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Exam questions - Chapters 7 and 8
Other things being equal, which of the following will occur in the balance of payments if a country begins to export more than it imports?
The financial account will improve.
Nothing will change in the current account since to an outflow will always correspond an inflow of the same magnitude in the same account.
If it was at equilibrium to start with, the current account will move to a surplus.
Net capital outflows will decrease.
Which of the following statements about the financial account is true?
Imports enter as a debit in the financial account.
None of the other answers is correct.
Net factor income from abroad enters as a debit in the financial account.
Exports enter as a debit in the financial account.
If exchanges rates are determined by PPP theory, then:
The real exchange rate is determined by the ratio of relative prices between the home and foreign country.
The nominal exchange rate is determined by the ratio of relative prices between the home and foreign country.
Prices of Big Macs are the same in every country.
An increase in NCO will lead to a depreciation of the domestic currency.
Assume that the law of one price holds for all goods. Which of the following statements is true ? I. The real exchange rate is 1. II. There is no further possibility for arbitrage between currencies. III. The nominal exchange rate between the currencies of two countries is equal to the relative price level of the two countries.
Propositions I and II are correct.
Propositions I and III are correct.
Propositions II and III are correct.
All of the propositions are correct.
Université de Genève
