Question 1

The Economic and Monetary Union is an example of

Accepted Answer

A) a tariff. 
B) the gold standard. 
C) a labor union. 
D) a system of common currency. 
E) a system of flexible exchange rates. 
A) a tariff. 
B) the gold standard. 
C) a labor union. 
D) a system of common currency. 
E) a system of flexible exchange rates.

Question 2

Most countries that are members of the EMU also have a common monetary policy.

Accepted Answer

A) True 
 B)False

Question 3

All else equal, a depreciation of the Japanese yen leads to an increase in Japan's net exports.

Accepted Answer

A) True 
 B)False

Question 4

Between 2000 and 2005, China pegged its currency to the dollar by

Accepted Answer

A) selling dollars in the foreign exchange market. 
B) buying the Chinese currency in the foreign exchange market. 
C) decreasing its holdings of dollar reserves and increasing its holdings of domestic currency. 
D) increasing its holdings of dollar reserves and decreasing its holdings of domestic currency. 
E) doing nothing. 
A) selling dollars in the foreign exchange market. 
B) buying the Chinese currency in the foreign exchange market. 
C) decreasing its holdings of dollar reserves and increasing its holdings of domestic currency. 
D) increasing its holdings of dollar reserves and decreasing its holdings of domestic currency. 
E) doing nothing.

Question 5

Foreign exchange market intervention like devaluation or revaluation occurs

Accepted Answer

A) when a central bank changes interest rates. 
B) whenever there is countercyclical fiscal policy. 
C) only if a country has adopted a flexible exchange rate policy. 
D) when a country's government buys or sells foreign currency to affect its exchange rate. 
E) only when countries want to permanently alter exchange rates. 
A) when a central bank changes interest rates. 
B) whenever there is countercyclical fiscal policy. 
C) only if a country has adopted a flexible exchange rate policy. 
D) when a country's government buys or sells foreign currency to affect its exchange rate. 
E) only when countries want to permanently alter exchange rates.

Question 6

A depreciation of the dollar relative to the euro means that

Accepted Answer

A) a dollar can be exchanged for more euros. 
B) the United States will export more goods to France. 
C) the United States will import more goods from Germany. 
D) the United States will export fewer goods to France. 
E) interest rates in the United States are increasing relative to the interest rates in the euro zone. 
A) a dollar can be exchanged for more euros. 
B) the United States will export more goods to France. 
C) the United States will import more goods from Germany. 
D) the United States will export fewer goods to France. 
E) interest rates in the United States are increasing relative to the interest rates in the euro zone.

Question 7

If U.S. residents boycott German goods, then

Accepted Answer

A) the demand for euros will decrease in the foreign exchange market. 
B) the supply of euros will decrease in the foreign exchange market. 
C) German goods will be more expensive in Germany. 
D) the euro will appreciate. 
E) there is no effect on the euro. 
A) the demand for euros will decrease in the foreign exchange market. 
B) the supply of euros will decrease in the foreign exchange market. 
C) German goods will be more expensive in Germany. 
D) the euro will appreciate. 
E) there is no effect on the euro.

Question 8

Suppose the foreign exchange market is in equilibrium. Now the interest rate in the United States rises while the interest rate in Germany remains the same. What will happen to the euro in the foreign exchange market? Explain.

Accepted Answer

An increase in the U.S. interest rate, a

Question 9

All else equal, a higher rate of inflation in the foreign country makes foreign goods cheaper in the domestic country.

Accepted Answer

A) True 
 B)False

Question 10

What is the theory of purchasing power parity? What does it predict about exchange rate movements?

Accepted Answer

The theory of purchasing power parity is

Question 11

Suppose the policymakers believe their country's currency is undervalued, they should apply a policy of

Accepted Answer

A) overvaluation. 
B) devaluation. 
C) revaluation. 
D) depreciation. 
E) the law of one price. 
A) overvaluation. 
B) devaluation. 
C) revaluation. 
D) depreciation. 
E) the law of one price.

Question 12

In the case of the European Union, the benefit of a fixed exchange rate system outweighed the loss of a separate monetary policy.

Accepted Answer

A) True 
 B)False

Question 13

What does it mean when the dollar appreciates? What does it mean when the dollar depreciate?

Accepted Answer

When the dollar appreciates against anot

Question 14

As a result of undervaluation,

Accepted Answer

A) domestic consumers can buy more foreign goods. 
B) exporters can sell more goods to foreign buyers. 
C) domestic currency is artificially more valuable. 
D) the government faces a flexible exchange rate. 
E) consumers pay more for domestic goods. 
A) domestic consumers can buy more foreign goods. 
B) exporters can sell more goods to foreign buyers. 
C) domestic currency is artificially more valuable. 
D) the government faces a flexible exchange rate. 
E) consumers pay more for domestic goods.

Question 15

Which of the following is a drawback for very small member states like Ireland to join the Economic and Monetary Union (EMU)?

Accepted Answer

A) Economic policy for the EMU reflects less of the particular economic conditions of smaller member states than for larger member states. 
B) Economic policy for the EMU reflects the economic conditions of smaller member states equally as larger member states. 
C) Economic policy for the EMU reflects more of the particular economic conditions of smaller member states than for larger member states. 
D) Economic policy for the EMU does not reflect the economic conditions of any of its member states. 
E) Economic policy for the EMU reflects only the economic conditions of Germany. 
A) Economic policy for the EMU reflects less of the particular economic conditions of smaller member states than for larger member states. 
B) Economic policy for the EMU reflects the economic conditions of smaller member states equally as larger member states. 
C) Economic policy for the EMU reflects more of the particular economic conditions of smaller member states than for larger member states. 
D) Economic policy for the EMU does not reflect the economic conditions of any of its member states. 
E) Economic policy for the EMU reflects only the economic conditions of Germany.

Question 16

Countries who maintain fixed exchange rates with each other are likely to more frequently employ countercyclical fiscal policy.

Accepted Answer

A) True 
 B)False

Question 17

All of the following countries are members of the Eurozone except

Accepted Answer

A) Ireland. 
B) Germany. 
C) France. 
D) Italy. 
E) the United Kingdom. 
A) Ireland. 
B) Germany. 
C) France. 
D) Italy. 
E) the United Kingdom.

Question 18

In 2015, one dollar was exchanged for 1.3 euros. In 2017, one dollar was exchanged for 1.09 euros. We know that over period 2015-2017, the euro

Accepted Answer

A) appreciated against the dollar. 
B) depreciated against the dollar. 
C) was at par with the dollar. 
D) and the dollar appreciated against all other currencies. 
E) and the dollar depreciated against all other currencies. 
A) appreciated against the dollar. 
B) depreciated against the dollar. 
C) was at par with the dollar. 
D) and the dollar appreciated against all other currencies. 
E) and the dollar depreciated against all other currencies.

Question 19

Demand for the Mexican peso is determined by

Accepted Answer

A) how stable the peso keeps its value. 
B) the demand for Mexican goods by other countries. 
C) the supply of Mexican goods to other countries. 
D) the demand for other countries' goods in those countries. 
E) the supply of other countries' goods in those countries. 
A) how stable the peso keeps its value. 
B) the demand for Mexican goods by other countries. 
C) the supply of Mexican goods to other countries. 
D) the demand for other countries' goods in those countries. 
E) the supply of other countries' goods in those countries.

Question 20

Suppose Country A pegs its currency to the dollar. If Country A wants to keep the exchange rate fixed, what are its options under each of the following scenarios? Is there an advantage to one of the options?

Accepted Answer

The answer of Suppose Country A pegs its currency to...

Exam 30: International Finance

The Economic and Monetary Union is an example of

Most countries that are members of the EMU also have a common monetary policy.

All else equal, a depreciation of the Japanese yen leads to an increase in Japan's net exports.

Between 2000 and 2005, China pegged its currency to the dollar by

Foreign exchange market intervention like devaluation or revaluation occurs

A depreciation of the dollar relative to the euro means that

If U.S. residents boycott German goods, then

Suppose the foreign exchange market is in equilibrium. Now the interest rate in the United States rises while the interest rate in Germany remains the same. What will happen to the euro in the foreign exchange market? Explain.

All else equal, a higher rate of inflation in the foreign country makes foreign goods cheaper in the domestic country.

What is the theory of purchasing power parity? What does it predict about exchange rate movements?

Suppose the policymakers believe their country's currency is undervalued, they should apply a policy of

In the case of the European Union, the benefit of a fixed exchange rate system outweighed the loss of a separate monetary policy.

What does it mean when the dollar appreciates? What does it mean when the dollar depreciate?

As a result of undervaluation,

Which of the following is a drawback for very small member states like Ireland to join the Economic and Monetary Union (EMU)?

Countries who maintain fixed exchange rates with each other are likely to more frequently employ countercyclical fiscal policy.

All of the following countries are members of the Eurozone except

In 2015, one dollar was exchanged for 1.3 euros. In 2017, one dollar was exchanged for 1.09 euros. We know that over period 2015-2017, the euro

Demand for the Mexican peso is determined by

Suppose Country A pegs its currency to the dollar. If Country A wants to keep the exchange rate fixed, what are its options under each of the following scenarios? Is there an advantage to one of the options?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

Filters