Share
Explore BrainMass

United States balance of payment and international indebtedness

1) Over the last two decades, according to the United States balance of payment,
A)the current accounts and the capital account balance tend to move in the same direction.(B) the current account and the capital accounts balance tends to move in opposite direction.(C)there is no clear relationship between the current accounts balance and the capital account balance.(D) the official settlements balance fluctuates greatly from year to year.

2)If a country has a capital account surplus, that country stock of international indebtedness is
A)increasing(B) decreasing(C)constant (D)zero

3)Suppose X-m=net exports;T-G= government sector surplus or deficits; and S-I =private sector surplus or deficits. Which of the following relationships is correct?
A) X-M=T-G+S-I (B) T-G=X-M+S-I(C)S-I=X-M+T-G(D)None of the above answer are correct.

4)Suppose the exchange rate of the U.S dollar was 1.5 British pound =$1.00(U.S) on Wednesday, and on Monday the exchange rtae was $.75(U.S)=1.00 British pound. Which of the following best describes what happen between Wednesday and Monday?
A)The U.S dollar appreciated aginst the British pound.(B) The British pound sppreciated against the U.S dollar(C)The U.S dollar Depreciated against the british pound.(D) Both answer B and C are correct

5)The ____ the current exchange rate ,The _____is the expected profit from holding dollars ,all other remaining the same.
A)higher;larger(B)lower;smaller(C)lower;larger(D) the premise of the question is wrong because the exchange rate has nothing to do with expected profit from the holding dollars

6)If the U.S interest rate rise, the
A) demand curve for the dollar shift rightward(B)demand curve for the dollar shift leftward(C) there is a movement downward along the demand curve for the dollars. (D)none of the above answer are correct.

7)Other things remaining the same, the _____ the exchange rate for dollars, the greater the _______ in the foreign exchange market.
A) higher; quantity of dollars supplied(B) higher; quantity of dollars demanded(C)lower; value of U.S imports(D) higher;expected profits from holding dollars

8)The quantity of dollars supplied will increase if
A) tourism to the united states increase(B) foreign demand for the U.S exports increases(C)U.S imports increase(D)U.S interest rates are high

9)An increase in the JApanese interest rate will_____ the supply of dollars and lead the dollars to_____
A)increase; appreciate(B)increase;Depreciate(C) decrease;appreciate(D)decrease;depreciate

10) Suppose the target exchange rate set by the Fed is 100yen per dollars. If the demand for the dollars temporarily increases , to maintain the target exchange rate, the Fed can;
A)sell dollars (B) buy dollars (C) violate interest Rate parity(D) violate purchasing power parity

11)Suppose the exchange rate between the U.S dollar and the french franc is 0.25 franc per dollars. If a television sells for 100 franc in France, what is the dollar price of the television set?
A)$400.(B)$25.(C)$50.(D)$200.

12) A country that borrows more from the rest of the world than it lends to it in a year is called a _____, and a contry that lends more to the rest of the world than it borrows from it in a year is called a _____.
A) borrows;lender(B)importer;exporter(C)net borrower;net lender(D)gross borrower;gross lender

13)Suppose that $1U.S cost $1.50 Canadian.If in St Louis a CD cost $10 U.S and in Montreal it cost $15 Canadian then _______
A) purshasing power parity exits(B) Canadians will buy CD in St Louis(C) Americans will buy CDs in Montreal(D) Virgin Records will have an incentive to build more stores in North America

Solution Preview

1) Over the last two decades, according to the United States balance of payment,
(B) the current account and the capital accounts balance tends to move in opposite direction
en.wikipedia.org/wiki/Balance_of_payments
.( 2)If a country has a capital account surplus, that country stock of international indebtedness is
decreasing

3)Suppose X-m=net exports;T-G= government sector surplus or deficits; and S-I =private sector surplus or deficits. Which of the following relationships is correct?
(D)None of the above answer are correct.

4)Suppose the exchange rate of the U.S dollar ...

$2.19