AP Macroeconomics Unit 6 Practice Test & Exam | 21 Questions

Questions 1-2 refer to the following table showing hypothetical data for the United States' balance of payments.

1. Based on the data in the table, what is the balance on the current account?

(A)A surplus of 650 billion dollars(B)A deficit of 500 billion dollars(C)A deficit of 650 billion dollars(D)A surplus of 500 billion dollars

2. Given the information in the table and assuming the balance of payments is zero, what must be the value of U.S. purchases of foreign assets?

(A)-150 billion dollars(B)+150 billion dollars(C)-650 billion dollars(D)+650 billion dollars

3. If the exchange rate between the U.S. dollar and the Mexican peso is 1 dollar = 20 pesos, what is the price in dollars of a product that costs 500 pesos?

(A)10,000 dollars(B)500 dollars(C)50 dollars(D)25 dollars

4. If the exchange rate for the Japanese yen changes from 150 yen per U.S. dollar to 140 yen per U.S. dollar, which of the following has occurred?

(A)The U.S. dollar has appreciated.(B)The Japanese yen has depreciated.(C)The U.S. dollar has depreciated.(D)Both currencies have appreciated.

The graph above shows the foreign exchange market for the U.S. dollar.

5. The demand for U.S. dollars is downward sloping because as the dollar appreciates,

(A)U.S. goods become more expensive for Europeans, so they demand a smaller quantity of dollars.(B)U.S. goods become cheaper for Europeans, so they demand a larger quantity of dollars.(C)U.S. goods become more expensive for Americans, so they demand a smaller quantity of dollars.(D)the supply of dollars decreases, leading to a higher exchange rate.

6. The supply of U.S. dollars to the foreign exchange market is generated by

(A)foreign citizens wanting to purchase U.S. financial assets.(B)U.S. citizens wanting to purchase foreign goods, services, and assets.(C)the U.S. Federal Reserve printing more money.(D)the U.S. government's demand for foreign currency reserves.

7. Assume the United States and the United Kingdom are major trading partners. If real income in the United Kingdom increases while real income in the United States remains unchanged, what will be the effect on the foreign exchange market for the U.S. dollar?

(A)The demand for dollars will increase, and the dollar will appreciate.(B)The supply of dollars will increase, and the dollar will depreciate.(C)The demand for dollars will decrease, and the dollar will depreciate.(D)The supply of dollars will decrease, and the dollar will appreciate.

8. If the real interest rate in the United States increases relative to the rest of the world, what is the most likely outcome?

(A)Decreased financial capital inflow into the United States and depreciation of the dollar.(B)Increased financial capital inflow into the United States and appreciation of the dollar.(C)Increased financial capital outflow from the United States and depreciation of the dollar.(D)Decreased financial capital outflow from the United States and appreciation of the dollar.

9. An appreciation of a country's currency will most likely lead to which of the following?

(A)A decrease in the country's price level and a decrease in real GDP.(B)An increase in the country's price level and an increase in real GDP.(C)An increase in the country's exports and a decrease in its imports.(D)An increase in aggregate supply.

10. Which of the following describes the complete causal chain resulting from a currency depreciation?

(A)Exports increase, imports decrease, net exports increase, aggregate demand shifts right.(B)Exports decrease, imports increase, net exports decrease, aggregate demand shifts left.(C)Exports increase, imports decrease, net exports increase, aggregate supply shifts right.(D)Interest rates fall, investment increases, aggregate demand shifts right.

11. Suppose consumers in Canada significantly increase their preference for wines produced in California. In the foreign exchange market for the U.S. dollar, which of the following will occur?

(A)The supply of U.S. dollars will increase, causing the dollar to depreciate.(B)The supply of U.S. dollars will decrease, causing the dollar to appreciate.(C)The demand for U.S. dollars will increase, causing the dollar to appreciate.(D)The demand for U.S. dollars will decrease, causing the dollar to depreciate.

12. A Japanese company builds a new automobile factory in the United States. In the U.S. balance of payments, this transaction would be recorded as a

(A)credit in the current account.(B)debit in the current account.(C)credit in the capital and financial account.(D)debit in the capital and financial account.

Refer to the table below.

13. Assume the central bank of Country X engages in expansionary monetary policy. How will this policy affect the international value of Country X's currency and its net exports?

(A)Appreciate, Increase(B)Appreciate, Decrease(C)Depreciate, Increase(D)Depreciate, Decrease

14. Contractionary fiscal policy in the United States that leads to a decrease in the U.S. budget deficit would most likely cause which of the following changes in the loanable funds market and the international value of the U.S. dollar?

(A)An increase in the real interest rate and an appreciation of the dollar.(B)An increase in the real interest rate and a depreciation of the dollar.(C)A decrease in the real interest rate and an appreciation of the dollar.(D)A decrease in the real interest rate and a depreciation of the dollar.

15. If a country has a current account deficit, it must have a

(A)budget deficit.(B)budget surplus.(C)capital and financial account deficit.(D)capital and financial account surplus.

The graph above shows the market for the Mexican peso.

16. At an exchange rate below the equilibrium rate E_1, there is a

(A)surplus of pesos, which will cause the peso to depreciate.(B)shortage of pesos, which will cause the peso to appreciate.(C)surplus of pesos, which will cause the peso to appreciate.(D)shortage of pesos, which will cause the peso to depreciate.

17. If the United States dollar appreciates relative to the euro, which of the following groups would benefit?

(A)U.S. firms that export goods to Europe.(B)U.S. tourists traveling to Europe.(C)European firms that export goods to the U.S.(D)European tourists traveling to the U.S.

18. If the general price level in the United States increases relative to the price level in Japan, what will be the effect on the foreign exchange market for the U.S. dollar?

(A)Demand for dollars will increase and the supply of dollars will decrease.(B)Demand for dollars will decrease and the supply of dollars will increase.(C)Demand for dollars will increase and the supply of dollars will increase.(D)Demand for dollars will decrease and the supply of dollars will decrease.

19. The concept of international capital flows refers to the

(A)movement of goods and services between countries.(B)transfer of technology and patents across borders.(C)purchase and sale of financial assets like stocks and bonds across borders.(D)migration of labor from one country to another.

20. Which of the following transactions would be recorded as a debit in the U.S. current account?

(A)A U.S. citizen receives a dividend payment from a French company.(B)A U.S. based technology firm sells software to a company in India.(C)The U.S. government sends foreign aid to another country.(D)A German investor purchases a U.S. Treasury bond.

AP Macroeconomics Unit 6: Open Economy—International Trade and Finance Practice Exam

Exam Details

A. Multiple-Choice Questions (20 Questions)

B. Short Answer Questions (1 Question)

AP Macroeconomics Unit 6: Open Economy—International Trade and Finance Practice Exam

Exam Details

A. Multiple-Choice Questions (20 Questions)

B. Short Answer Questions (1 Question)