1. Running persistent current account deficits is similar to: A.Owing money to o

Question

1. Running persistent current account deficits is similar to:     
A.Owing money to ourselves.
B.Taking money out of one pocket and putting it in another.
C. Running up debt on a credit card that eventually must be repaid.
D. None of the aboive.

Is the answer C?

2.Consider the market for euros. If American preferences for European goods were to rise, this would lead to a:     
A. Rightward shift in the demand for euros.
B. Leftward shift in the demand for euros.
C. Rightward shift in the supply of euros.
D. Leftward shift in the supply of euros.

Is the answer A or C?

3. When the dollar gets weaker relative to other currencies, this means that:     
A. It takes more of the foreign currency to buy each U.S. dollar.
B. It takes less of the foreign currency to buy each U.S. dollar.
C. It takes the same amount of foreign currency to buy each U.S. dollar.
D. Not enough information is provided to determine the impact on foreign currencies.

Is the answer B?

4.The U.S. has been running persistent trade deficits for the past three decades. True or False?

Is it True?

5.If the U.S. government were to impose a 20% tariff on all foreign imports, this would likely lead to _____ in demand for foreign currencies, causing the U.S. dollar to _____.     
A. A decrease; depreciate.
B. An increase; depreciate.
C. A decrease; appreciate.
D. An increase; appreciate.

Is the answer C?
          

Explanation / Answer

1. C. Running up debt on a credit card that eventually must be repaid.

2. A. Rightward shift in the demand for euros.

3. B. It takes less of the foreign currency to buy each U.S. dollar.

4. True

5. C. A decrease; appreciate.

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