Question 1

The foreign exchange market is where currencies are traded for one another.

Accepted Answer

A) True 
 B)False

Question 2

Refer to Figure 36.3 for the dollar-Swiss franc foreign exchange market.Which of the following is true?

Accepted Answer

A) The U.S.dollar appreciates in value compared to the franc when supply increases from S1 to S2. 
B) The Swiss franc appreciates in value compared to the U.S.dollar when supply decreases from S2 to S1. 
C) An increase in supply from S1 to S2 could be caused by an increase in the U.S.demand for Swiss chocolate. 
D) An increase in supply from S1 to S2 could be caused by an increase in Swiss demand for U.S.corn. 
A) The U.S.dollar appreciates in value compared to the franc when supply increases from S1 to S2. 
B) The Swiss franc appreciates in value compared to the U.S.dollar when supply decreases from S2 to S1. 
C) An increase in supply from S1 to S2 could be caused by an increase in the U.S.demand for Swiss chocolate. 
D) An increase in supply from S1 to S2 could be caused by an increase in Swiss demand for U.S.corn.

Question 3

A country could correct a balance-of-payments surplus by

Accepted Answer

A) Expansionary fiscal policy. 
B) Decreasing the money supply. 
C) Increasing tariffs on imported goods. 
D) Contractionary monetary policy. 
A) Expansionary fiscal policy. 
B) Decreasing the money supply. 
C) Increasing tariffs on imported goods. 
D) Contractionary monetary policy.

Question 4

The net balance of payments is

Accepted Answer

A) The difference between exports and imports. 
B) The difference between the current account balance and the capital account balance. 
C) The sum of the current account balance and the trade account balance. 
D) The sum of the current account balance and the capital account balance. 
A) The difference between exports and imports. 
B) The difference between the current account balance and the capital account balance. 
C) The sum of the current account balance and the trade account balance. 
D) The sum of the current account balance and the capital account balance.

Question 5

The equilibrium in a foreign exchange market determines

Accepted Answer

A) The exchange rate. 
B) The balance of payments. 
C) The terms of trade. 
D) Domestic economic conditions. 
A) The exchange rate. 
B) The balance of payments. 
C) The terms of trade. 
D) Domestic economic conditions.

Question 6

Which of the following events would result in a greater demand for U.S.dollars in the foreign exchange market,ceteris paribus?

Accepted Answer

A) An increase in interest rates in the United States. 
B) An increase in interest rates in Japan. 
C) Higher tariffs imposed by the United States on imports. 
D) Higher quotas imposed by the United States on imports. 
A) An increase in interest rates in the United States. 
B) An increase in interest rates in Japan. 
C) Higher tariffs imposed by the United States on imports. 
D) Higher quotas imposed by the United States on imports.

Question 7

How can trade policy,fiscal policy,and monetary policy be used to support fixed exchange rates when there is a surplus of U.S.dollars?

Accepted Answer

Any existing trade restrictions on U.S.p

Question 8

Generally speaking,a country whose currency depreciates will experience,as a result,

Accepted Answer

A) Increasing unemployment in export sectors. 
B) Reduced aggregate demand. 
C) Inflationary pressure because the prices of imports rise. 
D) Falling interest rates from a capital outflow. 
A) Increasing unemployment in export sectors. 
B) Reduced aggregate demand. 
C) Inflationary pressure because the prices of imports rise. 
D) Falling interest rates from a capital outflow.

Question 9

Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

Accepted Answer

A) A flexible rate at which $1 = 2 pounds. 
B) A fixed rate at which $1 = 2 pounds. 
C) A fixed rate at which $2 = 1 pound. 
D) A flexible rate at which $2 = 1 pound. 
A) A flexible rate at which $1 = 2 pounds. 
B) A fixed rate at which $1 = 2 pounds. 
C) A fixed rate at which $2 = 1 pound. 
D) A flexible rate at which $2 = 1 pound.

Question 10

Excess demand for a specific foreign currency,such as the pound,implies a

Accepted Answer

A) Capital account surplus for the United States. 
B) Capital account deficit for the United States. 
C) Balance-of-payments deficit for the United States. 
D) Balance-of-payments surplus for the United States. 
A) Capital account surplus for the United States. 
B) Capital account deficit for the United States. 
C) Balance-of-payments deficit for the United States. 
D) Balance-of-payments surplus for the United States.

Question 11

Industrial countries are not usually involved in currency bailouts since they are not likely to be affected by the devaluation of another country's currency.

Accepted Answer

A) True 
 B)False

Question 12

State the case for and the case against currency bailouts.

Accepted Answer

The case for a currency bailout rests on

Question 13

A result of the Asian Crisis of 1997-1998 was

Accepted Answer

A) An increase in the value of the U.S.dollar relative to Southeast Asian currencies. 
B) A major increase in the level of U.S.exports to Southeast Asia. 
C) Political stability in many Southeast Asian countries. 
D) An increase in the value of Southeast Asian currencies relative to the U.S.dollar. 
A) An increase in the value of the U.S.dollar relative to Southeast Asian currencies. 
B) A major increase in the level of U.S.exports to Southeast Asia. 
C) Political stability in many Southeast Asian countries. 
D) An increase in the value of Southeast Asian currencies relative to the U.S.dollar.

Question 14

Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for dollars given the following situation,ceteris paribus: The Japanese remove some tariffs on American goods.

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
A) a. 
B) b. 
C) c. 
D) d.

Question 15

A summary record of a country's international economic transactions in a given time period is the

Accepted Answer

A) Balance of payments. 
B) Current account. 
C) Capital account. 
D) Exchange rate balance. 
A) Balance of payments. 
B) Current account. 
C) Capital account. 
D) Exchange rate balance.

Question 16

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the ________ U.S.currency to ________.

Accepted Answer

A) supply of;decrease 
B) supply of;increase 
C) demand for;decrease 
D) demand for;increase 
A) supply of;decrease 
B) supply of;increase 
C) demand for;decrease 
D) demand for;increase

Question 17

An abrupt depreciation of a currency whose value was fixed or managed by the government is referred to as

Accepted Answer

A) Devaluation. 
B) Revaluation. 
C) Appreciation. 
D) Depreciation. 
A) Devaluation. 
B) Revaluation. 
C) Appreciation. 
D) Depreciation.

Question 18

The U.S.demand for foreign currency arises from speculation and the

Accepted Answer

A) U.S.demand for foreign goods,services,and financial assets. 
B) Foreign demand for U.S.goods,services,and financial assets. 
C) Foreign demand for U.S.holdings of gold. 
D) Supply of goods and services from the United States. 
A) U.S.demand for foreign goods,services,and financial assets. 
B) Foreign demand for U.S.goods,services,and financial assets. 
C) Foreign demand for U.S.holdings of gold. 
D) Supply of goods and services from the United States.

Question 19

American citizens planning a vacation abroad that would require foreign currency would welcome:

Accepted Answer

A) Appreciation of the dollar. 
B) Depreciation of the dollar. 
C) Devaluation of the dollar. 
D) Appreciation of the foreign currency. 
A) Appreciation of the dollar. 
B) Depreciation of the dollar. 
C) Devaluation of the dollar. 
D) Appreciation of the foreign currency.

Question 20

If one euro is equal to 0.60 U.S.dollars,what would be the euro price of a car that costs $10,000?

Accepted Answer

A) 5,000 euros. 
B) 16,667 euros. 
C) 60,000 euros. 
D) 10,000 euros. 
A) 5,000 euros. 
B) 16,667 euros. 
C) 60,000 euros. 
D) 10,000 euros.

Exam 36: International Finance

The foreign exchange market is where currencies are traded for one another.

Refer to Figure 36.3 for the dollar-Swiss franc foreign exchange market.Which of the following is true?

A country could correct a balance-of-payments surplus by

The net balance of payments is

The equilibrium in a foreign exchange market determines

Which of the following events would result in a greater demand for U.S.dollars in the foreign exchange market,ceteris paribus?

How can trade policy,fiscal policy,and monetary policy be used to support fixed exchange rates when there is a surplus of U.S.dollars?

Generally speaking,a country whose currency depreciates will experience,as a result,

Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

Excess demand for a specific foreign currency,such as the pound,implies a

Industrial countries are not usually involved in currency bailouts since they are not likely to be affected by the devaluation of another country's currency.

State the case for and the case against currency bailouts.

A result of the Asian Crisis of 1997-1998 was

Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for dollars given the following situation,ceteris paribus: The Japanese remove some tariffs on American goods.

A summary record of a country's international economic transactions in a given time period is the

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the ________ U.S.currency to ________.

An abrupt depreciation of a currency whose value was fixed or managed by the government is referred to as

The U.S.demand for foreign currency arises from speculation and the

American citizens planning a vacation abroad that would require foreign currency would welcome:

If one euro is equal to 0.60 U.S.dollars,what would be the euro price of a car that costs $10,000?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

Global Poverty

Filters

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the U.S.currency to .