AP Macroeconomics - Unit 6 - Review

Which of the following is included in a country's financial (capital) account?

• net exports

• net income from abroad

• financial inflows

• unilateral transfers

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

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

• decrease

• increase

• remain unchanged

• impossible to determine

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

The ________ ____ is the price at which one international currency can be exchanged for another.

Which of the following best describes the change that occurred in this foreign exchange market? (D is the first demand curve and D' is the second demand curve)

• The USD depreciated and the GBP appreciated

• The USD appreciated and the GBP depreciated

• Both the USD and the GBP appreciated

• Both the USD and the GBP depreciated

Assume Country X’s economy is experiencing high level of unemployment. Which of the following policies will decrease unemployment, and what is the consequent effect on the value of Country X’s currency in foreign exchange markets?

• 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

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

• buying government bonds, which will cause Country X's currency to appreciate

Assuming that the 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

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?

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

• The US will experience financial capital inflows and the dollar will depreciate

• The US will experience financial capital outflows and the dollar will appreciate

• The US will experience financial capital outflows and the dollar will depreciate