Question 1

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

Accepted Answer

A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates 
A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates

Question 2

Who among the following is most likely to favor an appreciation of the U.S.dollar?

Accepted Answer

A)  a German professor visiting Chicago 
B)  an American farmer who depends on exports 
C)  an American professor on a tour of Austrian universities 
D)  Disney World in Orlando,Florida,a popular destination for foreign tourists 
A)  a German professor visiting Chicago 
B)  an American farmer who depends on exports 
C)  an American professor on a tour of Austrian universities 
D)  Disney World in Orlando,Florida,a popular destination for foreign tourists

Question 3

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

Accepted Answer

A)  $1 = 2.79 pesos 
B)  $1 = 7.90 pesos 
C)  $1 = 9.30 pesos 
D)  $1 = 27.90 pesos 
A)  $1 = 2.79 pesos 
B)  $1 = 7.90 pesos 
C)  $1 = 9.30 pesos 
D)  $1 = 27.90 pesos

Question 4

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

Accepted Answer

A)  0.01 
B)  0.04 
C)  0.28 
D)  0.40 
A)  0.01 
B)  0.04 
C)  0.28 
D)  0.40

Question 5

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

Accepted Answer

A)  It will increase demand for U.S.dollars. 
B)  It will decrease demand for U.S.dollars. 
C)  It will increase supply of U.S.dollars. 
D)  It will decrease supply of U.S.dollars. 
A)  It will increase demand for U.S.dollars. 
B)  It will decrease demand for U.S.dollars. 
C)  It will increase supply of U.S.dollars. 
D)  It will decrease supply of U.S.dollars.

Question 6

The currency of the European Union,the euro,was established as part of the Bretton Woods agreements.

Accepted Answer

A) True 
 B)False

Question 7

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

Accepted Answer

A)  floated 
B)  revalued 
C)  devalued 
D)  depreciated 
A)  floated 
B)  revalued 
C)  devalued 
D)  depreciated

Question 8

On May 11,2011,it cost 11.601 Mexican pesos to buy one U.S.dollar.How many U.S.dollars did it take to buy a Mexican peso?

Accepted Answer

A)  $11.11 
B)  $10.82 
C)  $8.92 
D)  $0.09 
A)  $11.11 
B)  $10.82 
C)  $8.92 
D)  $0.09

Question 9

Under the gold standard,a balance of payments surplus leads to an outflow of gold.

Accepted Answer

A) True 
 B)False

Question 10

In the long run,the chief determinant of exchange rate changes is a change in

Accepted Answer

A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels. 
A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels.

Question 11

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

Accepted Answer

A)  the federal budget. 
B)  the sales of assets. 
C)  the sales of military goods. 
D)  its gold supplies. 
A)  the federal budget. 
B)  the sales of assets. 
C)  the sales of military goods. 
D)  its gold supplies.

Question 12

In 2007,the value of the American dollar rose relative to the euro.

Accepted Answer

A) True 
 B)False

Question 13

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

Accepted Answer

A)  Americans decrease their travel to Germany. 
B)  the Germans add to their holdings of U.S.Treasury bills. 
C)  Americans purchase land in Germany and build factories. 
D)  American exports to Germany increase. 
A)  Americans decrease their travel to Germany. 
B)  the Germans add to their holdings of U.S.Treasury bills. 
C)  Americans purchase land in Germany and build factories. 
D)  American exports to Germany increase.

Question 14

In 2008-2009,Iceland and several Baltic states increased their interest rates.One would expect which of the following?

Accepted Answer

A)  U.S.bond prices will fall and the dollar will appreciate. 
B)  U.S.bond prices will rise and the dollar will appreciate. 
C)  U.S.bond prices will fall and the dollar will depreciate. 
D)  U.S.bond prices will rise and the dollar will depreciate. 
A)  U.S.bond prices will fall and the dollar will appreciate. 
B)  U.S.bond prices will rise and the dollar will appreciate. 
C)  U.S.bond prices will fall and the dollar will depreciate. 
D)  U.S.bond prices will rise and the dollar will depreciate.

Question 15

A country devaluing its currency reduces the official value of its currency.

Accepted Answer

A) True 
 B)False

Question 16

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Accepted Answer

A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct. 
A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct.

Question 17

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

Accepted Answer

A)  Ricardo's Law. 
B)  comparative advantage. 
C)  absolute advantage. 
D)  purchasing power parity. 
A)  Ricardo's Law. 
B)  comparative advantage. 
C)  absolute advantage. 
D)  purchasing power parity.

Question 18

The rate at which one currency is traded for another is called a(n)

Accepted Answer

A)  prime rate. 
B)  trade rate. 
C)  exchange rate. 
D)  money rate. 
A)  prime rate. 
B)  trade rate. 
C)  exchange rate. 
D)  money rate.

Question 19

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

Accepted Answer

A) True 
 B)False

Question 20

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

Accepted Answer

A)  goods 
B)  energy 
C)  assets 
D)  automobiles 
A)  goods 
B)  energy 
C)  assets 
D)  automobiles

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

Who among the following is most likely to favor an appreciation of the U.S.dollar?

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

The currency of the European Union,the euro,was established as part of the Bretton Woods agreements.

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

On May 11,2011,it cost 11.601 Mexican pesos to buy one U.S.dollar.How many U.S.dollars did it take to buy a Mexican peso?

Under the gold standard,a balance of payments surplus leads to an outflow of gold.

In the long run,the chief determinant of exchange rate changes is a change in

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

In 2007,the value of the American dollar rose relative to the euro.

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

In 2008-2009,Iceland and several Baltic states increased their interest rates.One would expect which of the following?

A country devaluing its currency reduces the official value of its currency.

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

The rate at which one currency is traded for another is called a(n)

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

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

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

Who among the following is most likely to favor an appreciation of the U.S.dollar?

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

The currency of the European Union,the euro,was established as part of the Bretton Woods agreements.

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

On May 11,2011,it cost 11.601 Mexican pesos to buy one U.S.dollar.How many U.S.dollars did it take to buy a Mexican peso?

Under the gold standard,a balance of payments surplus leads to an outflow of gold.

In the long run,the chief determinant of exchange rate changes is a change in

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

In 2007,the value of the American dollar rose relative to the euro.

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

In 2008-2009,Iceland and several Baltic states increased their interest rates.One would expect which of the following?

A country devaluing its currency reduces the official value of its currency.

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

The rate at which one currency is traded for another is called a(n)

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

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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