ECON 2020 EXAM 4 FINCK AUBURN
UNIVERSITY STUDY GUIDE 2026
COMPLETE QUESTIONS WITH CORRECT
DETAILED ANSWERS || 100% GUARANTEED
PASS <RECENT VERSION
Section 1: The Open Economy: International Trade and Finance
1. The record of a country's transactions with the rest of the world is called
its:
A) Trade balance.
B) Current account.
C) Capital account.
D) Balance of payments.
2. Which of the following is a credit (+) in the U.S. current account?
A) The U.S. imports cars from Germany.
B) A U.S. tourist buys souvenirs in Mexico.
C) A British investor receives a dividend from a U.S. corporation.
D) The U.S. government gives foreign aid to Egypt.
3. If a country has a current account deficit, it must have:
A) A capital account deficit.
B) A capital account surplus.
C) A balanced trade account.
D) Negative net exports.
4. Net exports (NX) are defined as:
A) Exports plus imports.
B) Imports minus exports.
C) Exports minus imports.
D) The ratio of exports to imports.
,5. The purchase of a factory in Mexico by a U.S. corporation is recorded in the
U.S. balance of payments as a:
A) Credit in the current account.
B) Debit in the current account.
C) Debit in the financial account (capital account).
D) Credit in the financial account.
6. The "balance of trade" refers specifically to:
A) The difference between goods exports and goods imports.
B) The current account balance.
C) The capital account balance.
D) The difference between services exports and imports.
7. If the U.S. has a trade deficit, then:
A) It has positive net exports.
B) It must have a current account surplus.
C) It is spending more on foreign goods than foreigners are spending on U.S.
goods.
D) The value of the dollar will automatically depreciate.
8. An increase in a country's real interest rates relative to other countries
would likely lead to:
A) A capital outflow and currency depreciation.
B) A capital inflow and currency appreciation.
C) A decrease in the demand for the country's currency.
D) A current account surplus.
9. The nominal exchange rate is defined as:
A) The rate at which one good can be traded for another good across countries.
B) The rate at which one currency can be exchanged for another.
C) The real exchange rate adjusted for inflation.
D) The price of a country's currency in terms of gold.
10. If the nominal exchange rate is 0.8 euros per U.S. dollar, how many dollars
are needed to buy a product costing 50 euros?
A) $40.00
, B) $50.00
C) $62.50
D) $80.00
11. If the dollar appreciates against the yen, then:
A) Japanese goods become cheaper for Americans.
B) American goods become more expensive for Japanese.
C) The yen price of dollars falls.
D) U.S. exports to Japan will likely increase.
12. The real exchange rate is:
A) The nominal exchange rate minus the inflation rate.
B) The same as the nominal exchange rate in the long run.
C) The rate at which goods and services of one country can be traded for those
of another.
D) Always equal to 1 due to purchasing power parity.
13. If the real exchange rate between the U.S. and Japan is 1, this suggests:
A) The nominal exchange rate is 1.
B) Interest rates are equal in both countries.
C) A basket of goods costs roughly the same in both countries when measured
in a common currency.
D) Trade between the two countries is balanced.
14. Purchasing Power Parity (PPP) theory suggests that in the long run:
A) Nominal exchange rates are constant.
B) Current accounts are always balanced.
C) A unit of currency should be able to buy the same basket of goods in any
country.
D) Real exchange rates are highly volatile.
15. A depreciation of the U.S. dollar will make:
A) Both U.S. imports and exports more expensive.
B) U.S. imports cheaper and U.S. exports more expensive.
C) U.S. imports more expensive and U.S. exports cheaper.
D) Both U.S. imports and exports cheaper.
UNIVERSITY STUDY GUIDE 2026
COMPLETE QUESTIONS WITH CORRECT
DETAILED ANSWERS || 100% GUARANTEED
PASS <RECENT VERSION
Section 1: The Open Economy: International Trade and Finance
1. The record of a country's transactions with the rest of the world is called
its:
A) Trade balance.
B) Current account.
C) Capital account.
D) Balance of payments.
2. Which of the following is a credit (+) in the U.S. current account?
A) The U.S. imports cars from Germany.
B) A U.S. tourist buys souvenirs in Mexico.
C) A British investor receives a dividend from a U.S. corporation.
D) The U.S. government gives foreign aid to Egypt.
3. If a country has a current account deficit, it must have:
A) A capital account deficit.
B) A capital account surplus.
C) A balanced trade account.
D) Negative net exports.
4. Net exports (NX) are defined as:
A) Exports plus imports.
B) Imports minus exports.
C) Exports minus imports.
D) The ratio of exports to imports.
,5. The purchase of a factory in Mexico by a U.S. corporation is recorded in the
U.S. balance of payments as a:
A) Credit in the current account.
B) Debit in the current account.
C) Debit in the financial account (capital account).
D) Credit in the financial account.
6. The "balance of trade" refers specifically to:
A) The difference between goods exports and goods imports.
B) The current account balance.
C) The capital account balance.
D) The difference between services exports and imports.
7. If the U.S. has a trade deficit, then:
A) It has positive net exports.
B) It must have a current account surplus.
C) It is spending more on foreign goods than foreigners are spending on U.S.
goods.
D) The value of the dollar will automatically depreciate.
8. An increase in a country's real interest rates relative to other countries
would likely lead to:
A) A capital outflow and currency depreciation.
B) A capital inflow and currency appreciation.
C) A decrease in the demand for the country's currency.
D) A current account surplus.
9. The nominal exchange rate is defined as:
A) The rate at which one good can be traded for another good across countries.
B) The rate at which one currency can be exchanged for another.
C) The real exchange rate adjusted for inflation.
D) The price of a country's currency in terms of gold.
10. If the nominal exchange rate is 0.8 euros per U.S. dollar, how many dollars
are needed to buy a product costing 50 euros?
A) $40.00
, B) $50.00
C) $62.50
D) $80.00
11. If the dollar appreciates against the yen, then:
A) Japanese goods become cheaper for Americans.
B) American goods become more expensive for Japanese.
C) The yen price of dollars falls.
D) U.S. exports to Japan will likely increase.
12. The real exchange rate is:
A) The nominal exchange rate minus the inflation rate.
B) The same as the nominal exchange rate in the long run.
C) The rate at which goods and services of one country can be traded for those
of another.
D) Always equal to 1 due to purchasing power parity.
13. If the real exchange rate between the U.S. and Japan is 1, this suggests:
A) The nominal exchange rate is 1.
B) Interest rates are equal in both countries.
C) A basket of goods costs roughly the same in both countries when measured
in a common currency.
D) Trade between the two countries is balanced.
14. Purchasing Power Parity (PPP) theory suggests that in the long run:
A) Nominal exchange rates are constant.
B) Current accounts are always balanced.
C) A unit of currency should be able to buy the same basket of goods in any
country.
D) Real exchange rates are highly volatile.
15. A depreciation of the U.S. dollar will make:
A) Both U.S. imports and exports more expensive.
B) U.S. imports cheaper and U.S. exports more expensive.
C) U.S. imports more expensive and U.S. exports cheaper.
D) Both U.S. imports and exports cheaper.
