Question 1

An exchange rate is the price of one commodity (e.g., corn)measured in terms of another commodity (e.g., wheat).

Accepted Answer

A) True 
 B)False

Question 2

Imagine that there are only two nations in the world, the United States and Mexico.If Americans buy more goods made in Mexico, other things constant, the

Accepted Answer

A) U.S.demand curve for Mexican pesos will shift rightward 
B) U.S.demand curve for Mexican pesos will shift leftward 
C) U.S.supply curve of Mexican pesos will shift leftward 
D) U.S.supply curve of Mexican pesos will shift rightward 
E) U.S.supply curve of Mexican pesos will shift upward 
A) U.S.demand curve for Mexican pesos will shift rightward 
B) U.S.demand curve for Mexican pesos will shift leftward 
C) U.S.supply curve of Mexican pesos will shift leftward 
D) U.S.supply curve of Mexican pesos will shift rightward 
E) U.S.supply curve of Mexican pesos will shift upward

Question 3

The main goal of the Bretton Woods meeting was to

Accepted Answer

A) curb inflation 
B) encourage gold production 
C) set world prices for gold 
D) set up a new international system of payments and to stabilize exchange rates 
E) help less-developed countries of the Third World to develop economically 
A) curb inflation 
B) encourage gold production 
C) set world prices for gold 
D) set up a new international system of payments and to stabilize exchange rates 
E) help less-developed countries of the Third World to develop economically

Question 4

Wayne Brown is a Canadian citizen studying on our campus.When he came to school last fall, he had 400 Canadian dollars (C$), which at that time were worth $300 U.S.dollars (US$).When he went back to Canada in June, US$300 could purchase C$450.In June, the U.S.dollar purchased

Accepted Answer

A) 12.5 percent more Canadian dollars than it did last fall 
B) 12.5 percent fewer Canadian dollars than it did last fall 
C) 11.11 percent more Canadian dollars than it did last fall 
D) 11.11 percent fewer Canadian dollars than it did last fall 
E) the same amount of Canadian dollars, in percentage terms, as it did last fall 
A) 12.5 percent more Canadian dollars than it did last fall 
B) 12.5 percent fewer Canadian dollars than it did last fall 
C) 11.11 percent more Canadian dollars than it did last fall 
D) 11.11 percent fewer Canadian dollars than it did last fall 
E) the same amount of Canadian dollars, in percentage terms, as it did last fall

Question 5

If the British pound appreciates, U.S.television stations need fewer dollars to buy episodes of a Britcom from the British Broadcasting Company.

Accepted Answer

A) True 
 B)False

Question 6

In the early 1970s, in an attempt to solve the problem of the overvalued U.S.dollar, world leaders

Accepted Answer

A) increased the price of gold in terms of other currencies 
B) appreciated the dollar, which made foreign exchange cheaper to U.S.residents 
C) appreciated the dollar, which made foreign exchange more expensive to U.S.residents 
D) devalued the dollar, which made foreign exchange cheaper to U.S.residents 
E) devalued the dollar, which made foreign exchange more expensive to U.S.residents 
A) increased the price of gold in terms of other currencies 
B) appreciated the dollar, which made foreign exchange cheaper to U.S.residents 
C) appreciated the dollar, which made foreign exchange more expensive to U.S.residents 
D) devalued the dollar, which made foreign exchange cheaper to U.S.residents 
E) devalued the dollar, which made foreign exchange more expensive to U.S.residents

Question 7

The exchange rate is

Accepted Answer

A) the price of foreign exchange determined by the interaction of supply and demand 
B) an interest rate determined by the interaction of supply and demand 
C) fixed by each government separately 
D) always fixed for any two currencies by the two nations involved, regardless of any agreements made with other nations 
E) fixed by GATT 
A) the price of foreign exchange determined by the interaction of supply and demand 
B) an interest rate determined by the interaction of supply and demand 
C) fixed by each government separately 
D) always fixed for any two currencies by the two nations involved, regardless of any agreements made with other nations 
E) fixed by GATT

Question 8

Bank deposits denominated in Mexican pesos are an example of foreign exchange.

Accepted Answer

A) True 
 B)False

Question 9

If the current account shows a deficit, the capital account must show a surplus of the same amount.

Accepted Answer

A) True 
 B)False

Question 10

If the U.S.dollar appreciates relative to the Brazilian cruzeiro, then

Accepted Answer

A) the U.S.dollar-cruzeiro exchange rate will increase 
B) U.S.goods become less expensive in Brazil 
C) Brazilian goods become more expensive in the U.S. 
D) Brazilian investors will pay fewer cruzeiros to buy each U.S.dollar 
E) the U.S.will import more from Brazil 
A) the U.S.dollar-cruzeiro exchange rate will increase 
B) U.S.goods become less expensive in Brazil 
C) Brazilian goods become more expensive in the U.S. 
D) Brazilian investors will pay fewer cruzeiros to buy each U.S.dollar 
E) the U.S.will import more from Brazil

Question 11

The breakdown of the Bretton Woods system occurred because

Accepted Answer

A) the world economy was basically unhealthy 
B) the collapse of world gold production undermined the operation of the system 
C) the dollar was undervalued 
D) the dollar was overvalued 
E) the ten richest countries in the world refused to cooperate any longer 
A) the world economy was basically unhealthy 
B) the collapse of world gold production undermined the operation of the system 
C) the dollar was undervalued 
D) the dollar was overvalued 
E) the ten richest countries in the world refused to cooperate any longer

Question 12

Which of the following is not considered as a unilateral transfer?

Accepted Answer

A) income earned from foreign investments 
B) foreign aid 
C) personal gifts to friends or family abroad 
D) institutional charitable donations 
E) government transfers to foreign residents 
A) income earned from foreign investments 
B) foreign aid 
C) personal gifts to friends or family abroad 
D) institutional charitable donations 
E) government transfers to foreign residents

Question 13

The fact that exchange rates are nearly identical in different markets around the world is due to

Accepted Answer

A) the actions of speculators 
B) official action by central banks around the world 
C) the actions of arbitrageurs 
D) agreement by policy makers of the major industrial countries 
E) the actions of currency converters 
A) the actions of speculators 
B) official action by central banks around the world 
C) the actions of arbitrageurs 
D) agreement by policy makers of the major industrial countries 
E) the actions of currency converters

Question 14

If U.S.monetary authorities want to strengthen the dollar, they will

Accepted Answer

A) sell dollars in the foreign exchange market 
B) buy dollars in the foreign exchange market 
C) declare the dollar devalued 
D) sell dollars and buy only Euros in the foreign exchange market 
E) encourage other central bankers to sell dollars in the foreign exchange market 
A) sell dollars in the foreign exchange market 
B) buy dollars in the foreign exchange market 
C) declare the dollar devalued 
D) sell dollars and buy only Euros in the foreign exchange market 
E) encourage other central bankers to sell dollars in the foreign exchange market

Question 15

If the U.S.dollar appreciates, it means that

Accepted Answer

A) the value of the U.S.dollar has decreased 
B) the value of foreign exchange has increased 
C) fewer U.S.dollars are required to purchase foreign exchange 
D) more U.S.dollars are required to purchase foreign exchange 
E) exports will fall immediately 
A) the value of the U.S.dollar has decreased 
B) the value of foreign exchange has increased 
C) fewer U.S.dollars are required to purchase foreign exchange 
D) more U.S.dollars are required to purchase foreign exchange 
E) exports will fall immediately

Question 16

Which of the following components of the U.S.balance of payments includes direct investment by Americans in foreign securities?

Accepted Answer

A) U.S.official reserve assets 
B) the capital account 
C) the current account 
D) U.S.government assets abroad 
E) merchandise trade balance 
A) U.S.official reserve assets 
B) the capital account 
C) the current account 
D) U.S.government assets abroad 
E) merchandise trade balance

Question 17

If foreigners increase their ownership of U.S.assets, this would help to offset

Accepted Answer

A) a deficit in the U.S.current account 
B) a deficit in the U.S.capital account 
C) a surplus in the U.S.current account 
D) a surplus in the U.S.capital account 
E) a surplus in the total balance of payments 
A) a deficit in the U.S.current account 
B) a deficit in the U.S.capital account 
C) a surplus in the U.S.current account 
D) a surplus in the U.S.capital account 
E) a surplus in the total balance of payments

Question 18

Since 1983, the US has typically run a financial account surplus.

Accepted Answer

A) True 
 B)False

Question 19

If the U.S.dollar appreciates, it becomes cheaper for Australians to visit their relatives in the United States.

Accepted Answer

A) True 
 B)False

Question 20

The gold standard

Accepted Answer

A) has been in operation since the establishment of the Federal Reserve Board 
B) has been in operation since shortly after World War I 
C) has been in operation since the Bretton Woods agreement was signed 
D) was in operation for about 50 years before World War I 
E) was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S.dollar in 1971 
A) has been in operation since the establishment of the Federal Reserve Board 
B) has been in operation since shortly after World War I 
C) has been in operation since the Bretton Woods agreement was signed 
D) was in operation for about 50 years before World War I 
E) was in operation from the date of the Bretton Woods agreement until the devaluation of the U.S.dollar in 1971

Exam 20: International Finance

An exchange rate is the price of one commodity (e.g., corn)measured in terms of another commodity (e.g., wheat).

Imagine that there are only two nations in the world, the United States and Mexico.If Americans buy more goods made in Mexico, other things constant, the

The main goal of the Bretton Woods meeting was to

Wayne Brown is a Canadian citizen studying on our campus.When he came to school last fall, he had 400 Canadian dollars (C$), which at that time were worth $300 U.S.dollars (US$).When he went back to Canada in June, US$300 could purchase C$450.In June, the U.S.dollar purchased

If the British pound appreciates, U.S.television stations need fewer dollars to buy episodes of a Britcom from the British Broadcasting Company.

In the early 1970s, in an attempt to solve the problem of the overvalued U.S.dollar, world leaders

The exchange rate is

Bank deposits denominated in Mexican pesos are an example of foreign exchange.

If the current account shows a deficit, the capital account must show a surplus of the same amount.

If the U.S.dollar appreciates relative to the Brazilian cruzeiro, then

The breakdown of the Bretton Woods system occurred because

Which of the following is not considered as a unilateral transfer?

The fact that exchange rates are nearly identical in different markets around the world is due to

If U.S.monetary authorities want to strengthen the dollar, they will

If the U.S.dollar appreciates, it means that

Which of the following components of the U.S.balance of payments includes direct investment by Americans in foreign securities?

If foreigners increase their ownership of U.S.assets, this would help to offset

Since 1983, the US has typically run a financial account surplus.

If the U.S.dollar appreciates, it becomes cheaper for Australians to visit their relatives in the United States.

The gold standard

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

Economic Development

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