Question

Question 36 1. The trade balance includes,

a. both international payments for stocks and bonds and international payments for goods and services

b. international payments for stocks and bonds, but not international payments of profits and interest

c. international payments for goods and services, but not international payments for stocks and bonds

d. international payments for stocks and bonds, and international payments for goods and services, and international payments of profits and interest

Question 37 1. Suppose the ruble-euro nominal exchange rate is 75 Russian rubles to 1 euro. Suppose (absolute) purchasing power parity holds exactly, which of the following could be true?

a. Overall, 70 rubles buys the same amount in Russia as 1 euro buys in the Eurozone

b. Overall, 75 rubles buys the same amount in Russia as 1 euro buys in the Eurozone

c. Overall, 80 rubles buys the same amount in Russia as 1 euro buys in the Eurozone

d. any of the above could be true

Question 38 1. Suppose financial Security S is widely traded in the home (domestic) country and in foreign Country C as well. Suppose the perceived value of Security S then drops dramatically. Other things equal, this tends to cause,

a. the economy of the domestic country to slow down and the economy of Country C to slow down

b. the economy of the domestic country to slow down and the economy of Country C to speed up

c. the economy of the domestic country to speed up and the economy of Country C to slow down

d. the economy of the domestic country to speed up and the economy of Country C to speed up

Question 39 1. A country can,

a. have a floating exchange rate, allow free movement of capital in and out of the country, and have full control over its domestic monetary policy

b. have a fixed exchange rate, allow free movement of capital in and out of the country, and have full control over its domestic monetary policy

c. have a fixed exchange rate, allow free movement of capital in and out of the country, and not have full control over its domestic monetary policy

d. both A and C

Question 40 1. A real exchange rate can be thought of as,

a. the price of one currency in terms of another currency

b. a comparison of the actual nominal exchange rate versus the purchasing power parity predicted nominal exchange rate

c. the rate at which two countries' goods trade against each other

d. both B and C

Answer 1

Question 36

Trade balance is calculated as the difference between the amount of goods and services exported by a country and the goods and services imported by a country.

So,

It can be stated that trade balance includes international payments for goods and services, but not international payments for stocks and bonds.

Hence, the correct answer is the option (c).

Question 37

Exact holding of purchasing power parity in absolute terms imply that a unit of domestic currency is able to buy a unit of good in one country as the same amount of foreign currency.

The nominal exchange rate is 75 Russia rubles to 1 euro and absolute PPP holds that this means that overall, 75 rubles buy the same amount in Russia as 1 euro buys in the Eurozone.

Hence, the correct answer is the option (b).