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1 | |
If an American purchases a Canadian-made piece of computer software, this would appear in Canada's balance of payments accounts as: |
| | A) | a positive entry in the current account. |
| | B) | a negative entry in the current account. |
| | C) | a positive entry in the capital account. |
| | D) | a negative entry in the capital account. |
| | E) | a negative entry in the statistical discrepancy. |
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2 | |
Which of the following is not a component of the current account? |
| | A) | trade in services |
| | B) | merchandise trade |
| | C) | change in official reserves |
| | D) | transfers |
| | E) | investment income |
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3 | |
When the balance of trade is positive: |
| | A) | merchandise exports exceed merchandise imports. |
| | B) | imports of goods and services exceed exports of goods and services. |
| | C) | merchandise imports exceed merchandise exports. |
| | D) | exports of goods and services exceed imports of goods and services. |
| | E) | there is necessarily a surplus on the current account. |
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4 | |
Which of the following is a component of the capital account? |
| | A) | trade in services. |
| | B) | merchandise trade |
| | C) | investment income |
| | D) | transfers |
| | E) | portfolio investment |
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5 | |
When a country is running a balance of payments surplus: |
| | A) | its changes in official reserves account is positive. |
| | B) | the sum of its current and capital account balances is positive. |
| | C) | the sum of its current and capital accounts is negative. |
| | D) | it is purchasing its own currency and selling foreign currency. |
| | E) | it necessarily has a surplus balance of trade. |
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6 | |
If the value of the Canadian dollar in US-dollar terms falls from 80 cents to 75 cents, then: |
| | A) | the value of the US dollar in Canadian-dollar terms rises from $1.20 to $1.25 |
| | B) | Canadians will buy more Amerian imports. |
| | C) | the value of the US dollar in Canadian-dollar terms rises from $1.25 to $1.33. |
| | D) | Canadian exports to the US will decrease. |
| | E) | the value of the US dollar in Canadian dollar terms falls from $1.25 to $1.20. |
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7 | |
The demand for Canadian dollars in foreign currency markets is: |
| | A) | downward- sloping, because when the Canadian dollar rises in value, foreigners buy fewer Canadian exports. |
| | B) | downward- sloping, because when the Canadian dollar rises in value, Canadians buy fewer foreign imports. |
| | C) | upward-sloping, because when the Canadian dollar rises in value, Canadians buy more foreign imports. |
| | D) | upward-sloping, because when the Canadian dollar rises in value, foreigners buy more Canadian exports. |
| | E) | vertical, because changes in the value of the Canadian dollar do not affect the quantity of Canadian dollars demanded in return for foreign currency. |
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8 | |
The supply curve for Canadian dollars in foreign exchange markets is: |
| | A) | downward- sloping, because when the Canadian dollar rises in value, foreigners buy fewer Canadian exports. |
| | B) | downward- sloping, because when the Canadian dollar rises in value, Canadians buy fewer foreign imports. |
| | C) | upward-sloping, because when the Canadian dollar rises in value, Canadians buy more foreign imports. |
| | D) | upward-sloping, because when the Canadian dollar rises in value, foreigners buy more Canadian exports. |
| | E) | vertical, because changes in the value of the Canadian dollar do not affect the quantity of Canadian dollars supplied in return for foreign currency. |
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9 | |
Suppose the Canadian price level rises less quickly than the American price level. Therefore: |
| | A) | Canadian exports decrease, imports increase, and the equilibrium value of the Canadian dollar falls. |
| | B) | Canadian exports and imports both increase, raising the equilibrium value of the Canadian dollar. |
| | C) | Canadian exports and imports both decrease, reducing the equilibrium value of the Canadian dollar. |
| | D) | Canadian exports increase, imports decrease, and the equilibrium value of the Canadian dollar rises. |
| | E) | neither Canadian exports nor Canadian imports are affected, so the equilibrium value of the Canadian dollar stays the same. |
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10 | |
Suppose Canadian interest rates fall while US interest rates stay constant. Then, in the foreign exchange market for Canadian dollars: |
| | A) | demand decreases, supply increases, and the equilibrium value of the Canadian dollar falls. |
| | B) | demand and supply both increase, with the effect on the Canadian dollar's value depending on the sizes of these two shifts. |
| | C) | demand and supply both decrease, with the effect on the Canadian dollar's value depending on the sizes of these two shifts. |
| | D) | demand increases, supply decreases, and the equilibrium value of the Canadian dollar rises. |
| | E) | neither demand nor supply is affected, and the equilibrium value of the Canadian dollar stays the same. |
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11 | |
When a country that maintains a fixed exchange rate is experiencing a balance of payments deficit: |
| | A) | the value of its currency is lower than it would be with a flexible exchange rate. |
| | B) | the value of its currency is higher than it would be with a flexible exchange rate. |
| | C) | the country is buying up foreign currency and selling its own currency. |
| | D) | the country is pursuing a strategy of export-led growth. |
| | E) | the country can maintain the value of its fixed exchange rate indefinitely. |
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12 | |
The Bretton Woods system refers to: |
| | A) | the system of volatile exchange rates during the latter half of the 1930s. |
| | B) | the system of managed flexible exchange rates that arose in the 1970s. |
| | C) | the system of adjustable fixed exchange rates in the post-war period. |
| | D) | the gold standard that prevailed from the late 19th century until the Great Depression. |
| | E) | the current system of regional integration of currencies. |
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13 | |
According to Judith Maxwell, globalization and new technologies: |
| | A) | are causing Canadian incomes to become more equally distributed. |
| | B) | are causing average incomes in Canada to fall. |
| | C) | are creating challenges that can best be dealt with by private markets rather than by government. |
| | D) | are creating challenges that must be dealt with by government. |
| | E) | none of the above. |
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14 | |
When compared with other major industrial countries: |
| | A) | Canada has a high level of net foreign assets as a percentage of its GDP. |
| | B) | Canada has high level of foreign liabilities as a percentage of its GDP. |
| | C) | Canadians are major net lenders to the rest of the world. |
| | D) | Canadians receive more investment income from the rest of the world each year than they pay out. |
| | E) | Canada's foreign assets and liabilities are almost perfectly matched. |
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2002 McGraw-Hill Higher Education