Chapter 33 - International Finance

1		When an American store buys camcorders from a Japanese firm, this purchase is paid for in
			A)	gold.
			B)	dollars.
			C)	yen.
			D)	Euros.
2		In 2000 our balance of current account was about
			A)	-$100 billion.
			B)	-$200 billion.
			C)	-$300 billion.
			D)	-$400 billion.
			E)	-$500 billion.
3		The main reason why we are running huge current account deficits is because we are
			A)	running huge capital account surpluses.
			B)	running huge merchandise trade deficits.
			C)	running huge service trade deficits.
			D)	running huge federal budget surpluses.
4		The world's currencies were based on gold until
			A)	1900.
			B)	the 1930s.
			C)	the 1950s.
			D)	the 1980s.
5		Statement I. An exchange rate is the price of a country's currency in terms of another currency. Statement II. Under the gold standard, a negative balance of trade causes an outflow of gold.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
6		The world has had a freely floating exchange rate system since
			A)	1900.
			B)	1933.
			C)	1945.
			D)	1973.
			E)	1994.
7		Over the last few years the dollar has been traded for
			A)	less than 50 yen.
			B)	less than 75 yen.
			C)	over 100 yen.
			D)	over 125 yen.
			E)	over 150 yen.
8		When a nation's currency declines relative to other currencies, the main effect is that it makes that nation's imports _____ expensive and its exports _______ expensive.
			A)	more, more
			B)	less, less
			C)	more, less
			D)	less, more
9		Which is the most accurate statement?
			A)	Now that the federal budget deficit has been turned into a surplus, it is safe to say that our financial house is in order.
			B)	As a nation, we have been living well beyond our means for over 20 years.
			C)	As long as foreigners keep accepting our dollars, there will be no consequences if we let our trade and current account imbalances keep growing rapidly.
			D)	Over the next few years we'll probably see the dollar rise very sharply against the other leading currencies.
10		Statement I. We are the world's largest debtor nation. Statement II. We are the world's only economic superpower.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
11		We are running a trade _____ and a current account _____.
			A)	deficit, deficit
			B)	surplus, surplus
			C)	deficit, surplus
			D)	surplus, deficit
12		Our net foreign debt is now over
			A)	$100 billion.
			B)	$500 billion.
			C)	$1 trillion.
			D)	$2 trillion.
13		Which is the most accurate statement?
			A)	Foreigners will soon own America.
			B)	Within five years over one quarter of all Americans will work for foreign-owned companies.
			C)	Foreign banks provide about 30 percent of all business loans in the U.S.
			D)	Japan owns more American assets than any other country.
14		Which one of the following is not a reason for the Japanese to build automobile plants in the United States?
			A)	to save the shipping costs from Japan
			B)	to invest their dollars in a politically stable country
			C)	to place themselves within any tariff wall that may be erected in the future
			D)	to work their way into a position where they can control most of the American economy