AP Macro Unit 6

Which of the following is recorded in a country’s balance of payments accounts?

• The monthly payments by the country’s residents on domestic loans

• Financial capital flows between the country and the rest of the world

• The value added by each industry in the country at each stage of production

• The aggregate spending of the country’s residents on consumer goods

• Changes in the required reserve ratio determined by the country’s central bank

Which of the following transactions is recorded as a credit entry in the country’s current account?

• Imports of capital goods

• Exports of consumer goods

• Purchases of foreign government bonds

• Sales of domestic financial assets to foreign investors

• Income transfers from the country’s residents to recipients abroad

The table shows some of Country X’s balance of payments data for 2018. Which of the following is true about Country X’s current account balance and financial capital flows?

• Country X has a current account deficit of $65 million and has net financial capital inflows.

• Country X has a current account surplus of $65 million and has net financial capital outflows.

• Country X has a current account deficit of $60 million and has net financial capital inflows.

• Country X has a current account surplus of $60 million and has net financial capital outflows.

• Country X has a current account surplus of $5 million and has net financial capital inflows.

Suppose that the exchange rate between the United States dollar (S) and the Thai currency, baht (B), is B1 = $0.05. Leticia wants to buy a B600 souvenir from Thailand. What is the souvenir’s price in dollars?

• $0.05

• $1

• $30

• $600

• $12,000

The table shows the exchange rate for the British pound (£) against the dollar ($) and the euro (€) in 2015 and 2018. Which of the following is true?

• The dollar has depreciated against the British pound.

• The British pound has depreciated against the dollar.

• The British pound has appreciated against the dollar.

• The British pound has depreciated against the euro.

• The euro has appreciated against the British pound.

The exchange rate for one Qatari riyal was 0.5 Turkish lira in 2012, and it increased to 1.25 Turkish lira in 2018. Which of the following is true about the value of the Turkish lira in 2018?

• 1 Turkish lira = 2 Qatari riyal, and the Turkish lira appreciated.

• 1 Turkish lira = 1.75 Qatari riyal, and the Turkish lira appreciated.

• 1 Turkish lira = 1.25 Qatari riyal, and the Turkish lira depreciated.

• 1 Turkish lira = 0.8 Qatari riyal, and the Turkish lira depreciated.

• 1 Turkish lira = 0.75 Qatari riyal, and the Turkish lira depreciated.

If the current exchange rate for one Swiss franc is 0.84 euro and the equilibrium exchange rate for one Swiss franc is 0.88 euro, which of the following will occur in the flexible exchange market for the Swiss franc?

• There will be a shortage of euros.

• There will be a surplus of Swiss francs.

• The euro will appreciate.

• The Swiss franc will depreciate.

• The Swiss franc will appreciate.

The graph shows the foreign exchange market for the British pound (GBP). If the exchange rate is $1.70, which of the following is true?

• The British pound is in equilibrium.

• The surplus of British pounds will cause the British pound to depreciate.

• The shortage of British pounds will cause the British pound to depreciate.

• The surplus of British pounds will cause the British pound to appreciate.

• The shortage of British pounds will cause the British pound to appreciate.

Assuming the government of a country imposes a tariff on its imports of foreign goods, what is the likely effect on the country’s currency in foreign exchange markets?

• The supply of the currency will increase and the currency will depreciate.

• The supply of the currency will increase and the currency will appreciate.

• The supply of the currency will decrease and the currency will appreciate.

• The demand for the currency will decrease and the currency will appreciate.

• The demand for the currency will increase and the currency will depreciate.

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

• a contractionary monetary policy will increase interest rates, which will cause the currency to appreciate

• an expansionary monetary policy will decrease interest rates, which will cause the currency to appreciate

• an expansionary monetary policy will decrease interest rates, which will cause the currency to depreciate

• an expansionary monetary policy will increase interest rates, which will cause the currency to depreciate

• a contractionary monetary policy will increase interest rates, which will cause the currency to depreciate.