Question 1

Which one of the following would result in the dollar depreciating against the Japanese yen?

Accepted Answer

A) a fall in the Canadian interest rate 
B) a rise in the Canadian interest rate 
C) a fall in the Japanese interest rate 
D) an increase in the expected future Canadian exchange rate 
E) an increase in the Canadian interest rate differential 
A) a fall in the Canadian interest rate 
B) a rise in the Canadian interest rate 
C) a fall in the Japanese interest rate 
D) an increase in the expected future Canadian exchange rate 
E) an increase in the Canadian interest rate differential

Question 2

Which one of the following would result in the dollar appreciating against the Japanese yen?

Accepted Answer

A) a rise in the Canadian interest rate 
B) a fall in the Canadian interest rate 
C) a fall in the Japanese interest rate 
D) a decrease in the expected future Canadian exchange rate 
E) both A and C 
A) a rise in the Canadian interest rate 
B) a fall in the Canadian interest rate 
C) a fall in the Japanese interest rate 
D) a decrease in the expected future Canadian exchange rate 
E) both A and C

Question 3

Suppose that a country's government expenditures are $500 billion,net taxes are $400 billion,saving is $200 billion,and investment is $250 billion.The country has a government budget

Accepted Answer

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

Question 4

Choose the correct statements about the real exchange rate.
1.The real exchange rate is a measure of how much of one money exchanges for a unit of another money.
2.The real exchange rate is the value of the Canadian dollar expressed in units of foreign currency per Canadian dollar.
3.The real exchange rate is the relative price of Canadian-produced goods and services to foreign-produced goods and services.
4.The real exchange rate is a measure of the quantity of the real GDP of other countries that we get for a unit of Canadian real GDP.

Accepted Answer

A) Statements 1 and 2 are correct. 
B) Statements 2 and 4 are correct. 
C) Statements 1 and 3 are correct. 
D) Statements 3 and 4 are correct. 
E) Statements 2 and 3 are correct. 
A) Statements 1 and 2 are correct. 
B) Statements 2 and 4 are correct. 
C) Statements 1 and 3 are correct. 
D) Statements 3 and 4 are correct. 
E) Statements 2 and 3 are correct.

Question 5

The world's largest net borrower and debtor nation,________,borrows internationally to finance ________.

Accepted Answer

A) the United States;consumption 
B) the United States;private and public investment 
C) China;consumption 
D) China;private and public investment 
E) Japan;consumption 
A) the United States;consumption 
B) the United States;private and public investment 
C) China;consumption 
D) China;private and public investment 
E) Japan;consumption

Question 6

Suppose that a country's government expenditures are $500 billion,net taxes are $400 billion,saving is $200 billion,and investment is $250 billion.Net exports are a

Accepted Answer

A) surplus of $150 billion. 
B) surplus of $50 billion. 
C) deficit of $150 billion. 
D) deficit of $50 billion. 
E) deficit of $250 billion. 
A) surplus of $150 billion. 
B) surplus of $50 billion. 
C) deficit of $150 billion. 
D) deficit of $50 billion. 
E) deficit of $250 billion.

Question 7

All of the following statements are true except ________.

Accepted Answer

A) China's exchange rate policy increases exports in the long run 
B) China's exchange rate policy is mainly an attempt to control inflation 
C) China's exchange rate policy results in a yuan that has a lower foreign exchange rate against the U.S.dollar than it would otherwise have 
D) China's exchange rate policy does not impact the real exchange rate in the long run 
E) All of the above are true. 
A) China's exchange rate policy increases exports in the long run 
B) China's exchange rate policy is mainly an attempt to control inflation 
C) China's exchange rate policy results in a yuan that has a lower foreign exchange rate against the U.S.dollar than it would otherwise have 
D) China's exchange rate policy does not impact the real exchange rate in the long run 
E) All of the above are true.

Question 8

Canada's balance of payments accounts are the

Accepted Answer

A) current account, capital and financial account, and net interest account. 
B) capital and financial account, official settlements account, and merchandise trade account. 
C) current account, capital and financial account, and official settlements account. 
D) official settlements account, current account, and net interest account. 
E) capital and financial account, current account, and merchandise trade account. 
A) current account, capital and financial account, and net interest account. 
B) capital and financial account, official settlements account, and merchandise trade account. 
C) current account, capital and financial account, and official settlements account. 
D) official settlements account, current account, and net interest account. 
E) capital and financial account, current account, and merchandise trade account.

Question 9

If the exchange rate is too high in the foreign exchange market,

Accepted Answer

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

Question 10

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S,and 1 Canadian dollar buys 8.6 Chinese yuan.How many yuan will $1 U.S.buy?

Accepted Answer

A) 8.6 yuan 
B) 1.0 yuan 
C) 8.2 yuan 
D) 0.12 yuan 
E) 0.14 yuan 
A) 8.6 yuan 
B) 1.0 yuan 
C) 8.2 yuan 
D) 0.12 yuan 
E) 0.14 yuan

Question 11

Table 25.1.1
   
Refer to the table below to answer the following questions.
-Refer to Table 25.1.1.Between 2009 and 2010,the Canadian dollar ________ versus the euro and ________ versus the yen.

Accepted Answer

A) appreciated;depreciated 
B) appreciated;appreciated 
C) depreciated;depreciated 
D) depreciated;appreciated 
E) not changed;not changed 
A) appreciated;depreciated 
B) appreciated;appreciated 
C) depreciated;depreciated 
D) depreciated;appreciated 
E) not changed;not changed

Question 12

Choose the correct statements.
1.The exchange rate is the value of the Canadian dollar expressed in units of foreign currency per Canadian dollar.
2.The real exchange rate is the relative price of Canadian-produced goods and services to foreign-produced goods and services.
3.The exchange rate is a measure of the quantity of the real GDP of other countries that a unit of Canadian real GDP buys.
4.The exchange rate is the relative price of Canadian-produced goods and services to foreign-produced goods and services.

Accepted Answer

A) Statements 1 and 2 are correct. 
B) Statements 3 and 4 are correct. 
C) Statements 1 and 3 are correct. 
D) Statements 2 and 4 are correct. 
E) Statements 2 and 3 are correct. 
A) Statements 1 and 2 are correct. 
B) Statements 3 and 4 are correct. 
C) Statements 1 and 3 are correct. 
D) Statements 2 and 4 are correct. 
E) Statements 2 and 3 are correct.

Question 13

When would the exchange rate rise the most?

Accepted Answer

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

Question 14

If a country's central bank does not intervene in the foreign exchange market,the country has

Accepted Answer

A) a crawling peg exchange rate policy. 
B) a fixed exchange rate policy. 
C) a flexible exchange rate policy. 
D) no exchange rate policy. 
E) a responsible exchange rate policy. 
A) a crawling peg exchange rate policy. 
B) a fixed exchange rate policy. 
C) a flexible exchange rate policy. 
D) no exchange rate policy. 
E) a responsible exchange rate policy.

Question 15

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 16

The higher the exchange rate,all other things remaining the same,the

Accepted Answer

A) smaller is the supply of Canadian imports. 
B) smaller is the volume of Canadian imports. 
C) greater is the volume of Canadian imports. 
D) greater is the supply of Canadian imports. 
E) greater is the demand for Canadian exports. 
A) smaller is the supply of Canadian imports. 
B) smaller is the volume of Canadian imports. 
C) greater is the volume of Canadian imports. 
D) greater is the supply of Canadian imports. 
E) greater is the demand for Canadian exports.

Question 17

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

Question 18

Suppose initially Canada has all its international payments accounts in balance (no surplus or deficit).Then Canadian firms increase the amount they import from Japan,financing that increase by borrowing from Japan.Everything else remaining the same there will now be a current and financial account

Accepted Answer

A) surplus and a capital account surplus. 
B) surplus and a capital account deficit. 
C) deficit and a capital account surplus. 
D) deficit and a capital account deficit. 
E) surplus and a capital account balance. 
A) surplus and a capital account surplus. 
B) surplus and a capital account deficit. 
C) deficit and a capital account surplus. 
D) deficit and a capital account deficit. 
E) surplus and a capital account balance.

Question 19

Airbus is a European producer of airliners.Indian Airlines wants to buy 23 Airbus planes from Airbus because of an increased demand for world travel.The currency of India is the rupee.The currency of the European Union is the euro.As a result,________.

Accepted Answer

A) the supply curve of euros shifts rightward 
B) the supply curve of euros shifts leftward 
C) the demand curve for rupees shifts rightward 
D) the demand curve for euros shifts leftward 
E) demand curve for euros shifts rightward 
A) the supply curve of euros shifts rightward 
B) the supply curve of euros shifts leftward 
C) the demand curve for rupees shifts rightward 
D) the demand curve for euros shifts leftward 
E) demand curve for euros shifts rightward

Question 20

In the foreign exchange market,a change in which of the following will result in a movement along the demand curve for Canadian dollars?

Accepted Answer

A) the U.S.interest rate 
B) the Canadian interest rate 
C) the exchange rate 
D) the expected future exchange rate 
E) both A and B 
A) the U.S.interest rate 
B) the Canadian interest rate 
C) the exchange rate 
D) the expected future exchange rate 
E) both A and B

Exam 25: The Exchange Rate and the Balance of Payments

Which one of the following would result in the dollar depreciating against the Japanese yen?

Which one of the following would result in the dollar appreciating against the Japanese yen?

Suppose that a country's government expenditures are $500 billion,net taxes are $400 billion,saving is $200 billion,and investment is $250 billion.The country has a government budget

The world's largest net borrower and debtor nation,________,borrows internationally to finance ________.

Suppose that a country's government expenditures are $500 billion,net taxes are $400 billion,saving is $200 billion,and investment is $250 billion.Net exports are a

All of the following statements are true except ________.

Canada's balance of payments accounts are the

If the exchange rate is too high in the foreign exchange market,

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S,and 1 Canadian dollar buys 8.6 Chinese yuan.How many yuan will $1 U.S.buy?

Table 25.1.1 Refer to the table below to answer the following questions. -Refer to Table 25.1.1.Between 2009 and 2010,the Canadian dollar ________ versus the euro and ________ versus the yen.

When would the exchange rate rise the most?

If a country's central bank does not intervene in the foreign exchange market,the country has

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?

The higher the exchange rate,all other things remaining the same,the

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 initially Canada has all its international payments accounts in balance (no surplus or deficit).Then Canadian firms increase the amount they import from Japan,financing that increase by borrowing from Japan.Everything else remaining the same there will now be a current and financial account

Airbus is a European producer of airliners.Indian Airlines wants to buy 23 Airbus planes from Airbus because of an increased demand for world travel.The currency of India is the rupee.The currency of the European Union is the euro.As a result,________.

In the foreign exchange market,a change in which of the following will result in a movement along the demand curve for Canadian dollars?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

The world's largest net borrower and debtor nation,,borrows internationally to finance .

Table 25.1.1 Refer to the table below to answer the following questions. -Refer to Table 25.1.1.Between 2009 and 2010,the Canadian dollar versus the euro and versus the yen.