A) Monetary
B) Fiscal
C) Financial
D) Systemic
Answer: B
Ques Status: Previous Edition
21) When tax revenues are greater than government expenditures, the government has a budget
________.
A) crisis
B) deficit
C) surplus
D) revision
Answer: C
Ques Status: Previous Edition
22) A budget ________ occurs when government expenditures exceed tax revenues for a particular
time period.
A) deficit
B) surplus
C) surge
D) surfeit
Answer: A
Ques Status: New
23) Budgets deficits can be a concern because they might
A) ultimately lead to higher inflation.
B) lead to lower interest rates.
C) lead to a slower rate of money growth.
D) lead to higher bond prices.
Answer: A
Ques Status: Previous Edition
24) Budget deficits are important because deficits
A) cause bank failures.
B) always cause interest rates to fall.
C) can result in higher rates of monetary growth.
D) always cause prices to fall.
Answer: C
Ques Status: Previous Edition
25) What happens to economic growth and unemployment during a business cycle recession?
What is the relationship between the money growth rate and a business cycle recession?
Answer: During a recession, output declines and unemployment increases. Prior to every
recession in the U.S. the money growth rate has declined, however, not every decline is
followed by a recession.
Ques Status: Previous Edition
1.4 Why Study International Finance?
1) American companies can borrow funds
A) only in U.S. financial markets.
B) only in foreign financial markets.
C) in both U.S. and foreign financial markets.
D) only from the U.S. government.
Answer: C
Ques Status: New
2) The price of one countryʹs currency in terms of another countryʹs currency is called the
A) exchange rate.
B) interest rate.
C) Dow Jones industrial average.
D) prime rate.
Answer: A
Ques Status: Previous Edition
3) The market where one currency is converted into another currency is called the ________
market.
A) stock
B) bond
C) derivatives
D) foreign exchange
Answer: D
Ques Status: Previous Edition
4) Everything else constant, a stronger dollar will mean that
A) vacationing in England becomes more expensive.
B) vacationing in England becomes less expensive.
C) French cheese becomes more expensive.
D) Japanese cars become more expensive.
Answer: B
Ques Status: Previous Edition
5) Which of the following is most likely to result from a stronger dollar?
A) U.S. goods exported aboard will cost less in foreign countries, and so foreigners will buy
more of them.
B) U.S. goods exported aboard will cost more in foreign countries and so foreigners will buy
more of them.
C) U.S. goods exported abroad will cost more in foreign countries, and so foreigners will buy
fewer of them.
D) Americans will purchase fewer foreign goods.
Answer: C
Ques Status: Previous Edition
6) Everything else held constant, a weaker dollar will likely hurt
A) textile exporters in South Carolina.
B) wheat farmers in Montana that sell domestically.
C) automobile manufacturers in Michigan that use domestically produced inputs.
D) furniture importers in California.
Answer: D
Ques Status: Previous Edition
7) Everything else held constant, a stronger dollar benefits ________ and hurts ________.
A) American businesses; American consumers
B) American businesses; foreign businesses
C) American consumers; American businesses
D) foreign businesses; American consumers
Answer: C
Ques Status: Previous Edition
8) From 1980 to early 1985 the dollar ________ in value, thereby benefiting American ________.
A) appreciated; consumers
B) appreciated, businesses
C) depreciated; consumers
D) depreciated, businesses
Answer: A
Ques Status: Previous Edition
9) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else
constant, one would expect that, when compared to 1980,
A) fewer Britons traveled to the United States in 1985.
B) Britons imported more wine from California in 1985.
C) Americans exported more wheat to England in 1985.
D) more Britons traveled to the United States in 1985.
Answer: A
Ques Status: Previous Edition
10) When in 1985 a British pound cost approximately $1.30, a Shetland sweater that cost 100 British
pounds would have cost $130. With a weaker dollar, the same Shetland sweater would have
cost
A) less than $130.
B) more than $130.
C) $130, since the exchange rate does not affect the prices that American consumers pay for
foreign goods.
D) $130, since the demand for Shetland sweaters will decrease to prevent an increase in price
due to the stronger dollar.
Answer: B
Ques Status: Previous Edition
11) Everything else held constant, a decrease in the value of the dollar relative to all foreign
currencies means that the price of foreign goods purchased by Americans
A) increases
B) decreases.
C) remains unchanged.
D) either increases, decreases, or remains unchanged.
Answer: A
Ques Status: Previous Edition
12) American farmers who sell beef to Europe benefit most from
A) a decrease in the dollar price of euros.
B) an increase in the dollar price of euros.
C) a constant dollar price for euros.
D) a European ban on imports of American beef.
Answer: B
Ques Status: Previous Edition
13) If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else
held constant,
A) a European vacation becomes less expensive.
B) a European vacation becomes more expensive.
C) the cost of a European vacation is not affected.
D) foreign travel becomes impossible.
Answer: B
Ques Status: Previous Edition
14) Everything else held constant, Americans who love French wine benefit most from
A) a decrease in the dollar price of euros.
B) an increase in the dollar price of euros.
C) a constant dollar price for euros.
D) a ban on imports from Europe.
Answer: A
Ques Status: Previous Edition
15) From 1980-1985, the dollar strengthened in value against other currencies. Who was helped
and who was hurt by this strong dollar?
Answer: American consumers benefitted because imports were cheaper and consumers could
purchase more. American businesses and workers in those businesses were hurt as
domestic and foreign sales of American products fell.
Ques Status: New
1.5 Appendix: Defining Aggregate Output, Income, the Price Level, and the Inflation
Rate
1) The most comprehensive measure of aggregate output is
A) gross domestic product.
B) net national product.
C) the stock value of the industrial 500.
D) national income.
Answer: A
Ques Status: Previous Edition
2) The gross domestic product is the
A) the value of all wealth in an economy.
B) the value of all goods and services sold to other nations in a year.
C) the market value of all final goods and services produced in an economy in a year.
D) the market value of all intermediate goods and services produced in an economy in a year.
Answer: C
Ques Status: Previous Edition
3) Which of the following items are not counted in U.S. GDP?
A) your purchase of a new Ford Mustang
B) your purchase of new tires for your old car
C) GMʹs purchase of tires for new cars
D) a foreign consumerʹs purchase of a new Ford Mustang
Answer: C
Ques Status: New
4) If an economy has aggregate output of $20 trillion, then aggregate income is
A) $10 trillion.
B) $20 trillion.
C) $30 trillion.
D) $40 trillion.
Answer: B
Ques Status: Previous Edition
5) When the total value of final goods and services is calculated using current prices, the resulting
measure is referred to as
A) real GDP.
B) the GDP deflator.
C) nominal GDP.
D) the index of leading indicators.
Answer: C
Ques Status: Previous Edition
6) Nominal GDP is output measured in ________ prices while real GDP is output measured in
________ prices.
A) current; current
B) current; fixed
C) fixed; fixed
D) fixed; current
Answer: B
Ques Status: New
7) GDP measured with constant prices is referred to as
A) real GDP.
B) nominal GDP.
C) the GDP deflator.
D) industrial production.
Answer: A
Ques Status: Previous Edition
8) If your nominal income in 2002 was $50,000, and prices doubled between 2002 and 2008, to have
the same real income, your nominal income in 2008 must be
A) $50,000.
B) $75,000.
C) $90,000.
D) $100,000.
Answer: D
Ques Status: Revised
9) If your nominal income in 1998 is $50,000, and prices increase by 50% between 1998 and 2008, then to have the same real income, your nominal income in 2008 must be
A) $50,000.
B) $75,000.
C) $100,000.
D) $150,000.
Answer: B
Ques Status: Revised
10) To convert a nominal GDP to a real GDP, you would use
A) the PCE deflator.
B) the CPI measure.
C) the GDP deflator.
D) the PPI measure.
Answer: C
Ques Status: New
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