Question 1

The current exchange rate system for most currencies is described most accurately as one of

Accepted Answer

A)  fixed exchange rates. 
B)  freely flexible exchange rates. 
C)  gold standard rates. 
D)  dirty or managed floating. 
A)  fixed exchange rates. 
B)  freely flexible exchange rates. 
C)  gold standard rates. 
D)  dirty or managed floating.

Question 2

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

Accepted Answer

A)  the government gains more control over the economy. 
B)  floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. 
C)  exchange controls become unnecessary. 
D)  fiscal and monetary policy can focus more on domestic conditions. 
A)  the government gains more control over the economy. 
B)  floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. 
C)  exchange controls become unnecessary. 
D)  fiscal and monetary policy can focus more on domestic conditions.

Question 3

If nations erect tariffs and quotas to restrict trade,what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?

Accepted Answer

A)  They will be understated for tariffs and overstated for quotas. 
B)  They will be overstated for tariffs and understated for quotas. 
C)  They will be the correct values. 
D)  They will be incorrect. 
A)  They will be understated for tariffs and overstated for quotas. 
B)  They will be overstated for tariffs and understated for quotas. 
C)  They will be the correct values. 
D)  They will be incorrect.

Question 4

Adhering to a strict gold standard necessarily means that

Accepted Answer

A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation. 
A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation.

Question 5

If a currency decreases in value in response to market forces,this process is known as

Accepted Answer

A)  devaluation. 
B)  depreciation. 
C)  deflation. 
D)  degeneration. 
A)  devaluation. 
B)  depreciation. 
C)  deflation. 
D)  degeneration.

Question 6

The price of a currency will decrease when quantity demanded is less than quantity supplied.

Accepted Answer

A) True 
 B)False

Question 7

When one currency appreciates,another currency must depreciate.

Accepted Answer

A) True 
 B)False

Question 8

If U.S.securities pay 7 percent interest,and if Great Britain's securities pay 5 percent interest,then

Accepted Answer

A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will rise. 
D)  Great Britain's exports will fall. 
A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will rise. 
D)  Great Britain's exports will fall.

Question 9

What is the euro and why has it been created? How has its value changed relative to the U.S.dollar since its inception?

Accepted Answer

The euro is the currency created by the

Question 10

The dollar has depreciated if it buys less of a foreign currency.

Accepted Answer

A) True 
 B)False

Question 11

Inflation plays a major role in determining whether a currency is appreciating or depreciating.

Accepted Answer

A) True 
 B)False

Question 12

In each of the following scenarios,explain why the euro will appreciate or depreciate in a system of floating exchange rates.A)A recession in Germany cuts German purchases of American goods.B)American investors are attracted by prospects for profit on the Frankfurt Stock Exchange.C)Interest rates on government bonds rise in the U.S.but remain stable in Germany.

Accepted Answer

A)The recession leads to a drop in impor

Question 13

On May 12,2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

Accepted Answer

A)  0.70 
B)  1.43 
C)  1.70 
D)  2.70 
A)  0.70 
B)  1.43 
C)  1.70 
D)  2.70

Question 14

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 overvalued currency and a balance of trade deficit?

Accepted Answer

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

Question 15

If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen,the dollar has depreciated.

Accepted Answer

A) True 
 B)False

Question 16

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Accepted Answer

A)  It will increase demand for Japanese yen. 
B)  It will decrease demand for Japanese yen. 
C)  It will increase supply of Japanese yen. 
D)  It will decrease supply of Japanese yen. 
A)  It will increase demand for Japanese yen. 
B)  It will decrease demand for Japanese yen. 
C)  It will increase supply of Japanese yen. 
D)  It will decrease supply of Japanese yen.

Question 17

One method for a deficit country to correct the situation under a fixed exchange rate system is to

Accepted Answer

A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy. 
A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy.

Question 18

The idea behind the "Big Mac index" is a test of

Accepted Answer

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

Question 19

From the beginning of 2007,the value of the U.S.dollar

Accepted Answer

A)  dropped sharply against major currencies. 
B)  increased mildly against major currencies. 
C)  remained stable relative to major currencies. 
D)  fluctuated with no major trend against major currencies. 
A)  dropped sharply against major currencies. 
B)  increased mildly against major currencies. 
C)  remained stable relative to major currencies. 
D)  fluctuated with no major trend against major currencies.

Question 20

When exchange rates are set by government decree,

Accepted Answer

A)  appreciation is called devaluation. 
B)  depreciation is called devaluation. 
C)  depreciation is called deflation. 
D)  appreciation is called inflation. 
A)  appreciation is called devaluation. 
B)  depreciation is called devaluation. 
C)  depreciation is called deflation. 
D)  appreciation is called inflation.

The current exchange rate system for most currencies is described most accurately as one of

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

If nations erect tariffs and quotas to restrict trade,what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?

Adhering to a strict gold standard necessarily means that

If a currency decreases in value in response to market forces,this process is known as

The price of a currency will decrease when quantity demanded is less than quantity supplied.

When one currency appreciates,another currency must depreciate.

If U.S.securities pay 7 percent interest,and if Great Britain's securities pay 5 percent interest,then

What is the euro and why has it been created? How has its value changed relative to the U.S.dollar since its inception?

The dollar has depreciated if it buys less of a foreign currency.

Inflation plays a major role in determining whether a currency is appreciating or depreciating.

On May 12,2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

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 overvalued currency and a balance of trade deficit?

If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen,the dollar has depreciated.

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

One method for a deficit country to correct the situation under a fixed exchange rate system is to

The idea behind the "Big Mac index" is a test of

From the beginning of 2007,the value of the U.S.dollar

When exchange rates are set by government decree,

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 current exchange rate system for most currencies is described most accurately as one of

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

If nations erect tariffs and quotas to restrict trade,what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?

Adhering to a strict gold standard necessarily means that

If a currency decreases in value in response to market forces,this process is known as

The price of a currency will decrease when quantity demanded is less than quantity supplied.

When one currency appreciates,another currency must depreciate.

If U.S.securities pay 7 percent interest,and if Great Britain's securities pay 5 percent interest,then

What is the euro and why has it been created? How has its value changed relative to the U.S.dollar since its inception?

The dollar has depreciated if it buys less of a foreign currency.

Inflation plays a major role in determining whether a currency is appreciating or depreciating.

On May 12,2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

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 overvalued currency and a balance of trade deficit?

If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen,the dollar has depreciated.

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

One method for a deficit country to correct the situation under a fixed exchange rate system is to

The idea behind the "Big Mac index" is a test of

From the beginning of 2007,the value of the U.S.dollar

When exchange rates are set by government decree,

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

Filters