MULTIPLE CHOICE PRACTICE FOR UNIT 7
1. If a country sold more goods and services to the rest of the world than they purchased from the other countries, then the country has a:
A. trade deficit.
B. budget deficit.
C. budget balance.
D. budget surplus.
E. trade surplus.
2. When the dollar value of the euro is high:
A. travel in the U.S. is less expensive for Europeans.
B. travel in the U.S. is more expensive for Europeans.
C. the dollar has appreciated.
D. travel in Europe is less expensive for Americans.
E. the euro has depreciated.
3. Suppose that the value of the euro fell from $1.47 on January 1, 2009 to $1.40 on January 12, 2009. This implies that:
A. The euro depreciated and the dollar appreciated during this period of time.
B. The dollar depreciated and the euro appreciated during this period of time.
C. The euro depreciated and there is insufficient information about the dollar's value during this period of time.
D. The euro appreciated and there is insufficient information about the dollar's value during this period of time.
E. Both the euro and dollar appreciated during this period of time.
4. If the British pound appreciates against the dollar, this will make:
A. British imports and exports more expensive.
B. American imports and exports more expensive
C. British imports and exports less expensive.
D. British exports more expensive but lower the price of American exports to Britain.
E. British exports less expensive but increase the price of American exports to Britain.
5. If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:
A. the Japanese yen is depreciating, and the U.S. dollar is appreciating.
B. U.S. goods become cheaper for Japanese consumers to purchase.
C. Japanese goods become cheaper for U.S. consumers to purchase.
D. U.S. services become more expensive for Japanese firms to purchase.
E. U.S. exports to Japan will fall.
6. Suppose that the U.S. and European Union (EU) are the only trading partners in the world. If interest rates in the U.S. are significantly lower than those in the EU, we would expect:
A. the supply of the dollar to fall, appreciating the dollar.
B. the demand for the dollar to fall, depreciating the dollar.
C. the supply of euros to increase, depreciating the euro.
D. the demand for euros to decrease, depreciating the euro.
E. no change to the market for the euro, thus the value of the euro remains the same.
7. As the balance of payments in the financial account______, the balance of payments on the current account increases and the U.S. dollar ______.
A. increases; depreciates
B. decreases; depreciates
C. increases; appreciates
D. decreases; appreciates
E. decreases; remains unaffected
MULTIPLE CHOICE PRACTICE FOR UNIT 7
1. If a country sold more goods and services to the rest of the world than they purchased from the other countries, then the country has a:
A. trade deficit.
B. budget deficit.
C. budget balance.
D. budget surplus.
E. trade surplus.
2. When the dollar value of the euro is high:
A. travel in the U.S. is less expensive for Europeans.
B. travel in the U.S. is more expensive for Europeans.
C. the dollar has appreciated.
D. travel in Europe is less expensive for Americans.
E. the euro has depreciated.
3. Suppose that the value of the euro fell from $1.47 on January 1, 2009 to $1.40 on January 12, 2009. This implies that:
A. The euro depreciated and the dollar appreciated during this period of time.
B. The dollar depreciated and the euro appreciated during this period of time.
C. The euro depreciated and there is insufficient information about the dollar's value during this period of time.
D. The euro appreciated and there is insufficient information about the dollar's value during this period of time.
E. Both the euro and dollar appreciated during this period of time.
4. If the British pound appreciates against the dollar, this will make:
A. British imports and exports more expensive.
B. American imports and exports more expensive
C. British imports and exports less expensive.
D. British exports more expensive but lower the price of American exports to Britain.
E. British exports less expensive but increase the price of American exports to Britain.
5. If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that:
A. the Japanese yen is depreciating, and the U.S. dollar is appreciating.
B. U.S. goods become cheaper for Japanese consumers to purchase.
C. Japanese goods become cheaper for U.S. consumers to purchase.
D. U.S. services become more expensive for Japanese firms to purchase.
E. U.S. exports to Japan will fall.
6. Suppose that the U.S. and European Union (EU) are the only trading partners in the world. If interest rates in the U.S. are significantly lower than those in the EU, we would expect:
A. the supply of the dollar to fall, appreciating the dollar.
B. the demand for the dollar to fall, depreciating the dollar.
C. the supply of euros to increase, depreciating the euro.
D. the demand for euros to decrease, depreciating the euro.
E. no change to the market for the euro, thus the value of the euro remains the same.
7. As the balance of payments in the financial account______, the balance of payments on the current account increases and the U.S. dollar ______.
A. increases; depreciates
B. decreases; depreciates
C. increases; appreciates
D. decreases; appreciates
E. decreases; remains unaffected