1. Other things equal an increase in tax rates will tend to reduce the trade deficit.
TRUE
FALSE.
2. Which of the following will not help to reduce the U.S. trade deficit?
an increase in savings
an increase in taxes
a decrease in government spending
an increase in exports
an increase in government spending.
3. A stronger euro benefits:
U. S. exporters
European consumers
European exporters
both (a) and (b)
both (b) and (c).
4. Information for questions 14 through 20. Today, a U.S. importer places an order for machine tools that will arrive in Houston in 60 days, when he must pay 3,000,000 euros to the German exporter. Assume that the price of at-the-money, 60-days, euro calls is $0.03, and the price of 60-days, at-the-money euro puts is $0.04. Please note that the spot rate today is $1.22. All prices are per euro.
The U.S. importer is long euros.
TRUE
FALSE.
5. Unhedged, he will suffer a loss if the dollar appreciates.
TRUE
FALSE.