Unit 6 Review

Front

How will a decrease in private savings in the United States most likely affect financial capital flows and the value of the dollar in foreign exchange markets?

Back

The US will experience financial capital inflows and the dollar will appreciate.

Front

Assuming that Canada and Mexico are trading partners, which of the following will most likely cause aggregate demand to increase in Mexico?
- An increase in Mexican interest rates
- An appreciation of the Canadian dollar relative to the Mexican peso
- A quota placed on the importation of Mexican goods to Canada
- An increase in demand for Mexican financial assets by Canadian investors

Back

An appreciation of the Canadian dollar relative to the Mexican peso

Front

Assume Country X’s economy is experiencing high level of unemployment. Which policy will decrease unemployment, and what is the consequent effect on the value of Country X’s currency in foreign exchange markets? Options: lowering administered interest rates, which will cause Country X's currency to depreciate; selling government bonds, which will cause Country X's currency to depreciate; lowering the cash reserve ratio, which will cause County X's currency to appreciate; buying government bonds, which will cause Country X's currency to appreciate.

Back

lowering administered interest rates, which will cause Country X's currency to depreciate

Front

Which of the following is true about Country X’s current account balance and financial capital flows?
Country X has a current account surplus of $125 million and has net financial capital outflows,
Country X has a current account deficit of $125 million and has net financial capital inflows,
Country X has a current account surplus of $75 million and has net financial capital inflows,
Country X has a current account deficit of $75 million and has net financial capital outflows

Back

Country X has a current account surplus of $125 million and has net financial capital outflows.

Front

If a country's level of imports increase, then its level of capital inflows will __________, all else equal.

Back

increase

Front

Which of the following is an example of a financial outflow for the United States? a US business sells wheat to a foreign country, a US business buys timber from a foreign country, a US bank purchases bonds from a foreign government, a foreign bank purchases US government bonds

Back

a US bank purchases bonds from a foreign government

Front

Which of the following is included in a country's financial (capital) account? Options: net exports, net income from abroad, financial inflows, unilateral transfers

Back

financial inflows

Front

When a country's currency appreciates, its exports ____

Back

become more expensive

Front

Difference between sale of assets to foreigners and purchases of assets from foreigners is called_____

Back

financial account

Front

A country's ____ accounts are a summary of their transactions with other countries

Back

Balance of payment