Score Part I. True or False (Full Score: 20 Points) 1. A credit item is an item for which a country must pay. ) 2.1.1891USD/EUR means 1 USD=1.1891EUR. 3. Because the balance of payments accounts must balance, sub accounts like the financial account must balance, too. 4. If the interest rate of a foreign country is less than that of the domestic country, then the foreign country will have a positive forward premium on its currency. 5. Rapid increases in the U.S. exports of goods and services will result in an increase in the supply of foreign currency and an increase in the demand for the U.S. dollars in the foreign exchange market. 6. Under a fixed exchange rate system, a fall in the market price of a currency is called a depreciation of that currency. 7. The concept of purchasing power parity illustrates the relationship between the national price levels and exchange rates in the long-run. 8. The asset market approach to exchange rate determination seeks to predict the long-term pressures on exchange rates. 9. When the Fed. (The central bank of the U.S.) increases the money supply by 5%, unexpectedly, according to the overshooting effect, the short-run exchange value of USD will appreciate more than 5%. 10. Today, no country fixes its currency to gold. (