Question 1

When would the exchange rate fall the most?

Accepted Answer

A) The supply of and demand for dollars both decrease. 
B) The supply of and demand for dollars both increase. 
C) The supply of dollars decreases, and the demand for dollars increases. 
D) The supply of dollars increases, and the demand for dollars decreases. 
E) The Bank of Canada intervenes. 
A) The supply of and demand for dollars both decrease. 
B) The supply of and demand for dollars both increase. 
C) The supply of dollars decreases, and the demand for dollars increases. 
D) The supply of dollars increases, and the demand for dollars decreases. 
E) The Bank of Canada intervenes. D

Question 2

If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was

Accepted Answer

A) a fixed exchange rate. 
B) a flexible exchange rate. 
C) a crawling peg. 
D) too high. 
E) a nominally fixed exchange rate. 
A) a fixed exchange rate. 
B) a flexible exchange rate. 
C) a crawling peg. 
D) too high. 
E) a nominally fixed exchange rate. B

Question 3

Suppose the dollar- yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar.Then the yen has

Accepted Answer

A) appreciated against the dollar, and the dollar has depreciated against the yen. 
B) appreciated against the dollar, and the dollar has appreciated against the yen. 
C) depreciated against the dollar, and the dollar has appreciated against the yen. 
D) neither appreciated nor depreciated, but the dollar has depreciated against the yen. 
E) depreciated against the dollar, and the dollar has depreciated against the yen. 
A) appreciated against the dollar, and the dollar has depreciated against the yen. 
B) appreciated against the dollar, and the dollar has appreciated against the yen. 
C) depreciated against the dollar, and the dollar has appreciated against the yen. 
D) neither appreciated nor depreciated, but the dollar has depreciated against the yen. 
E) depreciated against the dollar, and the dollar has depreciated against the yen. A

Question 4

If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate, then

Accepted Answer

A) the Bank will print more dollars for foreign distribution. 
B) the Bank should rethink its policy. 
C) the Bank can do nothing in the short run. 
D) the Bank must sell dollars. 
E) the Bank must buy dollars. 
A) the Bank will print more dollars for foreign distribution. 
B) the Bank should rethink its policy. 
C) the Bank can do nothing in the short run. 
D) the Bank must sell dollars. 
E) the Bank must buy dollars.

Question 5

Which of the following factors influence the demand for Canadian dollars?

Accepted Answer

A) Interest rates in Canada and other countries, and the expected future exchange rate. 
B) The exchange rate and the world demand for Canadian exports. 
C) The world demand for Canadian exports and Canadian demand for imports. 
D) Both A and B are correct. 
E) Both B and C are correct. 
A) Interest rates in Canada and other countries, and the expected future exchange rate. 
B) The exchange rate and the world demand for Canadian exports. 
C) The world demand for Canadian exports and Canadian demand for imports. 
D) Both A and B are correct. 
E) Both B and C are correct.

Question 6

Suppose that a country's government expenditures are $400 billion, net taxes are $300 billion, saving is $300 billion, and investment is $250 billion.This country has a government budget

Accepted Answer

A) deficit and a private sector deficit. 
B) surplus and a private sector deficit. 
C) surplus and a private sector surplus. 
D) surplus and a private sector balance. 
E) deficit and a private sector surplus. 
A) deficit and a private sector deficit. 
B) surplus and a private sector deficit. 
C) surplus and a private sector surplus. 
D) surplus and a private sector balance. 
E) deficit and a private sector surplus.

Question 7

If the exchange rate is above the equilibrium exchange rate in the foreign exchange market,

Accepted Answer

A) a shortage exists, and the exchange rate will rise. 
B) a shortage exists, and the exchange rate will fall. 
C) a surplus exists, and the exchange rate will fall. 
D) exports are cheap, and the demand curve for Canadian dollars will shift rightward. 
E) a surplus exists, and the exchange rate will rise. 
A) a shortage exists, and the exchange rate will rise. 
B) a shortage exists, and the exchange rate will fall. 
C) a surplus exists, and the exchange rate will fall. 
D) exports are cheap, and the demand curve for Canadian dollars will shift rightward. 
E) a surplus exists, and the exchange rate will rise.

Question 8

The demand curve for dollars shifts rightward if

Accepted Answer

A) the Canadian exchange rate falls. 
B) the expected future value of the dollar falls. 
C) the Canadian interest rate differential rises. 
D) the Canadian interest rate differential falls. 
E) the price of Canadian goods and services increases. 
A) the Canadian exchange rate falls. 
B) the expected future value of the dollar falls. 
C) the Canadian interest rate differential rises. 
D) the Canadian interest rate differential falls. 
E) the price of Canadian goods and services increases.

Question 9

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand.How many yuan will one rand buy?

Accepted Answer

A) 1.43 yuan 
B) 0.80 yuan 
C) 5.77 yuan 
D) 1.25 yuan 
E) 7.20 yuan 
A) 1.43 yuan 
B) 0.80 yuan 
C) 5.77 yuan 
D) 1.25 yuan 
E) 7.20 yuan

Question 10

Use the table below to answer the following questions.
Table 9.4.1
  
-Refer to Table 9.4.1.If the official settlement balance was in surplus every year, for which year or years can you say for sure there was a current account deficit?

Accepted Answer

A) year 1 only 
B) years 3 and 4 
C) years 1 and 2 
D) years 2 and 3 
E) years 1, 2, and 3 
A) year 1 only 
B) years 3 and 4 
C) years 1 and 2 
D) years 2 and 3 
E) years 1, 2, and 3

Question 11

If the current account is in deficit and the capital and financial account is also in deficit, then the official settlements account balance is

Accepted Answer

A) positive. 
B) equal to the sum of the current account and the capital account. 
C) negative. 
D) zero. 
E) probably close to zero, but could be either negative or positive. 
A) positive. 
B) equal to the sum of the current account and the capital account. 
C) negative. 
D) zero. 
E) probably close to zero, but could be either negative or positive.

Question 12

A change in the exchange rate, other things remaining the same, brings a

Accepted Answer

A) change in the quantity of Canadian dollars supplied with no movement along the supply curve. 
B) change in the quantity of Canadian dollars supplied and a shift of the supply curve. 
C) shift of the supply curve for Canadian with a movement along the demand curve. 
D) change in the quantity of Canadian dollars supplied and a movement along the supply curve. 
E) shift of the supply curve for Canadian dollars with no movement along the supply curve. 
A) change in the quantity of Canadian dollars supplied with no movement along the supply curve. 
B) change in the quantity of Canadian dollars supplied and a shift of the supply curve. 
C) shift of the supply curve for Canadian with a movement along the demand curve. 
D) change in the quantity of Canadian dollars supplied and a movement along the supply curve. 
E) shift of the supply curve for Canadian dollars with no movement along the supply curve.

Question 13

Suppose that the following situation exists in the foreign exchange market.1 Canadian dollar buys 9.47 South African rand.If the price of a bottle of South African wine is 53 rand, what is the price in Canadian dollars if purchase power parity exists?

Accepted Answer

A) $18.02 
B) $53.00 
C) $5.55 
D) $5.60 
E) $501.91 
A) $18.02 
B) $53.00 
C) $5.55 
D) $5.60 
E) $501.91

Question 14

A debtor nation is a country that during its entire history has

Accepted Answer

A) a public sector deficit that is larger than its net exports. 
B) borrowed more from the rest of the world than it has lent to it. 
C) lent more to the rest of the world than it has borrowed from it. 
D) a government debt. 
E) invested more in the rest of the world than has been invested in it. 
A) a public sector deficit that is larger than its net exports. 
B) borrowed more from the rest of the world than it has lent to it. 
C) lent more to the rest of the world than it has borrowed from it. 
D) a government debt. 
E) invested more in the rest of the world than has been invested in it.

Question 15

If the exchange rate is higher than the Bank of Canada's target exchange rate, the Bank

Accepted Answer

A) buys dollars. 
B) raises the target exchange rate. 
C) implements interest rate parity. 
D) sells dollars. 
E) implements purchasing power parity. 
A) buys dollars. 
B) raises the target exchange rate. 
C) implements interest rate parity. 
D) sells dollars. 
E) implements purchasing power parity.

Question 16

The market fundamentals that determine the exchange rate in the long run are

Accepted Answer

A) the real exchange rate and the quantities of money in each economy. 
B) expectations. 
C) the world demand for exports and the world demand for imports. 
D) purchase power parity and interest rate parity. 
E) the interest rate differential and the world demand for exports. 
A) the real exchange rate and the quantities of money in each economy. 
B) expectations. 
C) the world demand for exports and the world demand for imports. 
D) purchase power parity and interest rate parity. 
E) the interest rate differential and the world demand for exports.

Question 17

Suppose you think that the Canadian dollar exchange rate will depreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

Accepted Answer

A) Buy Canadian dollars. 
B) Buy U.S.dollars. 
C) Sell Canadian dollars. 
D) Sell U.S.dollars. 
E) Do both B and C. 
A) Buy Canadian dollars. 
B) Buy U.S.dollars. 
C) Sell Canadian dollars. 
D) Sell U.S.dollars. 
E) Do both B and C.

Question 18

Which of the following shifts the supply curve of Canadian dollars rightward?

Accepted Answer

A) U.S.interest rates fall. 
B) Canadian interest rates rise. 
C) The dollar is expected to appreciate. 
D) A decrease in the demand for Canadian goods by foreigners 
E) An increase in the demand for foreign goods by Canadians 
A) U.S.interest rates fall. 
B) Canadian interest rates rise. 
C) The dollar is expected to appreciate. 
D) A decrease in the demand for Canadian goods by foreigners 
E) An increase in the demand for foreign goods by Canadians

Question 19

Suppose the interest rate in Canada rises and the interest rate in Japan remains the same.Interest rate parity implies that given equal risk,

Accepted Answer

A) Canadian financial investments are less profitable. 
B) the yen is expected to appreciate against the dollar. 
C) the inflation rate is higher in Japan. 
D) the yen is expected to depreciate against the dollar. 
E) Japanese financial investments are less profitable. 
A) Canadian financial investments are less profitable. 
B) the yen is expected to appreciate against the dollar. 
C) the inflation rate is higher in Japan. 
D) the yen is expected to depreciate against the dollar. 
E) Japanese financial investments are less profitable.

Question 20

Suppose you think that the Canadian dollar exchange rate will appreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

Accepted Answer

A) Buy Canadian dollars. 
B) Buy U.S.dollars. 
C) Sell Canadian dollars. 
D) Sell U.S.dollars. 
E) Do both A and D. 
A) Buy Canadian dollars. 
B) Buy U.S.dollars. 
C) Sell Canadian dollars. 
D) Sell U.S.dollars. 
E) Do both A and D.

When would the exchange rate fall the most?

If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was

Suppose the dollar- yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar.Then the yen has

If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate, then

Which of the following factors influence the demand for Canadian dollars?

Suppose that a country's government expenditures are $400 billion, net taxes are $300 billion, saving is $300 billion, and investment is $250 billion.This country has a government budget

If the exchange rate is above the equilibrium exchange rate in the foreign exchange market,

The demand curve for dollars shifts rightward if

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand.How many yuan will one rand buy?

Use the table below to answer the following questions. Table 9.4.1 -Refer to Table 9.4.1.If the official settlement balance was in surplus every year, for which year or years can you say for sure there was a current account deficit?

If the current account is in deficit and the capital and financial account is also in deficit, then the official settlements account balance is

A change in the exchange rate, other things remaining the same, brings a

Suppose that the following situation exists in the foreign exchange market.1 Canadian dollar buys 9.47 South African rand.If the price of a bottle of South African wine is 53 rand, what is the price in Canadian dollars if purchase power parity exists?

A debtor nation is a country that during its entire history has

If the exchange rate is higher than the Bank of Canada's target exchange rate, the Bank

The market fundamentals that determine the exchange rate in the long run are

Suppose you think that the Canadian dollar exchange rate will depreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

Which of the following shifts the supply curve of Canadian dollars rightward?

Suppose the interest rate in Canada rises and the interest rate in Japan remains the same.Interest rate parity implies that given equal risk,

Suppose you think that the Canadian dollar exchange rate will appreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

When would the exchange rate fall the most?

If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was

Suppose the dollar- yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar.Then the yen has

If the Bank of Canada sets a target exchange rate that is higher than the current exchange rate, then

Which of the following factors influence the demand for Canadian dollars?

Suppose that a country's government expenditures are $400 billion, net taxes are $300 billion, saving is $300 billion, and investment is $250 billion.This country has a government budget

If the exchange rate is above the equilibrium exchange rate in the foreign exchange market,

The demand curve for dollars shifts rightward if

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand.How many yuan will one rand buy?

Use the table below to answer the following questions. Table 9.4.1 -Refer to Table 9.4.1.If the official settlement balance was in surplus every year, for which year or years can you say for sure there was a current account deficit?

If the current account is in deficit and the capital and financial account is also in deficit, then the official settlements account balance is

A change in the exchange rate, other things remaining the same, brings a

Suppose that the following situation exists in the foreign exchange market.1 Canadian dollar buys 9.47 South African rand.If the price of a bottle of South African wine is 53 rand, what is the price in Canadian dollars if purchase power parity exists?

A debtor nation is a country that during its entire history has

If the exchange rate is higher than the Bank of Canada's target exchange rate, the Bank

The market fundamentals that determine the exchange rate in the long run are

Suppose you think that the Canadian dollar exchange rate will depreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

Which of the following shifts the supply curve of Canadian dollars rightward?

Suppose the interest rate in Canada rises and the interest rate in Japan remains the same.Interest rate parity implies that given equal risk,

Suppose you think that the Canadian dollar exchange rate will appreciate against the U.S.dollar over the next month.What should you do now in anticipation of profit?

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters