Quiz 11

1. individuals will only hold domestic bonds.
2. the domestic currency is expected to depreciate by 2%.
3. individuals will only hold foreign bonds.
4. the domestic currency is expected to appreciate by 2%.

1. "transactions above the line."
2. "net transfers received."
3. "capital account transactions."
4. "checking account transactions."
5. "investment income."

1. decreased tariffs on U.S. imports, which led to an expansion of world trade.
2. decreased tariffs on U.S. imports, which led to a contraction of world trade.
3. increased competition in global markets, which led to an expansion of world trade.
4. increased competition in global markets, which led to a contraction of world trade.
5. none of the above

1. the trade balance.
2. net transfers received.
3. investment income.
4. the capital account balance.
5. all of the above

1. Japan
2. Austria
3. United Kingdom
4. United States

1. a 6% nominal depreciation and a 6% reduction in P^*
2. a 6% nominal depreciation and a 6% increase in the foreign price level (P^*)
3. a 2% nominal appreciation and a 2% increase in P
4. a 3% nominal appreciation
5. a 6% increase in the domestic price level (P) and a 6% reduction in P^*

1. trade barriers.
2. each country's size.
3. geography.
4. all of the above
5. both B and C

1. the U.S. interest rate to fall.
2. the dollar-pound exchange rate to remain fixed.
3. the pound to depreciate.
4. the pound to appreciate.
5. none of the above

1. X/Y has decreased and Q/Y has increased.
2. X/Y has increased while Q/Y has decreased.
3. X/Y and Q/Y have stayed relatively constant.
4. the ratio of exports to GDP (X/Y) and the ratio of imports to GDP (Q/Y) have both decreased.
5. none of the above

1. EP^*
2. EP^*/P
3. E/P
4. E
5. none of the above

1. E_t
2. e_t
3. E^e_t+1
4. 1/ E^e_t+1
5. none of the above

1. 1 + i^*
2. (1 + i^*)E^e_t+1/Et
3. (1 + i^*)E_t/E^e_t+1
4. i
5. none of the above

1. domestic goods are now relatively more expensive.
2. foreign goods are now relatively more expensive.
3. foreign goods are now relatively cheaper.
4. both A and C

1. nominal appreciation
2. real depreciation
3. real appreciation
4. nominal depreciation

1. France
2. Mexico.
3. Japan.
4. Germany.
5. none of the above

1. the price of domestic currency in terms of foreign currency.
2. the number of units of foreign currency you can obtain with one unit of domestic currency.
3. the number of units of domestic goods you can obtain with one unit of foreign goods.
4. none of the above
5. both A and C

1. Germany
2. Canada
3. Belgium
4. Japan

1. the ratio of exports to GDP (X/Y) and the ratio of imports to GDP (Q/Y) have both increased.
2. X/Y has decreased and Q/Y has increased.
3. X/Y has decreased and Q/Y has decreased.
4. X/Y has increased while Q/Y has decreased.

1. the price of domestic goods in terms of foreign goods.
2. the price of domestic currency in terms of foreign currency.
3. the price of foreign currency in terms of domestic currency.
4. the price of foreign bonds in terms of domestic bonds.
5. none of the above

1. domestic goods are now relatively cheaper.
2. foreign goods are now relatively cheaper.
3. domestic goods are now relatively more expensive.
4. both B and C

1. changes in nominal exchange rates.
2. changes in quotas or tariffs.
3. changes in capital controls.
4. changes in relative rates of inflation.
5. changes in relative growth rates of output.

1. lending to the rest of the world.
2. borrowing from the rest of the world.
3. running a balanced trade account.
4. suffering from negative investment income.
5. none of the above

1. individuals will only hold foreign bonds.
2. the interest parity condition holds.
3. individuals will be indifferent about holding domestic or foreign bonds.
4. individuals will only hold domestic bonds.

1. 29%.
2. 11%.
3. 5%.
4. 21%.

1. inflation in the domestic country.
2. trade barriers.
3. each country's size.
4. monetary policy.
5. fiscal policy.