ECON 213 TOP EXAM CERTIFICATION
ASSESSMENT 2026 VERIFIED ANSWERS
GRADED A+
◉ Net transfers
Answer: Foreign aid, remittances, international organization
payments.
◉ Why a current account deficit requires a financial account surplus
Answer: If a country buys more than it sells, it must borrow or sell
assets to foreigners.
◉ Foreign-owned assets in the U.S.
Answer: Includes foreign ownership of plants, stocks, bonds, and
bank deposits.
◉ U.S.-owned assets abroad
Answer: U.S. ownership of foreign stocks, bonds, and facilities.
◉ Exchange rate
Answer: Price of one currency in terms of another.
,◉ Nominal exchange rate
Answer: The market price of one currency for another.
◉ Real exchange rate
Answer: Nominal exchange rate × (domestic price level ÷ foreign
price level).
◉ Meaning of real exchange rate
Answer: The market price of one currency for another.
◉ Purchasing power parity (PPP)
Answer: Exchange rate that equalizes purchasing power across
countries.
◉ Why PPP rarely holds
Answer: Non-traded goods, taxes, transportation costs, and different
standards of living.
◉ Big Mac Index
Answer: A lighthearted PPP measure comparing Big Mac prices
across countries.
◉ Appreciation
, Answer: Currency increases in value relative to another.
◉ Depreciation
Answer: Currency decreases in value relative to another.
◉ What causes appreciation
Answer: Higher demand for the currency or lower supply.
◉ What causes depreciation
Answer: Lower demand for the currency or higher supply.
◉ Interest rate effect on exchange rates
Answer: Higher interest rates attract capital inflows → appreciation.
◉ Inflation effect on exchange rates
Answer: Higher inflation makes exports expensive → currency
depreciates.
◉ Disposable income effect
Answer: Higher domestic income increases imports → worsens
current account → depreciation.
ASSESSMENT 2026 VERIFIED ANSWERS
GRADED A+
◉ Net transfers
Answer: Foreign aid, remittances, international organization
payments.
◉ Why a current account deficit requires a financial account surplus
Answer: If a country buys more than it sells, it must borrow or sell
assets to foreigners.
◉ Foreign-owned assets in the U.S.
Answer: Includes foreign ownership of plants, stocks, bonds, and
bank deposits.
◉ U.S.-owned assets abroad
Answer: U.S. ownership of foreign stocks, bonds, and facilities.
◉ Exchange rate
Answer: Price of one currency in terms of another.
,◉ Nominal exchange rate
Answer: The market price of one currency for another.
◉ Real exchange rate
Answer: Nominal exchange rate × (domestic price level ÷ foreign
price level).
◉ Meaning of real exchange rate
Answer: The market price of one currency for another.
◉ Purchasing power parity (PPP)
Answer: Exchange rate that equalizes purchasing power across
countries.
◉ Why PPP rarely holds
Answer: Non-traded goods, taxes, transportation costs, and different
standards of living.
◉ Big Mac Index
Answer: A lighthearted PPP measure comparing Big Mac prices
across countries.
◉ Appreciation
, Answer: Currency increases in value relative to another.
◉ Depreciation
Answer: Currency decreases in value relative to another.
◉ What causes appreciation
Answer: Higher demand for the currency or lower supply.
◉ What causes depreciation
Answer: Lower demand for the currency or higher supply.
◉ Interest rate effect on exchange rates
Answer: Higher interest rates attract capital inflows → appreciation.
◉ Inflation effect on exchange rates
Answer: Higher inflation makes exports expensive → currency
depreciates.
◉ Disposable income effect
Answer: Higher domestic income increases imports → worsens
current account → depreciation.
