Exam (elaborations)
ECON 340 Final Exam Detailed Questions And Expert Answers
- Course
- ECON 340
- Institution
- University Of Michigan
ECON 340 Final Exam Detailed Questions And Expert Answers
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ECON 340 Final Exam Detailed Questions AndExpert Answers
Current Account Deficit= - ANS (Government Expenditures - Taxes) + Private-Sector
Net Borrowing
which of the following statements about the current account deficit are correct? -
ANS 1) The US has been able to be a large debtor nation without bearing negative
debt service cost.
2) Using a current account deficit to finance domestic consumption may result in a
burden for the nation's economy.
3) Economic downturns may reduce the current account deficits.
What could explain why a current account deficit may stimulate an economy? -
ANS Foreign purchases of American assets can stimulate the US economy.
The net borrowing of a nation can increase if: - ANS a government expenditure
increases
What is considered direct investment in the capital and financial account? - ANS A
Japanese company holding 25 percent of a share of a Greek firm.
A trade deficit can lead to? - ANS capital account inflows
, What represents a debit transaction in the US balance-of-payments account? -
ANS Exports of Merchandise
Suppose the exchange value for the euro is $1.5 while the exchange value of the
Kuwaiti dinar is $3.39. The cross exchange rate between euro and the dinar is? -
ANS 0.44 dinars per euro
A financial institution is willing to write a foreign currency option because? - ANS It
has the potential to generate substantial premium income.
What can be included in the income balance as a part of the US balance of
payments? - ANS Dividends received from an investment in France.
The weakening of the dollar to the pound can lead to? - ANS Higher costs of
imports from the United Kingdom
Suppose that in 2002, the base year, the nominal exchange rate between the euro
and the dollar was $1.2 per euro. By 2004, the nominal exchange rate fell to $1.1
per euro. The U.S.' price level increased to 102 and European prices increased to
108. The real exchange rate is? - ANS 1.045 dollars per euro
A Chinese resident can profit from relatively higher interest rates on U.S. Treasury
bills if? - ANS He buys dollars by selling yuan in the spot market and the spot price
of dollar rises.
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