Question 1

The dollar appreciates against the euro when U.S.demand for European goods increases.

Accepted Answer

A) True 
 B)False

Question 2

The Bretton Woods system worked fairly well for a number of years,but it finally broke down over

Accepted Answer

A)  lack of agreement on how to settle the problems of the surplus nations. 
B)  its inability to devalue the U.S.dollar. 
C)  the huge debts of the IMF to less-developed countries. 
D)  the controversies generated by surplus nations wanting to devalue their currencies. 
A)  lack of agreement on how to settle the problems of the surplus nations. 
B)  its inability to devalue the U.S.dollar. 
C)  the huge debts of the IMF to less-developed countries. 
D)  the controversies generated by surplus nations wanting to devalue their currencies.

Question 3

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

Accepted Answer

A)  depreciate 
B)  devalue 
C)  revalue 
D)  appreciate 
A)  depreciate 
B)  devalue 
C)  revalue 
D)  appreciate

Question 4

Figure 19-3  
-Of the graphs in Figure 19-3,where the dotted line shows the actual exchange rate,which one shows a country with an undervalued currency and a balance of trade surplus?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 5

Which of the following companies would gain from foreign currency depreciation?

Accepted Answer

A)  companies which borrow in foreign currency. 
B)  companies which export goods and services. 
C)  companies which invest in the foreign equity markets. 
D)  companies which buy bonds issued by the foreign government. 
A)  companies which borrow in foreign currency. 
B)  companies which export goods and services. 
C)  companies which invest in the foreign equity markets. 
D)  companies which buy bonds issued by the foreign government.

Question 6

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Accepted Answer

A)  inflation for deficit countries and recessions for surplus countries. 
B)  no change for surplus countries,tax cuts for deficit countries. 
C)  inflation for surplus countries and recessions for deficit countries. 
D)  sales of gold for deficit countries and revaluations for surplus countries. 
A)  inflation for deficit countries and recessions for surplus countries. 
B)  no change for surplus countries,tax cuts for deficit countries. 
C)  inflation for surplus countries and recessions for deficit countries. 
D)  sales of gold for deficit countries and revaluations for surplus countries.

Question 7

Exchange rates determined by the forces of demand and supply are called

Accepted Answer

A)  fixed exchange rates. 
B)  floating exchange rates. 
C)  equilibrium exchange rates. 
D)  dirty exchange rates. 
A)  fixed exchange rates. 
B)  floating exchange rates. 
C)  equilibrium exchange rates. 
D)  dirty exchange rates.

Question 8

To "cure" their balance of payments deficits without altering exchange rates,Southeast Asian countries in 1997 were forced to create

Accepted Answer

A)  more inflation. 
B)  recessions. 
C)  faster economic growth. 
D)  money at an accelerated rate. 
A)  more inflation. 
B)  recessions. 
C)  faster economic growth. 
D)  money at an accelerated rate.

Question 9

Figure 19-1  
-Of the graphs in Figure 19-1,which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 10

In a floating exchange market,the exchange rate for pesos and yen will not change when:

Accepted Answer

A)  ​the yen trades at a rate below the equilibrium level 
B)  ​the peso trades at a rate above the equilibrium level 
C)  ​the currencies trade at the equilibrium exchange rate 
D)  ​it will change in all of these situations 
A)  ​the yen trades at a rate below the equilibrium level 
B)  ​the peso trades at a rate above the equilibrium level 
C)  ​the currencies trade at the equilibrium exchange rate 
D)  ​it will change in all of these situations

Question 11

Explain three factors that would cause the dollar to appreciate.

Accepted Answer

An increase in the demand for U.S.export

Question 12

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls,U.S.

Accepted Answer

A)  tariffs will automatically rise. 
B)  exports will rise. 
C)  imports will fall. 
D)  exports will fall. 
A)  tariffs will automatically rise. 
B)  exports will rise. 
C)  imports will fall. 
D)  exports will fall.

Question 13

Under the gold standard of a century ago,the world's commerce

Accepted Answer

A)  nearly collapsed before the beginning of World War I. 
B)  was at the mercy of gold discoveries. 
C)  grew steadily without interruption from monetary disturbances. 
D)  grew when the gold stock grew slowly,and shrank when gold discoveries increased. 
A)  nearly collapsed before the beginning of World War I. 
B)  was at the mercy of gold discoveries. 
C)  grew steadily without interruption from monetary disturbances. 
D)  grew when the gold stock grew slowly,and shrank when gold discoveries increased.

Question 14

Assuming free trade between countries,exchange rates will change so that goods cost the same in all countries.This concept is known as the

Accepted Answer

A)  long-run equilibrium theory. 
B)  exchange rate equalization theory. 
C)  interest rate parity theory. 
D)  purchasing power parity theory. 
A)  long-run equilibrium theory. 
B)  exchange rate equalization theory. 
C)  interest rate parity theory. 
D)  purchasing power parity theory.

Question 15

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

Accepted Answer

A) True 
 B)False

Question 16

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Accepted Answer

Argentina was maintaining a fixed exchan

Question 17

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

Accepted Answer

A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard 
A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard

Question 18

In 2001,the Argentine peso was overvalued relative to the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 19

The purchasing power parity theory of exchange rate determination states that

Accepted Answer

A)  in the short run,rates will adjust to parity. 
B)  in the long run,the rate reflects differences in price levels between the two countries. 
C)  in the long run,a government agency sets the rate at parity. 
D)  in the short run,the cost of labor really sets the exchange rate. 
A)  in the short run,rates will adjust to parity. 
B)  in the long run,the rate reflects differences in price levels between the two countries. 
C)  in the long run,a government agency sets the rate at parity. 
D)  in the short run,the cost of labor really sets the exchange rate.

Question 20

At any given moment there is one exchange rate

Accepted Answer

A)  for currencies in the free world. 
B)  between every pair of currencies. 
C)  for all the world's currencies. 
D)  established by the Federal Reserve Board. 
A)  for currencies in the free world. 
B)  between every pair of currencies. 
C)  for all the world's currencies. 
D)  established by the Federal Reserve Board.

The dollar appreciates against the euro when U.S.demand for European goods increases.

The Bretton Woods system worked fairly well for a number of years,but it finally broke down over

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

Figure 19-3 -Of the graphs in Figure 19-3,where the dotted line shows the actual exchange rate,which one shows a country with an undervalued currency and a balance of trade surplus?

Which of the following companies would gain from foreign currency depreciation?

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Exchange rates determined by the forces of demand and supply are called

To "cure" their balance of payments deficits without altering exchange rates,Southeast Asian countries in 1997 were forced to create

Figure 19-1 -Of the graphs in Figure 19-1,which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

In a floating exchange market,the exchange rate for pesos and yen will not change when:

Explain three factors that would cause the dollar to appreciate.

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls,U.S.

Under the gold standard of a century ago,the world's commerce

Assuming free trade between countries,exchange rates will change so that goods cost the same in all countries.This concept is known as the

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

In 2001,the Argentine peso was overvalued relative to the U.S.dollar.

The purchasing power parity theory of exchange rate determination states that

At any given moment there is one exchange rate

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and The Macroeconomy

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Exam 19: The International Monetary System Order Or Disorder

The dollar appreciates against the euro when U.S.demand for European goods increases.

The Bretton Woods system worked fairly well for a number of years,but it finally broke down over

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

Figure 19-3 -Of the graphs in Figure 19-3,where the dotted line shows the actual exchange rate,which one shows a country with an undervalued currency and a balance of trade surplus?

Which of the following companies would gain from foreign currency depreciation?

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Exchange rates determined by the forces of demand and supply are called

To "cure" their balance of payments deficits without altering exchange rates,Southeast Asian countries in 1997 were forced to create

Figure 19-1 -Of the graphs in Figure 19-1,which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

In a floating exchange market,the exchange rate for pesos and yen will not change when:

Explain three factors that would cause the dollar to appreciate.

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls,U.S.

Under the gold standard of a century ago,the world's commerce

Assuming free trade between countries,exchange rates will change so that goods cost the same in all countries.This concept is known as the

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

In 2001,the Argentine peso was overvalued relative to the U.S.dollar.

The purchasing power parity theory of exchange rate determination states that

At any given moment there is one exchange rate

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and The Macroeconomy

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