflows for Country A, causing its currency to depreciate lead to financial capital outflows from Country B, causing its currency to appreciate O lead to financial capital inflows for Country B, causing its currency to depreciate lead to financial capital inflows for Country B, causing its currency to appreciateQuestion 4 In Switzerland, the price of a domestically produced wristwatch is 100 Swiss francs. If an American tourist can purchase the same watch in Switzerland for $120, what must be the exchange rate between the two countries? $0.20 per Swiss franc $0.83 per Swiss franc $1.20 per Swiss franc $5 per Swiss franc $6 per Swiss franc Question 5 Assume the United States government significantly increases deficit spending relative to other countries Which of the following would happen to the U.S. dollar in the foreign exchange markets because of the change in the interest rate, ceteris paribus? O The U.S. dollar will appreciate. The U.S. dollar will depreciate. There will be a decrease in demand for the U.S. dollar on foreign exchange markets. There will be a decrease in the supply of U.S. dollars on foreign exchange markets. The U.S. dollar will be devalued.Question 6 Which of the following will increase the demand for the currency of country A in the foreign exchange market? O Increase in the price level in country A Decrease in expectations regarding appreciation of currency of country A O Increase in the foreign demand for goods of country A O Decrease in the foreign demand for goods of country A O Increase in the aggregate demand in country AQuestion 7 Use the graph to answer the question that follows. Dollars per Peso Do DA Quantity of Pesos The shift from Do to D, could be the result if the United States Federal Reserve O sells government bonds O purchases government bonds increases the money supply O decreases the required reserve ratio O reduces the federal discount rateQuestion 8 When a nation A's currency appreciates relative to its trading partners', what will happen to nation A's exports, imports, and aggregate demand? Exports, imports, and aggregate demand will all decrease. Exports will decrease, imports will increase, and aggregate demand will decrease. O Exports will increase, imports will decrease, and aggregate demand will increase. O Exports will decrease, imports will increase, and aggregate demand will increase. O Experts will increase, imports will decrease, and aggregate demand will decrease. Question 9 When the exchange rate between two currencies freely floats, the O governments will deflate their currency to increase exports balance of payments will always favor current accounts exchange rate equalizes the quantity demanded and quantity supplied of each currency O demand curves for the currencies will slope upward sum of the current account and the capital and financial account will be oneQuestion 10 Which of the following explains the reason for a downward-sloping demand curve for U.S. dollars in the foreign exchange market? 1. The exports of the United States become less expensive when the price of the dollar falls, so more exports from the U.S. are demanded II. When the price of a dollar falls, people buy more dollars for travel to the United States. III. As the price of the dollar increases, people wish to import more goods from the United States. Ol only Oil only O Ill only Question 11 How will the depreciation of the U.S. dollar impact the output of the United States, ceteris paribus? O Depreciation of a dollar will allow cheaper imports, decreasing output. Depreciation of a dollar will increase the net exports, increasing output. O Depreciation of a dollar will decrease the value of a dollar, decreasing output. O Depreciation of a dollar will boost exports of foreign countries, decreasing output. Depreciation of a dollar will also make other currencies cheaper, decreasing output.Question 12 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? O The country has a balance of trade surplus. The country has a balance of trade deficit. The country's balance of payments is in disequilibrium. The country's current account balance is zero. The country's financial account is in surplus.Question 13 Assume the dollar price of one euro increases from $1.20 to $1.50. What is happening to the dollar, and what will happen to European exports to the United States, ceteris paribus? U.S. Dollar European Exports to the United States Depreciation | Decrease U.S. Dollar European Exports to the United States Depreciation | Increase O U.S. Dollar European Exports to the United States Appreciation Decrease O U.S. Dollar European Exports to the United States Appreciation | Increase O U.S. Dollar European Exports to the United States Appreciation No changeQuestion 14 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? O There will be financial capital outflows. There will be financial capital inflows. There will be an increase in the export of goods. There will be a decrease in the import of goods. There will be an increase in remittances from abroad. Question 15 The value of consumer goods produced abroad that are purchased by a country's residents is recorded in its O national account current account financial account capital account transfers accountQuestion 16 Use the graph to answer the question that follows. Dollars/Pound S $10 $7.5 $3 D 30 50 70 Quantity of Pounds If one pound is exchanged for three dollars in the foreign exchange market as shown in the graph, what would be the result in the market for pounds? OA surplus of $40 A shortage of $40 A shortage of 40 pounds A surplus of 40 pounds Equilibrium in the foreign exchange market