Question

The record of international trade in goods and services and international transfer payments is called

Select one:
a. the exchange rate account
b. the foreign account
c. the balance of payments
d. the current account
e. the capital account

Under a flexible exchange rate system, expansionary fiscal policy

Select one:
a. has no effect on the trade balance
b. is very effective because crowding out cannot occur
c. cannot change the level of consumption
d. always has to be supplemented by restrictive monetary policy
e. will cause a deterioration of the trade balance

A depreciation of a currency occurs when:

Select one:
a. Inflation falls
b. The value of the currency increases
c. The overall balance of payments improves
d. The value of the currency falls
e. The balance of payments improves

Which of the following items are deficit items in the balance of payments for the United States?

Select one:
a. a French and a German citizen make a deposit in a U.S. bank
b. a French citizen buys a U.S. Securities
c. a U.S. citizen buys a vacation home in Mexico
d. a German citizen makes a deposit in a U.S. bank
e. a German citizen buys a U.S. Treasury bill

In a model with flexible exchange rates and capital mobility, expansionary fiscal policy is likely to cause

Select one:
a. a reduction in net exports
b. a decrease in imports
c. an increase in the current account surplus
d. an outflow of funds
e. a currency depreciation

Answer 1

1[d]. the current account-Record of all international transactions for goods and services, income payments and receipts, and unilateral transfers.

2.[d.] always has to be supplemented by restrictive monetary policy- expansionary fiscal policy can result in rising interest rates, growing trade deficits, and accelerating inflation, particularly if applied during healthy economic expansions as result expansionary policies always has to be supplemented by restrictive monetary policy

3.[d]. The value of the currency falls-A fall in the exchange rate is known as a depreciation in the exchange rate It means the currency is worth less compared to other countries

4.[c] U.S. citizen buys a vacation home in Mexico-Causes an outflow of currency which cause a BoP deficit

5.[e] currency depreciation-The U.S. expansionary monetary policy causes an increase in GNP, a depreciation of the U.S. dollar