AP Macro International Review

From an economic perspective, returns on foreign investment are included in the overall measure of trade because financial investments:

• A. are a form of trade that takes place in the financial capital market.
• B. can also be thought of as payments made by the government.
• C. are made by parties in the U.S. economy and foreign investors. 
• D. have expanded substantially in the U.S. over the last few decades.

Which of the following would most likely be included in the negative side of the current account balance?

• A. money earned by Canadian firms in the U.S.
• B. money spent by Canadian tourists in the U.S.
• C. returns paid to U.S. investors in Southeast Asia
• D. European aid sent to the U.S. to fund the Iraq war

Only one of the following statements about trade surplus and capital flow is correct. Which one is it?

• A. a trade surplus means that there is a net inflow of capital
• B. a trade surplus means that there is a net outflow of capital
• C. a trade surplus exists if there is a net inflow of capital excluding foreign borrowing and lending
• D. a trade surplus exists if there is a net outflow of capital excluding foreign borrowing and lending

Which of the following represents a financial inflow to the U.S. economy?

• A. returns paid on U.S. financial investments in Switzerland
• B. computer chip imports from Israel
• C. oil imports from Canada
• D. foreign aid from the U.S. to Ethiopia

A recession tends to make a _____________________.

• A. trade surplus smaller
• B. trade deficit smaller
• C. trade deficit larger
• D. both a and b above

Under what circumstances would it most likely be considered beneficial for a government to be a large borrower of foreign investment capital? 

• A. never as there is no economic merit in a policy of running trade deficits
• B. if the inflow of capital is absorbed by greater government borrowing
• C. when borrowing larger amounts is based on unconventional macroeconomic wisdom
• D. when those funds are invested in a way that sustains economic growth over time

When Mataeo buys Euros through _________________________, he will use his U.S. dollars to pay for them.

• A. the foreign exchange market
• B. the currency exchange market
• C. a floating exchange market
• D. foreign currency market

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

• A. strengthening; more
• B. weakening; less
• C. a problem for exporters; less
• D. beneficial to importers; more

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;

• A. the U.S. dollar appreciated against the Canadian dollar.
• B. the Canadian dollar weakened against the Canadian dollar.
• C. the U.S. dollar strengthened against the Canadian dollar.
• D. the Canadian dollar appreciated against the U.S. dollar.

In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?

• A. 2010: .12 U.S. dollars; 2012: .15 U.S. dollars
• B. 2010: 1.2 U.S. dollars; 2012: 1.5 U.S. dollars
• C. 2010: .82 U.S. dollars; 2012: .66 U.S. dollars
• D. 2010: .15 U.S. dollars; 2012: .11 U.S. dollars