Question 1

If the expected future exchange rate rises, the currencyʹs

Accepted Answer

A)  supply increases. 
B)  supply decreases. 
C)  quantity supplied increases. 
D)  exchange rate falls. 
A)  supply increases. 
B)  supply decreases. 
C)  quantity supplied increases. 
D)  exchange rate falls.

Question 2

Relative to the yen, from 2005-2007 the U.S. dollar

Accepted Answer

A)  appreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
B)  depreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
C)  depreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
D)  appreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
A)  appreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
B)  depreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate. 
C)  depreciated due to a decrease in the interest rate differential and expectations of a lower future exchange rate. 
D)  appreciated due to an increase in the interest rate differential and expectations of a higher future exchange rate.

Question 3

If net exports is 100 and the private sector balance is 150, then the government sector balance is

Accepted Answer

A)  -50. 
B)  0. 
C)  50. 
D)  250. 
A)  -50. 
B)  0. 
C)  50. 
D)  250.

Question 4

If there is an increase in the expected future U.S. exchange rate, there is

Accepted Answer

A)  a leftward shift of the demand curve for dollars. 
B)  a downward movement along the demand curve for dollars. 
C)  an upward movement along the demand curve for dollars. 
D)  a rightward shift of the demand curve for dollars. 
A)  a leftward shift of the demand curve for dollars. 
B)  a downward movement along the demand curve for dollars. 
C)  an upward movement along the demand curve for dollars. 
D)  a rightward shift of the demand curve for dollars.

Question 5

The demand curve for U.S. dollars _________slopes downward because as the dollar U.S. goods become_________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.

Accepted Answer

A)  appreciates; more 
B)  appreciates; less 
C)  depreciates; less 
D)  depreciates; more 
A)  appreciates; more 
B)  appreciates; less 
C)  depreciates; less 
D)  depreciates; more

Question 6

When the U.S. exchange rate falls, U.S. goods become _________to foreign residents and U.S. exports _________.

Accepted Answer

A)  less expensive; increase 
B)  more expensive; increase 
C)  less expensive; decrease 
D)  more expensive; decrease 
A)  less expensive; increase 
B)  more expensive; increase 
C)  less expensive; decrease 
D)  more expensive; decrease

Question 7

When the U.S. dollar depreciates against the yen, the yen becomes___________ expensive and the
u.S. exchange rate___________ .

Accepted Answer

A)  more; falls 
B)  more; rises 
C)  less; falls 
D)  less; rises 
A)  more; falls 
B)  more; rises 
C)  less; falls 
D)  less; rises

Question 8

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when

Accepted Answer

A)  the expected future exchange rate decreases. 
B)  the U.S. interest rate rises. 
C)  foreign interest rates increase. 
D)  people expect that the dollar will depreciate. 
A)  the expected future exchange rate decreases. 
B)  the U.S. interest rate rises. 
C)  foreign interest rates increase. 
D)  people expect that the dollar will depreciate.

Question 9

$$\begin{array} { | l | l | } 
\hline \text { Component } & \begin{array} { l } 
\text { Amount } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Investment }, I & 700 \
\hline \text { Net taxes, } T & 1,300 \\hline \text { Government expenditure }, & 1,200 \
G\\hline \text { Exports, } X & 1,500 \
\hline \text { Imports }, M & 1,700 \
\hline
\end{array}$$
-In the above table, saving must be

Accepted Answer

A)  -$400 billion. 
B)  $300 billion. 
C)  -$300 billion. 
D)  $400 billion. 
A)  -$400 billion. 
B)  $300 billion. 
C)  -$300 billion. 
D)  $400 billion.

Question 10

$$\begin{array} { | l | l | } 
\hline \text { Investor } & \begin{array} { l } 
\text { Expected future value of a } \
\text { dollar (francs per doll ar) }
\end{array} \
\hline \text { Investor A } & 120 \
\hline \text { Investor B } & 100 \
\hline \text { Investor C } & 85 \
\hline
\end{array}$$
-Using the table above, if the current market value of the dollar is 125 francs,

Accepted Answer

A)  all three investors hold francs. 
B)  investor A holds dollars, but B and C hold francs. 
C)  investor A holds francs, but B and C hold dollars. 
D)  all three investors hold dollars. 
A)  all three investors hold francs. 
B)  investor A holds dollars, but B and C hold francs. 
C)  investor A holds francs, but B and C hold dollars. 
D)  all three investors hold dollars.

Question 11

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

Accepted Answer

A)  375 fish 
B)  25 fish 
C)  -375 fish 
D)  -25 fish 
A)  375 fish 
B)  25 fish 
C)  -375 fish 
D)  -25 fish

Question 12

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

Accepted Answer

A)  the exchange rate for the dollar rises. 
B)  the expected future exchange rate rises. 
C)  the U.S. interest rate differential decreases. 
D)  All of the above are correct. 
A)  the exchange rate for the dollar rises. 
B)  the expected future exchange rate rises. 
C)  the U.S. interest rate differential decreases. 
D)  All of the above are correct.

Question 13

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

Accepted Answer

A) True 
 B)False

Question 14

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

Accepted Answer

Three factors are the exchange rate, the

Question 15

If U.S. interest rates are rise relative to foreign interest rates, in the foreign exchange market the demand for U.S. dollars will decrease.

Accepted Answer

A) True 
 B)False

Question 16

The value of net exports increases when the value of___________

Accepted Answer

A)  imports of goods and services increase 
B)  imports of goods and services decrease 
C)  exports of goods and services minus imports of goods and services decreases 
D)  exports of goods and services decrease 
A)  imports of goods and services increase 
B)  imports of goods and services decrease 
C)  exports of goods and services minus imports of goods and services decreases 
D)  exports of goods and services decrease

Question 17

Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. To keep the foreign exchange value of the omega fairly steady, the Bank of Epsilon will __________enough omegas on the foreign exchange market so that the __________omegas will__________ .

Accepted Answer

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

Question 18

In France, the price of a computer is 1,227.6 euros. In Japan, the price of the same computer is 137,920 yen. If a U.S. dollar can buy 1.023 euros or 119.93 yen, then purchasing power parity__________

Accepted Answer

A)  does not hold and the computer is cheaper in France 
B)  is equal to interest rate parity and the computer is cheaper in North America 
C)  holds and the computer is the same price everywhere 
D)  does not hold and the computer is cheaper in Japan 
A)  does not hold and the computer is cheaper in France 
B)  is equal to interest rate parity and the computer is cheaper in North America 
C)  holds and the computer is the same price everywhere 
D)  does not hold and the computer is cheaper in Japan

Question 19

By definition, currency depreciation occurs when the value of

Accepted Answer

A)  one currency rises relative to another currency. 
B)  all currencies fall relative to gold. 
C)  one currency falls relative to another currency. 
D)  gold falls relative to the value of currencies. 
A)  one currency rises relative to another currency. 
B)  all currencies fall relative to gold. 
C)  one currency falls relative to another currency. 
D)  gold falls relative to the value of currencies.

Question 20

If the U.S. exchange rate rises, the price to foreigners of U.S.-produced goods and services_________
And the quantity of U.S. dollars demanded_________.

Accepted Answer

A)  falls; decreases 
B)  rises; decreases 
C)  falls; increases 
D)  rises; increases 
A)  falls; decreases 
B)  rises; decreases 
C)  falls; increases 
D)  rises; increases

If the expected future exchange rate rises, the currencyʹs

Relative to the yen, from 2005-2007 the U.S. dollar

If net exports is 100 and the private sector balance is 150, then the government sector balance is

If there is an increase in the expected future U.S. exchange rate, there is

The demand curve for U.S. dollars _slopes downward because as the dollar U.S. goods become_ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.

When the U.S. exchange rate falls, U.S. goods become _to foreign residents and U.S. exports _.

When the U.S. dollar depreciates against the yen, the yen becomes_ expensive and the u.S. exchange rate_ .

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

Component Amount (billions of dollars) Investment ,I 700 Net taxes, T 1,300 Government expenditure , 1,200 G Exports, X 1,500 Imports ,M 1,700 -In the above table, saving must be

Investor Expected future value of a dollar (francs per doll ar) Investor A 120 Investor B 100 Investor C 85 -Using the table above, if the current market value of the dollar is 125 francs,

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

If U.S. interest rates are rise relative to foreign interest rates, in the foreign exchange market the demand for U.S. dollars will decrease.

The value of net exports increases when the value of___________

Epsilon is a country whose unit of currency is the omega. New information leads people to expect that the omega will appreciate next year. To keep the foreign exchange value of the omega fairly steady, the Bank of Epsilon will enough omegas on the foreign exchange market so that the omegas will__ .

In France, the price of a computer is 1,227.6 euros. In Japan, the price of the same computer is 137,920 yen. If a U.S. dollar can buy 1.023 euros or 119.93 yen, then purchasing power parity__________

By definition, currency depreciation occurs when the value of

If the U.S. exchange rate rises, the price to foreigners of U.S.-produced goods and services_ And the quantity of U.S. dollars demanded_.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 9: The Exchange Rate and the Balance of Payments

If the expected future exchange rate rises, the currencyʹs

Relative to the yen, from 2005-2007 the U.S. dollar

If net exports is 100 and the private sector balance is 150, then the government sector balance is

If there is an increase in the expected future U.S. exchange rate, there is

The demand curve for U.S. dollars _________slopes downward because as the dollar U.S. goods become_________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.

When the U.S. exchange rate falls, U.S. goods become _________to foreign residents and U.S. exports _________.

When the U.S. dollar depreciates against the yen, the yen becomes___________ expensive and the u.S. exchange rate___________ .

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when

Component Amount (billions of dollars) Investment ,I 700 Net taxes, T 1,300 Government expenditure , 1,200 G Exports, X 1,500 Imports ,M 1,700 -In the above table, saving must be

Investor Expected future value of a dollar (francs per doll ar) Investor A 120 Investor B 100 Investor C 85 -Using the table above, if the current market value of the dollar is 125 francs,

On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?

The supply of dollars in the foreign exchange market decreases and that the supply curve shifts leftward if

Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

Name three factors in the foreign exchange market that affect either the quantity of dollars demanded or the demand for dollars. Discuss whether the factor increases or decreases the number of dollars people want to hold.

If U.S. interest rates are rise relative to foreign interest rates, in the foreign exchange market the demand for U.S. dollars will decrease.

The value of net exports increases when the value of___________

In France, the price of a computer is 1,227.6 euros. In Japan, the price of the same computer is 137,920 yen. If a U.S. dollar can buy 1.023 euros or 119.93 yen, then purchasing power parity__________

By definition, currency depreciation occurs when the value of

If the U.S. exchange rate rises, the price to foreigners of U.S.-produced goods and services_________ And the quantity of U.S. dollars demanded_________.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

The demand curve for U.S. dollars _slopes downward because as the dollar U.S. goods become_ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases.

When the U.S. exchange rate falls, U.S. goods become _to foreign residents and U.S. exports _.

When the U.S. dollar depreciates against the yen, the yen becomes_ expensive and the u.S. exchange rate_ .

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

If the U.S. exchange rate rises, the price to foreigners of U.S.-produced goods and services_ And the quantity of U.S. dollars demanded_.