Question

1. A currency market starts at equilibrium. The fed decides to increase the supply of u.s. dollars because of a new expansionary monetary policy. What happens to the amount of Mexican pesos that have to be given to recieve $1 in exchange?

a) More pesos have to be given

b)Less pesos have to be given

c) the same number of pesos are given for $1

d)This effect cannot be determined

e) none of the above

2. A few years ago, a solar eclipse occurred and could only been seen in a remote part of Mexico. To see this, many tourists went to the remote area. What effect would this have on the price of pesos in terms of U.s. dollars?

a) Price of pesos increase

b)Price of pesos decrease

c) Price of pesos stay the same

d)Any of these are possible

e) None of these are right.

3. A few years ago, a solar eclipse occurred and could only been seen in a remote part of Mexico. To see this, many tourists went to the remote area. What effect would this have on the cost of a U.S. dollar in terms of a peso?

a) Price of u.s. dollars increase

b)Price of u.s. dollars decrease

c) price of u.s. dollars stay the same

d)Any of these are possible

e)None of these are possible

4. Balance of payments are equal to:

a) Exports

b)imports

c)imports-exports(minus)

d) 0

e) Exports-imports(minus)

5. When money leaves a country for the purchase of goods abroad, it:

a) leaves the first country, but comes back in the same form

b)becomes an injection for the original country

c)becomes a leakage for country that sells the good

d)It leaves the country and never comes back

e)The original country is worse off because of this

6) A large surplus in the capital account is accompanied by a large:

a) deficit in current account

b)surplus in balance of payments

c)deficit in balance of payments

d)surplus in current account

e)future deficit in the capital account.

Answer 1

1

B

Expansionary monetary policy, will cause, a decrease in the value of USD. So, less Pesos will be required to buy 1 USD.

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2.

A

When more people come to the Mexico, then demand for Peso increases and price of Peso also increases with respect to the USD.

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3.

B

A given event in the Mexico, will lead to supply of USD in the market. It will cause price of USD to decrease.

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4.

D

Value of BOP is 0.

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6.

A

It makes the value of BOP to be zero, where the current account position is offset by the capital account position.