The balance of payments, exchange rates, and trade deficits

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Presentation transcript:

The balance of payments, exchange rates, and trade deficits Chapter 21 The balance of payments, exchange rates, and trade deficits

Taylor Economics – Chapter 21 1. U.S. exports: Increase the foreign demand for dollars Increase the domestic demand for dollars Increase the foreign supply of dollars Decrease the domestic supply of foreign currency Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 1. U.S. exports: Increase the foreign demand for dollars Increase the domestic demand for dollars Increase the foreign supply of dollars Decrease the domestic supply of foreign currency Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 2. If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is: $1.40 $2.00 $2.25 $6.00 Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 2. If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is: $1.40 $2.00 $2.25 $6.00 Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 3. Other things being equal, an increase in the U.S. rate of inflation is likely to cause an increase in the: Quantity of exports Quantity of imports Demand for U.S. dollars International value of the U.S. dollar Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 3. Other things being equal, an increase in the U.S. rate of inflation is likely to cause an increase in the: Quantity of exports Quantity of imports Demand for U.S. dollars International value of the U.S. dollar Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 4. One reason for the persistent trade deficits in the United States during the late 1990s and early 2000s was: Action taken to raise tariffs in the United States A declining U.S. saving rate Slower economic growth in the United States Increased direct foreign investment in the United States Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 4. One reason for the persistent trade deficits in the United States during the late 1990s and early 2000s was: Action taken to raise tariffs in the United States A declining U.S. saving rate Slower economic growth in the United States Increased direct foreign investment in the United States Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 5. The current account in a nation's balance of payments includes: its goods exports and imports, and its services exports and imports. foreign purchases of domestic assets. purchases of foreign assets. all of these Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 5. The current account in a nation's balance of payments includes: its goods exports and imports, and its services exports and imports. foreign purchases of domestic assets. purchases of foreign assets. all of these Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 6. In the balance of payments of the United States, U.S. goods imports are recorded as a: positive entry. capital account entry. current account entry. official reserves entry Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 6. In the balance of payments of the United States, U.S. goods imports are recorded as a: positive entry. capital account entry. current account entry. official reserves entry Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 7. If the rate of exchange for a pound is $4, the rate of exchange for the dollar is: 1/4 pound. 4 pounds. $.25. $1.00. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 7. If the rate of exchange for a pound is $4, the rate of exchange for the dollar is: 1/4 pound. 4 pounds. $.25. $1.00. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 8. If the dollar depreciates relative to the Russian ruble, the ruble: will be less expensive to Americans. may either appreciate or depreciate relative to the dollar. will appreciate relative to the dollar. will depreciate relative to the dollar. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 8. If the dollar depreciates relative to the Russian ruble, the ruble: will be less expensive to Americans. may either appreciate or depreciate relative to the dollar. will appreciate relative to the dollar. will depreciate relative to the dollar. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 9. Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may: initiate protectionist trade policies. run short of international monetary reserves. be forced to invoke contractionary monetary and fiscal policies. do all of these. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 9. Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may: initiate protectionist trade policies. run short of international monetary reserves. be forced to invoke contractionary monetary and fiscal policies. do all of these. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 10. Present consumption supported by large trade deficits may come at the expense of: permanent debt to foreign interests. permanent foreign ownership of formerly U.S. owned assets. large sacrifices of future consumption. all of these. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

Taylor Economics – Chapter 21 10. Present consumption supported by large trade deficits may come at the expense of: permanent debt to foreign interests. permanent foreign ownership of formerly U.S. owned assets. large sacrifices of future consumption. all of these. Source: Ch 15, Micro Test Bank, #15 Copyright © Houghton Mifflin Company. All rights reserved.