c. The capital account records payments for financial capital, such as stocks and bonds. The goods account is the value of a nation’s goods imports subtracted from its goods exports. There is no official reserve account.
13. Which of the following international accounts records the purchase and sale of financial assets and real estate between the United States and other nations?
c. The balance of trade is the value of a nation’s goods imports subtracted from its goods exports. The current account includes trade in currently produced goods and services. Balance of payments is a bookkeeping record of all international transactions in a given period of time.
14. If a Japanese radio priced at 2,000 yen can be purchased for $10, the exchange rate is
a. 200 yen per dollar.
b. 20 yen per dollar.
c. 20 dollars per yen.
d. none of the above.
a. X yen / dollar = 2,000 yen / 10 dollars = 200 yen / dollar.
15. The United States
a. was on a fixed exchange rate system prior to late 1971, but now is on a flexible exchange rate system.
b. has been on a fixed exchange rate system since 1945.
c. has been on a flexible exchange rate system since 1945.
d. was on a flexible exchange rate system prior to late 1983, but now is on a fixed exchange rate system.
a. For most years between World War II and 1971, the U.S. exchange rate was based primarily on gold.
16. Suppose the exchange rate changes so that fewer Japanese yen are required to buy a dollar. We would conclude that
a. the Japanese yen has depreciated in value.
b. U.S. citizens will buy fewer Japanese imports.
c. Japanese will demand fewer U.S. exports.
d. none of the above will occur.
b. When the dollar is weak or depreciates, U.S. goods cost foreign consumers less and they buy more U.S. exports.
17. Which of the following would cause a decrease in the demand for euros by those holding U.S. dollars?
a. Inflation in France, but not in the United States