Macro_Unit_10 Fx_and_BOP

Let’s say that a U.S. auto exporter sells cars to an Asian company. This transaction is recorded as part of the:

• Current Account
• Services Account
• Capital Account
• Credit Account

Let’s say that a European business person buys stocks on the New York Stock Exchange. This transaction is recorded as part of the:

• Current Account
• Financial and Capital Account
• Merchandise Trade Account
• Services Account

Let’s say that a U.S. resident receives dividends and interest from stocks and bonds, which are held through a brokerage account in South America. This transaction is recorded as part of the:

• Current Account
• Financial and Capital Account
• Merchandise Trade Account
• Services Account

The trade deficit refers to or reflects:

• The difference in inflows and outflows of all international transactions that are part of the current account
• A negative balance of payments
• The difference in inflows and outflows of all international merchandise transactions
• All of the above

A trade deficit:

• Is harmful to an economy
• Is beneficial to an economy
• Is always a sign of a country's economic weakness
• Can be a sign of a country’s economic strength

In a flexible exchange rate system, if the value of a currency declines, we say that it:

• Devaluates
• Revaluates
• Depreciates
• Appreciates

If the value of a currency decreases, then the country’s exports:

• Become cheaper
• Become more expensive
• Stays the same
• Is indeterminate

If a country experiences a significant increase in inflation, then, ceteris paribus (if nothing else changes):

• Its currency exchange value will increase
• Its currency exchange value will decrease
• Its currency exchange value will stay the same
• There is no relation between inflation and a country’s currency

What is not an exchange rate determinate?

• Economic and Political Stability
• Inflation Rate
• Speculators Epectations
• Defecit Spending