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Part A: Multiple Choice

AP Macro Unit 6 Practice Test: Open Economy—International Trade and Finance

This AP Macroeconomics Unit 6 practice test covers the open economy. It includes the balance of payments accounts, the foreign exchange market, and the impact of capital flows. The unit also explains how changes in exchange rates affect net exports and overall economic activity. Use these free questions to strengthen your understanding of international trade and finance.

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Question 1 of 20

1. Question

Which of the following would likely lead to a trade surplus?

Appreciation of the domestic currency
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Depreciation of the domestic currency
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Expansionary fiscal policy
Correct Incorrect Correct answer

Higher tariffs
Correct Incorrect Correct answer

An increase in inflation
Correct Incorrect Correct answer

Correct

Incorrect
Question 2 of 20

2. Question

If a country has a current account deficit, which of the following must be true?

The country must have a trade surplus
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The country must have a deficit in its financial and capital account
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The country must have a surplus in its financial and capital account
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The country must have low prices relative to other countries
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The country must have low interest rates relative to other countries
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Question 3 of 20

3. Question

Which of the following would increase the current account surplus of the United States?

A bank from Mexico buys corporate bonds from a U.S. company
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A company from the United States invests to build a factory in Mexico
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A company in the United States buys computers from Japan
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A company in the United States sells software to Japan
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An increase in the financial and capital account surplus in the United States
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Question 4 of 20

4. Question

Which of the following would move the United States toward a financial and capital account surplus?

A bank from Mexico buys corporate bonds from a U.S. company
Correct Incorrect Correct answer

A company from the United States invests to build a factory in Mexico
Correct Incorrect Correct answer

A company in the United States buys computers from Japan
Correct Incorrect Correct answer

A company in the United States sells software to Japan
Correct Incorrect Correct answer

An increase in the financial and capital account surplus in the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 5 of 20

5. Question

Which of the following would move the United States toward a current account Deficit?

A bank from Mexico buys corporate bonds from a U.S. company
Correct Incorrect Correct answer

A company from the United States invests to build a factory in Mexico
Correct Incorrect Correct answer

A company in the United States buys computers from Japan
Correct Incorrect Correct answer

A company in the United States sells software to Japan
Correct Incorrect Correct answer

An increase in the financial and capital account surplus in the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 6 of 20

6. Question

Which of the following would move the United States financial and capital Account toward a deficit?

A bank from Mexico buys corporate bonds from a U.S. company
Correct Incorrect Correct answer

A company from the United States buys real estate in Mexico
Correct Incorrect Correct answer

A company in the United States buys computers from Japan
Correct Incorrect Correct answer

A company in the United States sells software to Japan
Correct Incorrect Correct answer

An increase in the financial and capital account surplus in the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 7 of 20

7. Question

The exchange rate between the United States dollar and the Japanese yen moves from $1 per ¥100 to $1 per ¥110. Assume that the relative prices in the two countries did not change. What happened to the dollar relative to the yen?

The dollar depreciated relative to the yen making imports from Japan into the United States cheaper
Correct Incorrect Correct answer

The dollar depreciated relative to the yen making imports from Japan into the United States more expensive
Correct Incorrect Correct answer

The dollar appreciated relative to the yen making imports from Japan into the United States more expensive
Correct Incorrect Correct answer

The dollar appreciated relative to the yen making imports from Japan into the United States cheaper
Correct Incorrect Correct answer

The dollar depreciated relative to the yen but that did not change the relative cost of imports Japan into the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 20

8. Question

The exchange rate between the United States dollar and the Japanese yen moves from $1 per ¥100 to $1 per ¥90. Assume that the relative prices in the two countries did not change. What happened to the dollar relative to the yen?

The dollar depreciated relative to the yen making imports from Japan into the United States cheaper
Correct Incorrect Correct answer

The dollar depreciated relative to the yen making imports from Japan into the United States more expensive
Correct Incorrect Correct answer

The dollar appreciated relative to the yen making imports from Japan into the United States more expensive
Correct Incorrect Correct answer

The dollar appreciated relative to the yen making imports from Japan into the United States cheaper
Correct Incorrect Correct answer

The dollar depreciated relative to the yen but that did not change the relative cost of imports Japan into the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 9 of 20

9. Question

What is a flexible or floating foreign exchange rate regime?

The supply of currency is downward sloping
Correct Incorrect Correct answer

The demand for currency is upward sloping
Correct Incorrect Correct answer

Only the nominal exchange rate can be determined
Correct Incorrect Correct answer

When a nation allows market forces of supply and demand to determine the value of its currency in foreign exchange markets
Correct Incorrect Correct answer

When a nation uses sovereign funds to buy and sells currency to maintain a particular value of its currency relative to another currency
Correct Incorrect Correct answer

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Question 10 of 20

10. Question

What is a fixed or pegged foreign exchange rate regime?

The supply of currency is downward sloping
Correct Incorrect Correct answer

The demand for currency is upward sloping
Correct Incorrect Correct answer

Only the nominal exchange rate can be determined
Correct Incorrect Correct answer

When a nation allows market forces of supply and demand to determine the value of its currency in foreign exchange markets
Correct Incorrect Correct answer

When a nation uses sovereign funds to buy and sell currency to maintain a particular value of its currency relative to another currency
Correct Incorrect Correct answer

Correct

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Question 11 of 20

11. Question

A depreciation of the dollar in foreign exchange rate markets would most likely be caused by which of the following?

A decrease in tariffs placed on foreign imports into the United States
Correct Incorrect Correct answer

A decrease in the price level in the United States
Correct Incorrect Correct answer

An increase in foreign demand for goods produced in the United States
Correct Incorrect Correct answer

A decrease in foreign demand for goods produced in the United States
Correct Incorrect Correct answer

A contractionary monetary policy in the United States
Correct Incorrect Correct answer

Correct

Incorrect
Question 12 of 20

12. Question

An appreciation of the dollar in foreign exchange rate markets would most likely be caused by which of the following?

An increase in tariffs placed on foreign imports into the United States
Correct Incorrect Correct answer

An increase in the price level in the United States
Correct Incorrect Correct answer

An increase in foreign demand for goods produced in the United States
Correct Incorrect Correct answer

A decrease in foreign demand for goods produced in the United States
Correct Incorrect Correct answer

An expansionary monetary policy in the United States
Correct Incorrect Correct answer

Correct

Incorrect

Question 13 of 20

13. Question

Assume that a country has a flexible exchange rate system and limited reserves. If the country’s central bank buys bonds in open market operations what is the most likely impact on the money supply, interest rates, and foreign value of the currency?

	Money Supply	Interest Rates	Currency Value
(A)	Decrease	Increase	Appreciates
(B)	Decrease	Decrease	Depreciates
(C)	Increase	Increase	Appreciates
(D)	Increase	Decrease	Depreciates
(E)	Increase	Decrease	Appreciates

(A)

Correct Incorrect Correct answer

(B)

Correct Incorrect Correct answer

(C)

Correct Incorrect Correct answer

(D)

Correct Incorrect Correct answer

(E)

Correct Incorrect Correct answer

Correct

Incorrect

Question 14 of 20

14. Question

14. Assume that a country has a flexible exchange rate system and limited reserves. If the country’s central bank sells bonds in open market operations what is the most likely impact on the money supply, interest rates, and foreign value of the currency?

	Money Supply	Interest Rates	Currency Value
(A)	Decrease	Increase	Appreciates
(B)	Decrease	Decrease	Depreciates
(C)	Increase	Increase	Appreciates
(D)	Increase	Decrease	Depreciates
(E)	Increase	Decrease	Appreciates

(A)

Correct Incorrect Correct answer

(B)

Correct Incorrect Correct answer

(C)

Correct Incorrect Correct answer

(D)

Correct Incorrect Correct answer

(E)

Correct Incorrect Correct answer

Correct

Incorrect

Question 15 of 20

15. Question

If country has a high inflation rate relative to its trading partners what is most likely to happen?

The supply of the country’s currency will shift left and depreciate
Correct Incorrect Correct answer

The supply of the country’s currency will shift left and appreciate
Correct Incorrect Correct answer

The supply of the country’s currency will shift right and appreciate
Correct Incorrect Correct answer

The demand for the country’s currency will shift right and appreciate
Correct Incorrect Correct answer

The demand for the country’s currency will shift left and depreciate
Correct Incorrect Correct answer

Correct

Incorrect
Question 16 of 20

16. Question

If country has a low inflation rate relative to its trading partners what is most likely to happen?

The supply of the country’s currency will shift left and depreciate
Correct Incorrect Correct answer

The supply of the country’s currency will shift left and appreciate
Correct Incorrect Correct answer

The supply of the country’s currency will shift right and appreciate
Correct Incorrect Correct answer

The demand for the country’s currency will shift right and appreciate
Correct Incorrect Correct answer

The demand for the country’s currency will shift left and depreciate
Correct Incorrect Correct answer

Correct

Incorrect
Question 17 of 20

17. Question

An appreciation of the United States dollar relative to its trading partners will be likely to have what impact?

An increase in exports, a decrease in imports, and an increase in aggregate demand
Correct Incorrect Correct answer

A decrease in exports, an increase in imports, and a decrease in aggregate demand
Correct Incorrect Correct answer

An increase in exports, a decrease in imports, and a decrease in aggregate demand
Correct Incorrect Correct answer

A decrease in exports, an increase in imports, and an increase in aggregate demand
Correct Incorrect Correct answer

An increase in exports, a decrease in imports, and no change in aggregate demand
Correct Incorrect Correct answer

Correct

Incorrect
Question 18 of 20

18. Question

A depreciation of the United States dollar relative to its trading partners will be likely to have what impact?

An increase in exports, a decrease in imports, and an increase in aggregate demand
Correct Incorrect Correct answer

A decrease in exports, an increase in imports, and a decrease in aggregate demand
Correct Incorrect Correct answer

An increase in exports, a decrease in imports, and a decrease in aggregate demand
Correct Incorrect Correct answer

A decrease in exports, an increase in imports, and an increase in aggregate demand
Correct Incorrect Correct answer

An increase in exports, a decrease in imports, and no change in aggregate demand
Correct Incorrect Correct answer

Correct

Incorrect

Question 19 of 20

19. Question

If a nation experiences an increase in interest rates relative to its trading partners, what is the likely impact on its financial and capital account and currency?

	Financial and Capital Account	Currency Value
(A)	Financial and capital outflows	Depreciation
(B)	Financial and capital inflows	Appreciation
(C)	Financial and capital outflows	Appreciation
(D)	Financial and capital inflows	Depreciation
(E)	No change	No change

(A)

Correct Incorrect Correct answer

(B)

Correct Incorrect Correct answer

(C)

Correct Incorrect Correct answer

(D)

Correct Incorrect Correct answer

(E)

Correct Incorrect Correct answer

Correct

Incorrect

Question 20 of 20

20. Question

If a nation experiences a decrease in interest rates relative to its trading partners, what is the likely impact on its financial and capital account and currency?

	Financial and Capital Account	Currency Value
(A)	Financial and capital outflows	Depreciation
(B)	Financial and capital inflows	Appreciation
(C)	Financial and capital outflows	Appreciation
(D)	Financial and capital inflows	Depreciation
(E)	No change	No change

(A)

Correct Incorrect Correct answer

(B)

Correct Incorrect Correct answer

(C)

Correct Incorrect Correct answer

(D)

Correct Incorrect Correct answer

(E)

Correct Incorrect Correct answer

Correct

Incorrect

Current
Correct
Incorrect

Next: Part A: Multiple Choice

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Free AP Macroeconomics Tests

AP Macro Practice Tests

Full-Length AP Macro Practice Exam

AP Macro Unit 6 Practice Test: Open Economy—International Trade and Finance

Quiz Summary

Information

Results

Results

Categories

1. Question

Which of the following would likely lead to a trade surplus?

2. Question

If a country has a current account deficit, which of the following must be true?

3. Question

Which of the following would increase the current account surplus of the United States?

4. Question

Which of the following would move the United States toward a financial and capital account surplus?

5. Question

Which of the following would move the United States toward a current account Deficit?

6. Question

Which of the following would move the United States financial and capital Account toward a deficit?

7. Question

The exchange rate between the United States dollar and the Japanese yen moves from $1 per ¥100 to $1 per ¥110. Assume that the relative prices in the two countries did not change. What happened to the dollar relative to the yen?

8. Question

The exchange rate between the United States dollar and the Japanese yen moves from $1 per ¥100 to $1 per ¥90. Assume that the relative prices in the two countries did not change. What happened to the dollar relative to the yen?

9. Question

What is a flexible or floating foreign exchange rate regime?

10. Question

What is a fixed or pegged foreign exchange rate regime?

11. Question

A depreciation of the dollar in foreign exchange rate markets would most likely be caused by which of the following?

12. Question

An appreciation of the dollar in foreign exchange rate markets would most likely be caused by which of the following?

13. Question

Assume that a country has a flexible exchange rate system and limited reserves. If the country’s central bank buys bonds in open market operations what is the most likely impact on the money supply, interest rates, and foreign value of the currency?

14. Question

14. Assume that a country has a flexible exchange rate system and limited reserves. If the country’s central bank sells bonds in open market operations what is the most likely impact on the money supply, interest rates, and foreign value of the currency?

15. Question

If country has a high inflation rate relative to its trading partners what is most likely to happen?

16. Question

If country has a low inflation rate relative to its trading partners what is most likely to happen?

17. Question

An appreciation of the United States dollar relative to its trading partners will be likely to have what impact?

18. Question

A depreciation of the United States dollar relative to its trading partners will be likely to have what impact?

19. Question

If a nation experiences an increase in interest rates relative to its trading partners, what is the likely impact on its financial and capital account and currency?

20. Question

If a nation experiences a decrease in interest rates relative to its trading partners, what is the likely impact on its financial and capital account and currency?

Next: Part A: Multiple Choice