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Quiz 11

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Question 1 (1.0 points)
Assume the interest parity conditions holds. If i = 9% and i * = 7%, we know that:
  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%.
Question 2 (1.0 points)
Another name for "current account transactions" is:
  1. "transactions above the line."
  2. "net transfers received."
  3. "capital account transactions."
  4. "checking account transactions."
  5. "investment income."
Question 3 (1.0 points)
The Smoot-Hawley Act:
  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
Question 4 (1.0 points)
Because the U.S. traditionally gives more foreign aid than it receives, the U.S. traditionally has a negative value for:
  1. the trade balance.
  2. net transfers received.
  3. investment income.
  4. the capital account balance.
  5. all of the above
Question 5 (1.0 points)
In 2000, which of the following countries had the highest ratio of exports to GDP?
  1. Japan
  2. Austria
  3. United Kingdom
  4. United States
Question 6 (1.0 points)
Which of the following events will cause the smallest change in the real exchange rate (e)?
  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 *
Question 7 (1.0 points)
The differences in the ratios of exports to GDP across countries are believed to be caused primarily by:
  1. trade barriers.
  2. each country's size.
  3. geography.
  4. all of the above
  5. both B and C
Question 8 (1.0 points)
Assume that the uncovered interest parity condition holds. Also assume that the U.S. interest rate is greater than the U.K. interest rate. Given this information, we know that investors expect:
  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
Question 9 (1.0 points)
Since 1929, we have observed the following for the United States:
  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
Question 10 (1.0 points)
Which of the following expressions represents the real exchange rate (e)?
  1. EP *
  2. EP * /P
  3. E/P
  4. E
  5. none of the above
Question 11 (1.0 points)
Suppose you have one U.S. dollar. Which of the following expressions represents the amount of foreign currency you can obtain with that one U.S. dollar?
  1. E t
  2. e t
  3. E e t+1
  4. 1/ E e t+1
  5. none of the above
Question 12 (1.0 points)
Suppose you have one U.S. dollar with which you wish to purchase U.K. (one-year) bonds in period t. Which of the following expressions represents the amount of U.S. dollars you will receive in one year (i.e., period t+1) from purchasing U.K. bonds in period t?
  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
Question 13 (1.0 points)
A real depreciation indicates that:
  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
Question 14 (1.0 points)
Suppose E the dollar price of foreign currency increases. Which of the following will have occurred to the dollar as a result of this increase in E?
  1. nominal appreciation
  2. real depreciation
  3. real appreciation
  4. nominal depreciation
Question 15 (1.0 points)
America's largest trading partner is:
  1. France
  2. Mexico.
  3. Japan.
  4. Germany.
  5. none of the above
Question 16 (1.0 points)
The nominal exchange rate (E) as defined in the text represents:
  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
Question 17 (1.0 points)
In 2000, which of the following countries had the lowest ratio of exports to GDP?
  1. Germany
  2. Canada
  3. Belgium
  4. Japan
Question 18 (1.0 points)
Since 1929, we have observed the following for the United States:
  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.
Question 19 (1.0 points)
The real exchange rate is:
  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
Question 20 (1.0 points)
A real appreciation indicates that:
  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
Question 21 (1.0 points)
Year-to-year movements in real exchange rates between industrialized countries like the U.S. and Canada are caused mostly by:
  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.
Question 22 (1.0 points)
When the U.S. has a current account surplus, we know that it is also:
  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
Question 23 (1.0 points)
Suppose i = 4%, i * = 2%, and that the domestic currency is expected to depreciate by 3% during the coming year. Given this information, we know that:
  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.
Question 24 (1.0 points)
The ratios of exports to GDP for the United States are now approximately equal to:
  1. 29%.
  2. 11%.
  3. 5%.
  4. 21%.
Question 25 (1.0 points)
The differences in the ratios of exports to GDP across countries are believed to be caused primarily by:
  1. inflation in the domestic country.
  2. trade barriers.
  3. each country's size.
  4. monetary policy.
  5. fiscal policy.
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Quiz 11. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/macroeconomics-for-managers/quiz11.htm. This work is licensed under a Creative Commons License Creative Commons License