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

2. 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
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3. 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.

4. 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.

5. 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.

6. 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
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7. 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.

8. 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
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9. 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.

10. 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
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11. 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.

12. 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
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13. 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
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14. 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
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15. 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
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16. 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
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17. 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.

18. 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.

19. 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.

20. 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
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21. 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.