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1

A nation's balance on the current account is equal to its exports less its imports of
A)goods and services
B)goods and services, plus Canadian purchases of assets abroad
C)goods and services, plus net investment income and net transfers
D)goods and services, minus foreign purchases of assets in Canada
2

The net investment income of Canada in its international balance of payment is the
A)interest income it receives from foreign residents
B)dividends it receives from foreign residents
C)excess of interest and dividends it receives from foreign residents over what it paid to them
D)excess of public and private transfer payments it receives from foreign residents over what it paid to them
3

A nation may be able to correct or eliminate a persistent (long-term) balance of payments deficit by
A)lowering the barriers on imported goods
B)reducing the international value of its currency
C)expanding its national income
D)reducing its official reserves
4

If a nation had a balance of payments surplus and exchange rates floated freely, the foreign exchange rate (the foreign currency price of its currency) for its currency would
A)rise, its exports would increase, and its imports would decrease
B)rise, its exports would decrease, and its imports would increase
C)fall, its exports would increase, and its imports would decrease
D)fall, its exports would decrease, and its imports would increase
5

Which of the following would be one of the results associated with the use of freely floating foreign exchange rates to correct a nation's balance of payments surplus?
A)The nation's terms of trade with other nations would be worsened.
B)Importers in the nation who had made contracts for the future delivery of goods would find that they had to pay a higher price than expected for the goods.
C)If the nation were at full employment, the decrease in exports and the increase in imports would be inflationary.
D)Exporters in the nation would find their sales abroad had decreased.
6

When exchange rates are fixed and a nation at full employment has a balance of payments surplus, the result in that nation will be
A)a declining price level
B)falling currency income
C)inflation
D)rising real income
7

The use of exchange controls to eliminate a nation's balance of payments deficit results in decreasing the nation's
A)imports
B)exports
C)Price level
D)income
8

If a nation has a current account deficit of 6 and a capital account surplus of 2
A)the nation gains 8 in international reserves
B)the nation loses 8 in international reserves
C)the nation gains 4 in international reserves
D)the nation loses 4 in international reserves
9

If the nations of the world were on the gold standard and one nation has a balance of payments surplus,
A)foreign exchange rates in that nation would rise
B)gold would tend to be imported into that country
C)the level of prices in that country would fall
D)employment and output in that country would fall
10

Which was the principal disadvantage of the gold standard?
A)unstable foreign exchange rates
B)persistent payments imbalances
C)the uncertainties and decreased trade that resulted from the depreciation of gold
D)the domestic macroeconomic adjustments experienced by a nation with a payments deficit or surplus
11

The major dilemma created by the persistent U.S. payments deficits under the Bretton Woods system was that to maintain the status of the U.S. dollar as an acceptable international monetary reserve, the deficits had to
A)decrease, but to expand reserves to accommodate world trade, the deficits had to continue
B)continue, but to expand reserves to accommodate world trade, the deficits had to be eliminated
C)increase, but to expand reserves to accommodate world trade, the deficits had to be reduced
D)decrease, but to expand reserves to accommodate world trade, the deficits had to be eliminated
12

A system of managed floating exchange rates
A)allows nations to stabilize exchange rates in the short term
B)requires nations to stabilize exchange rates in the long term
C)entails stable exchange rates in both the short and long term
D)fixes exchange rates at market levels







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