Practice: 1.3.3 International Economic Factors

Section 1: Knowledge of Capital Markets. 12 question(s) in this unit's pool (2 above the exam). Free up to ten a day; the coach picks which ones based on what you have already answered and when each is next due.

Section 1: Knowledge of Capital MarketsSIE outline 1.3.3

Today's practice

Pick an answer, say how sure you are, then reveal. Every wrong choice gets its own explanation. Questions you have already answered correctly and confidently stay out of the way until they are due for review again.

Question 1Exam level

The dollar strengthens sharply against the euro. What happens to the price of imported European goods for U.S. buyers, and to U.S. exporters selling into Europe?

A. Imports get cheaper; exports get more expensive abroad B. Imports get more expensive; exports get cheaper abroad C. Both imports and exports get cheaper D. Neither price changes; exchange rates do not affect trade prices

How sure are you?

Sure Fairly sure Guessing

Correct: A. A stronger home currency makes imports cheaper and exports more expensive abroad.

B. Reverses both effects; a stronger currency makes imports cheaper, not more expensive.

C. Only imports get cheaper under a stronger currency; exports get more expensive.

D. Contradicts the outline's own stated exchange-rate effect on cross-border prices.

Unit: SIE outline 1.3.3

Question 2Exam level

A Japan-headquartered automaker operates an assembly plant inside the United States. In which measure does that plant's output count for the United States?

A. U.S. GDP, since the plant is located inside U.S. borders B. U.S. GNP, since the plant's output is sold in the U.S. C. Japan's GDP, since the parent company is Japanese D. Neither GDP nor GNP counts foreign-owned output

How sure are you?

Sure Fairly sure Guessing

Correct: A. GDP is a location-based measure: output produced within a country's own borders, by anyone, foreign-owned included.

B. GNP is ownership-based, tracking a country's own citizens and companies wherever they operate; a foreign-owned plant does not count toward U.S. GNP simply because its output is sold in the U.S.

C. GDP is a location-based measure specific to where the plant physically sits, not where its parent company is headquartered.

D. GDP explicitly counts output produced within a country's borders by anyone, foreign-owned included.

Unit: SIE outline 1.3.3

Question 3Exam level

A U.S.-headquartered company's factory in Germany reports rising output. In which U.S. measure does that output count?

A. U.S. GNP, since the company is U.S.-owned wherever it operates B. U.S. GDP, since the output is eventually sold back into the U.S. C. Germany's GNP only, since the factory sits inside Germany D. Neither GDP nor GNP; foreign output never counts toward either measure

How sure are you?

Sure Fairly sure Guessing

Correct: A. GNP is ownership-based: output produced by a country's own citizens and companies, wherever in the world they operate, so a U.S. company's German factory counts toward U.S. GNP.

B. GDP is location-based; output produced outside U.S. borders does not count toward U.S. GDP regardless of where it is later sold.

C. The factory's location inside Germany affects Germany's GDP, not its GNP claim on this output, which follows ownership instead.

D. GNP specifically counts a country's own companies' foreign output; it does not vanish from both measures.

Unit: SIE outline 1.3.3

Question 4Exam level

What does a country's balance of payments record?

A. Its transactions with the rest of the world: what flows in and what flows out B. Only its government's tax revenue and spending C. Only the value of its currency against a single benchmark D. Only its stock market's total capitalization

How sure are you?

Sure Fairly sure Guessing

Correct: A. The balance of payments is the record of a country's transactions with the rest of the world.

B. That describes fiscal policy or the federal budget, not the balance of payments.

C. A currency's value against a benchmark is an exchange rate, a separate factor.

D. Stock market capitalization is unrelated to a country's payments with the rest of the world.

Unit: SIE outline 1.3.3

Question 5Exam level

A country buys more from abroad than it sells abroad. What is that called on its balance of payments, and what is the reverse case called?

A. A deficit; the reverse is a surplus B. A surplus; the reverse is a deficit C. A recession; the reverse is an expansion D. A tariff; the reverse is a subsidy

How sure are you?

Sure Fairly sure Guessing

Correct: A. Buying more than it sells is a deficit; selling more than it buys is a surplus.

B. Reverses the two terms; buying more than selling is a deficit, not a surplus.

C. Recession and expansion are business-cycle phases, not balance-of-payments terms.

D. Tariffs and subsidies are trade-policy tools, not descriptions of a payments balance.

Unit: SIE outline 1.3.3

Question 6Exam level

On this outline, what does the abbreviation GDP actually measure?

A. Output produced within a country's own borders, by anyone B. Output produced by a country's own citizens and companies, wherever they operate C. A country's total tax revenue collected in one year D. The value of a country's currency against a fixed benchmark

How sure are you?

Sure Fairly sure Guessing

Correct: A. GDP measures output produced within a country's own borders, by anyone.

B. That describes GNP, the ownership-based measure GDP is distinguished from.

C. Tax revenue is a fiscal-policy figure, not GDP.

D. Currency value against a benchmark is an exchange rate, unrelated to GDP.

Unit: SIE outline 1.3.3

Question 7Exam level

What does GNP measure, as distinct from GDP?

A. Output produced by a country's own citizens and companies, wherever they operate B. Output produced within a country's own borders, by anyone C. A country's imports minus its exports D. The interest rate a central bank sets directly

How sure are you?

Sure Fairly sure Guessing

Correct: A. GNP measures output produced by a country's own citizens and companies, wherever in the world they operate.

B. That is GDP's own location-based definition, the measure GNP is distinguished from.

C. Imports minus exports describes a trade balance, not GNP.

D. A central bank's rate-setting is a monetary-policy fact, unrelated to GNP.

Unit: SIE outline 1.3.3

Question 8Exam level

What is an exchange rate?

A. The price of one currency in terms of another B. A country's total balance of payments for one year C. The federal funds rate target set by a central bank D. A tariff rate applied to imported goods

How sure are you?

Sure Fairly sure Guessing

Correct: A. An exchange rate is the price of one currency in terms of another.

B. The balance of payments records total transactions, a different figure from a currency's price against another currency.

C. The federal funds rate is a domestic monetary-policy tool, not a currency price.

D. A tariff rate is a trade-policy charge, not a currency price.

Unit: SIE outline 1.3.3

Question 9Exam level

A U.S.-headquartered company operates a factory in Mexico. In which measure does that factory's output count?

A. U.S. GDP only B. U.S. GNP only C. Both U.S. GDP and GNP equally D. Neither; it counts only in Mexico's GDP

How sure are you?

Sure Fairly sure Guessing

Correct: B. GNP counts output produced by U.S. residents and companies wherever in the world it happens; this factory counts there, not in U.S. GDP, since GDP stops at the border.

A. GDP counts output produced inside U.S. borders; a Mexican factory is outside them.

C. The two measures draw the line differently on purpose; this factory does not count in both.

D. It does count in Mexico's GDP too, but the question is about the U.S. measures, and GNP is the one that reaches it.

Unit: SIE outline 1.3.3

Question 10Exam level

The dollar weakens against the euro. Which U.S. group is helped?

A. U.S. importers B. U.S. exporters C. U.S. travelers going to Europe D. Nobody; exchange rates do not affect trade

How sure are you?

Sure Fairly sure Guessing

Correct: B. A weak dollar makes American goods cheaper for foreign buyers, which helps U.S. exporters.

A. A weak dollar makes imports cost more for U.S. buyers, hurting importers, not helping them.

C. A weak dollar makes European travel more expensive for U.S. travelers, not less.

D. Exchange rates directly affect the price at which trade settles.

Unit: SIE outline 1.3.3

Question 11Above the exam

A country runs a balance-of-payments surplus this year while its currency simultaneously weakens against its major trading partner's currency. Which pair of effects follows for that country's own exporters and importers?

A. Exporters are helped by the weaker currency; importers face higher prices for foreign goods, independent of the surplus itself B. The surplus alone guarantees a stronger currency, so exporters are hurt C. A weaker currency always erases a balance-of-payments surplus within the same year D. Importers are helped and exporters are hurt, since a weaker currency lowers import prices

How sure are you?

Sure Fairly sure Guessing

Correct: A. The exchange-rate effect (a weaker currency helps exporters and raises import prices) operates on its own terms; the balance-of-payments surplus is a separate fact, and the outline draws no rule tying the two together within a single year.

B. Invents a guaranteed link between a surplus and currency strength that the outline never states.

C. Invents a rule that a weaker currency erases a surplus, unsupported by either named fact.

D. Reverses the exchange-rate effect; a weaker currency makes imports more expensive, not cheaper, and helps exporters, not importers.

Unit: SIE outline 1.3.3

Question 12Above the exam

A U.S. company's foreign subsidiary reports rising output at the same time a leading domestic indicator (building permits) turns upward. Which pair of statements is correct?

A. The subsidiary's output counts toward U.S. GNP, not U.S. GDP; and the building-permits rise signals a turn is coming, not one already underway B. The subsidiary's output counts toward U.S. GDP; and building permits confirm a turn that already happened C. The subsidiary's output counts toward neither GDP nor GNP; and building permits are a coincident indicator D. The subsidiary's output counts toward U.S. GNP; and building permits are a lagging indicator

How sure are you?

Sure Fairly sure Guessing

Correct: A. GNP is ownership-based, so a U.S. company's foreign subsidiary's output counts toward U.S. GNP, not GDP, which is location-based; building permits are a leading indicator, predicting a turn before it happens.

B. Reverses the GDP/GNP assignment; a U.S. company's foreign output is a GNP fact, since GDP is about where output is produced, inside U.S. borders.

C. The subsidiary's output does count toward GNP; it does not vanish from both measures.

D. Correctly assigns GNP, but mislabels building permits as lagging when the definition makes them leading.

Unit: SIE outline 1.3.3

That is today's practice for this unit. Read the lesson for this unit · Go to your map to see your updated state, or pick the coach's next recommended unit from there.