Additional Sample Questions. Set I (red) Set II (blue), and Set III (black). 1. Which of the following would likely have the least direct influence on a country’s current account? a. Inflation. b. National income. c. Exchange rates. d. Tariffs. e. Tax on income earned on foreign stocks . 2. ______________ is (are) income received by investors on investments in foreign financial assets (securities). a. Portfolio income b. Foreign direct investment income c. Unilateral transfers d. Factor income e. All of the above 3. Also known as the “Central Banks’ Central Bank,” the ___________ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis. a. World Bank b. International Financial Corporation (IFC) c. World Trade Organization d. International Development Association (IDA) e. Bank for International Settlements (BIS ) 4. ___________ is not a factor that causes currency supply and demand schedules to change. a. Relative inflation rates b. Change in exchange rates . c. Relative interest rates d. Relative income levels e. Expectations 5. A large increase in the income level in Mexico along with no growth in the U.S. income level, ceteris paribus, is expected to cause a/an _________ in Mexican demand for U.S. goods, and the Mexican peso should ____________ a. Increase; appreciate b. Increase; depreciate c. Decrease; depreciate d. Decrease; appreciate 1
6. An increase in U.S. interest (real) rates relative to German interest rates would likely ___________ the U.S. demand for euros and ____________ the supply of euros for sale. a. Reduce; increase b. Increase; reduce c. Reduce; reduce d. Increase; increase 7. If U.S. inflation suddenly increased while European inflation stayed the same, there would be: a. An increased U.S. demand for euros and an increased supply of euros for sale. b. A decreased U.S. demand for euros and an increased supply of euros for sale. c. A decreased U.S. demand for euros and a decreased supply of euros for sale. d. An increased U.S. demand for euros and a decreased supply of euros for sale . 8. Assume that British corporations begin to purchase more supplies from the U.S. as a result of several labor strikes by British suppliers. This action reflects: a. An increased demand for British pounds. b. A decrease in the demand for British pounds c. An increase in the supply of British pounds for sale . d. A decrease in the supply of British pounds for sale. 9. Assume that the U.S. places a strict quota on goods imported from China and that China does not retaliate. Holding other factors constant, this event should immediately cause the U.S. demand for Chinese Yuan to _____and the value of the Yuan to_____ a. Increase; appreciate b. Increase; depreciate c. Decrease; depreciate d. Decrease; appreciate 10. Any event that increases the U.S. demand for euros should result in a (an) _________ in the value of the euro with respect to ___________, other things being equal. a.
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