Question 1

The exchange rate is determined in the commodities markets.

Accepted Answer

A) True 
 B)False

Question 2

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

Accepted Answer

A) True 
 B)False

Question 3

All other things equal, a contractionary monetary policy will cause the domestic currency to appreciate.

Accepted Answer

A) True 
 B)False

Question 4

If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; decrease

Question 5

When a Japanese investor buys stock in General Motors, the _____ account is affected.

Accepted Answer

A)  current 
B)  financial 
C)  reserve 
D)  foreign exchange 
A)  current 
B)  financial 
C)  reserve 
D)  foreign exchange

Question 6

Suppose that the United States and European Union are the only trading partners in the world. If interest rates in the United States are significantly lower than those in the European Union, we would expect the:

Accepted Answer

A)  supply of the dollar to fall, appreciating the dollar. 
B)  demand for the dollar to fall, depreciating the dollar. 
C)  supply of euros to increase, depreciating the euro. 
D)  demand for euros to decrease, depreciating the euro. 
A)  supply of the dollar to fall, appreciating the dollar. 
B)  demand for the dollar to fall, depreciating the dollar. 
C)  supply of euros to increase, depreciating the euro. 
D)  demand for euros to decrease, depreciating the euro.

Question 7

A revaluation will make exports less expensive and imports more expensive.

Accepted Answer

A) True 
 B)False

Question 8

If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate _____, demand for the domestic currency _____, supply of the domestic currency _____, and the effect on the exchange rate is _____.

Accepted Answer

A)  falls; falls; rises; ambiguous 
B)  rises; rises; falls; an increase 
C)  falls; falls; rises; a decrease 
D)  falls; remains unchanged; rises; a decrease 
A)  falls; falls; rises; ambiguous 
B)  rises; rises; falls; an increase 
C)  falls; falls; rises; a decrease 
D)  falls; remains unchanged; rises; a decrease

Question 9

In terms of foreign currency, a revaluation makes:

Accepted Answer

A)  domestic goods cheaper relative to foreign goods. 
B)  both domestic and foreign goods less expensive. 
C)  both domestic and foreign goods more expensive. 
D)  domestic goods more expensive relative to foreign goods. 
A)  domestic goods cheaper relative to foreign goods. 
B)  both domestic and foreign goods less expensive. 
C)  both domestic and foreign goods more expensive. 
D)  domestic goods more expensive relative to foreign goods.

Question 10

A current account deficit is generally a result of:

Accepted Answer

A)  imports exceeding exports. 
B)  U.S. purchases of bonds issued by foreign corporations. 
C)  a large amount of U.S. purchases of foreign real estate. 
D)  exports exceeding imports. 
A)  imports exceeding exports. 
B)  U.S. purchases of bonds issued by foreign corporations. 
C)  a large amount of U.S. purchases of foreign real estate. 
D)  exports exceeding imports.

Question 11

A person from the U.S. deposits $10,000 in an account in a London bank. In the U.S. balance of payments, this transaction causes the balance on the _____ account to _____.

Accepted Answer

A)  financial; increase 
B)  financial; decrease 
C)  current; decrease 
D)  current; increase 
A)  financial; increase 
B)  financial; decrease 
C)  current; decrease 
D)  current; increase

Question 12

If a government wants to increase the value of its currency in foreign exchange markets, it can:

Accepted Answer

A)  use contractionary monetary policy. 
B)  use expansionary monetary policy. 
C)  decrease interest rates. 
D)  sell its currency. 
A)  use contractionary monetary policy. 
B)  use expansionary monetary policy. 
C)  decrease interest rates. 
D)  sell its currency.

Question 13

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

Accepted Answer

A)  allowing the price of currency to rise. 
B)  allowing the price of currency to fall. 
C)  buying assets from other countries. 
D)  selling assets to other countries. 
A)  allowing the price of currency to rise. 
B)  allowing the price of currency to fall. 
C)  buying assets from other countries. 
D)  selling assets to other countries.

Question 14

Use the following to answer questions:  
-(Figure: Exchange Market Intervention) Refer to panel (a) in Figure: Exchange Market Intervention. Which approach could the Genovian government use to raise the value of the geno above its present equilibrium exchange rate and into the target range?

Accepted Answer

A)  use its own currency to buy U.S. dollars 
B)  shift the demand for genos to the right by raising interest rates in Genovia 
C)  eliminate the exchange controls that limit the right of Genovian citizens to buy U.S. dollars 
D)  tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens 
A)  use its own currency to buy U.S. dollars 
B)  shift the demand for genos to the right by raising interest rates in Genovia 
C)  eliminate the exchange controls that limit the right of Genovian citizens to buy U.S. dollars 
D)  tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens

Question 15

A reduction in the value of a currency that is set under a fixed exchange rate regime is a(n):

Accepted Answer

A)  depreciation. 
B)  devaluation. 
C)  appreciation. 
D)  revaluation. 
A)  depreciation. 
B)  devaluation. 
C)  appreciation. 
D)  revaluation.

Question 16

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5, 2012. This implies that during this period the euro _____ and the dollar _____.

Accepted Answer

A)  depreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; fluctuated 
D)  appreciated; did not change 
A)  depreciated; appreciated 
B)  appreciated; depreciated 
C)  depreciated; fluctuated 
D)  appreciated; did not change

Question 17

The real exchange rate between the U.S. dollar and the Indian rupee is the:

Accepted Answer

A)  exchange rate between the dollar and the rupee. 
B)  exchange rate between the dollar and the rupee divided by the price level in India. 
C)  amount of Indian rupees per dollar multiplied by the relative price levels in the United States and India. 
D)  official exchange rate between the dollar and the rupee quoted by the banks in the United States and India. 
A)  exchange rate between the dollar and the rupee. 
B)  exchange rate between the dollar and the rupee divided by the price level in India. 
C)  amount of Indian rupees per dollar multiplied by the relative price levels in the United States and India. 
D)  official exchange rate between the dollar and the rupee quoted by the banks in the United States and India.

Question 18

An appreciated dollar will cause aggregate demand to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  fluctuate randomly.

Question 19

Foreign exchange controls decrease the costs of red tape and corruption surrounding international trade.

Accepted Answer

A) True 
 B)False

Question 20

Under a floating exchange rate regime, raising the interest rate does NOT:

Accepted Answer

A)  increase foreign imports. 
B)  reduce capital outflows. 
C)  increase domestic investment spending. 
D)  reduce domestic exports. 
A)  increase foreign imports. 
B)  reduce capital outflows. 
C)  increase domestic investment spending. 
D)  reduce domestic exports.

The exchange rate is determined in the commodities markets.

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

All other things equal, a contractionary monetary policy will cause the domestic currency to appreciate.

If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will _ and exports will _.

When a Japanese investor buys stock in General Motors, the _____ account is affected.

Suppose that the United States and European Union are the only trading partners in the world. If interest rates in the United States are significantly lower than those in the European Union, we would expect the:

A revaluation will make exports less expensive and imports more expensive.

If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate ___, demand for the domestic currency _, supply of the domestic currency _, and the effect on the exchange rate is ___.

In terms of foreign currency, a revaluation makes:

A current account deficit is generally a result of:

A person from the U.S. deposits $10,000 in an account in a London bank. In the U.S. balance of payments, this transaction causes the balance on the _ account to _.

If a government wants to increase the value of its currency in foreign exchange markets, it can:

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

Use the following to answer questions: -(Figure: Exchange Market Intervention) Refer to panel (a) in Figure: Exchange Market Intervention. Which approach could the Genovian government use to raise the value of the geno above its present equilibrium exchange rate and into the target range?

A reduction in the value of a currency that is set under a fixed exchange rate regime is a(n):

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5, 2012. This implies that during this period the euro _ and the dollar _.

The real exchange rate between the U.S. dollar and the Indian rupee is the:

An appreciated dollar will cause aggregate demand to:

Foreign exchange controls decrease the costs of red tape and corruption surrounding international trade.

Under a floating exchange rate regime, raising the interest rate does NOT:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

Exam 18: International Macroeconomics

The exchange rate is determined in the commodities markets.

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

All other things equal, a contractionary monetary policy will cause the domestic currency to appreciate.

If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____.

When a Japanese investor buys stock in General Motors, the _____ account is affected.

Suppose that the United States and European Union are the only trading partners in the world. If interest rates in the United States are significantly lower than those in the European Union, we would expect the:

A revaluation will make exports less expensive and imports more expensive.

If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate _____, demand for the domestic currency _____, supply of the domestic currency _____, and the effect on the exchange rate is _____.

In terms of foreign currency, a revaluation makes:

A current account deficit is generally a result of:

A person from the U.S. deposits $10,000 in an account in a London bank. In the U.S. balance of payments, this transaction causes the balance on the _____ account to _____.

If a government wants to increase the value of its currency in foreign exchange markets, it can:

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

Use the following to answer questions: -(Figure: Exchange Market Intervention) Refer to panel (a) in Figure: Exchange Market Intervention. Which approach could the Genovian government use to raise the value of the geno above its present equilibrium exchange rate and into the target range?

A reduction in the value of a currency that is set under a fixed exchange rate regime is a(n):

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5, 2012. This implies that during this period the euro _____ and the dollar _____.

The real exchange rate between the U.S. dollar and the Indian rupee is the:

An appreciated dollar will cause aggregate demand to:

Foreign exchange controls decrease the costs of red tape and corruption surrounding international trade.

Under a floating exchange rate regime, raising the interest rate does NOT:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

Filters

If the U.S. dollar depreciates relative to currencies in other countries, then U.S. imports will _ and exports will _.

If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate ___, demand for the domestic currency _, supply of the domestic currency _, and the effect on the exchange rate is ___.

A person from the U.S. deposits $10,000 in an account in a London bank. In the U.S. balance of payments, this transaction causes the balance on the _ account to _.

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.24 on July 5, 2012. This implies that during this period the euro _ and the dollar _.