Q: Which of the following equations correctly represents net exports?

$$\text{Net exports} = \text{Exports} - \text{Imports}$$

Question 1

Which of the following best describes a trade deficit?

Accepted Answer

A situation where a country's imports are greater than its exports.

Question 2

If the exchange rate changes from $$1.17/€1 to 1.07$$/€1, what has happened to the U.S. dollar?

Accepted Answer

The U.S. dollar has appreciated against the euro.

Question 3

Given the exchange rate $$0.05 = 1 Peso, how many Pesos is 1 $$worth?

Accepted Answer

$1 = 20 Pesos

Question 4

Suppose a dress shirt costs $$40 and the exchange rate is 1 = 20 $$Pesos. What is the price of the shirt in Pesos?

Accepted Answer

800 Pesos

Question 5

Which of the following equations correctly represents net exports?

Accepted Answer

$$	ext{Net exports} = 	ext{Exports} - 	ext{Imports}$$

Question 6

If the U.S. dollar depreciates, what is the likely effect on U.S. exports and imports?

Accepted Answer

Exports increase, imports decrease

Question 7

Which of the following best describes capital inflow?

Accepted Answer

Acquisition of domestic assets by foreigners

Question 8

What is the equilibrium exchange rate in the foreign exchange market?

Accepted Answer

The rate at which the quantity of foreign currency demanded equals the quantity supplied

Question 9

If U.S. residents buy more foreign goods and assets, what happens in the foreign exchange market?

Accepted Answer

There is an increased demand for foreign currency and supply of dollars

Question 10

Which of the following is true if a country has a trade surplus?

Accepted Answer

Exports are greater than imports

Question 11

If the exchange rate changes from $$1.07/€1 to 1.12$$/€1, what has happened to the U.S. dollar?

Accepted Answer

The U.S. dollar has depreciated against the euro.

Question 12

Which of the following best describes the relationship between trade deficits and capital flows?

Accepted Answer

Trade deficits are linked to net inflow of capital

Question 13

Given the equation $$	ext{Imports} + 	ext{Capital outflow} = 	ext{Exports} + 	ext{Capital inflow}$$, what does $$	ext{Imports} - 	ext{Exports}$$ equal?

Accepted Answer

$$	ext{Capital inflow} - 	ext{Capital outflow}$$

Question 14

If the U.S. dollar weakens sharply against the Japanese yen, what is the most likely immediate effect on U.S. imports from Japan?

Accepted Answer

U.S. imports from Japan will become more expensive

Question 15

Which of the following is NOT a factor that affects exports?

Accepted Answer

Domestic income level

Question 16

If net capital inflow is positive, which of the following must be true?

Accepted Answer

Capital inflow is greater than capital outflow

Question 17

Which of the following best describes appreciation of a currency?

Accepted Answer

An increase in the value of domestic currency relative to a foreign currency

Question 18

If the exchange rate is quoted as $$\0.146$$/	ext{CN}\yen1$$, how many Chinese yuan (CN¥) is 1 $$worth?

Accepted Answer

$$1 = 6.85 CN$$¥

Question 19

Which of the following actions generates demand for foreign currency in the foreign exchange market?

Accepted Answer

U.S. residents buying products from foreigners

Question 20

Which of the following is a correct statement about currency quotation conventions?

Accepted Answer

USD/JPY refers to the number of Japanese yen per one U.S. dollar

Foreign Exchange Market and International Trade: Study Notes

Study Guide - Practice Questions