Which of the following appears as a positive item on the balance of payments account for the United States? (Points : 4)
U.S. government sending aid to natural disaster victims in Asia
American tourists spending money in the other countries
Buying of U.S. Treasury bonds by a foreign bank
Payment of stock dividends by U.S. firms to foreign shareholders

2. (TCO 9) A trade deficit means a net (Points : 4)
inflow of payments for goods and services.
outflow of goods and services.
inflow of goods and services.
excess of exports over imports.

3. (TCO 9) If a Japanese importer could buy $1,000 U.S. for 122,000 yen, the rate of exchange for $1 would be (Points : 4)
8.19 yen.
122 yen.
820 yen.
1,220 yen.

4. (TCO 9) If the exchange rate is $1 = 0.7841 euro, then a French DVD priced at 20 euros would cost an American buyer (excluding taxes and other fees) (Points : 4)

5. (TCO 9) Proponents of the managed floating exchange rate system argue that it has (Points : 4)
added the volatility needed by the exchange rate market.
been effective because it is a “nonsystem” without fixed rules.
been sufficiently flexible to weather major economic turbulence.
resolved major problems in balance of payments surpluses and deficits.

(TCO 8) a) Explain four problems with the argument that trade protection is needed to protect American jobs. b) Describe the economic reasons why businesses use offshoring.

(Points : 40)

(TCO 6) a) Identify the four major tools of monetary policy. b) Describe how changes in the Fed’s major policy tools leads to [1] expansionary and [2] restrictive or contractionay monetary policies.