Question 1

The purchasing power parity theory is a good predictor of:

Accepted Answer

A) changes in exchange rates between two third world nations. 
B) the long-run relationship between changes in the price level and the exchange rate of two countries. 
C) interest rate differentials between two countries when there are strong barriers preventing trade between the two countries. 
D) how intervention in exchange markets by central banks influences prices in various countries. 
E) the day-to-day relationship between changes in the price level and the exchange rate of two countries. 
A) changes in exchange rates between two third world nations. 
B) the long-run relationship between changes in the price level and the exchange rate of two countries. 
C) interest rate differentials between two countries when there are strong barriers preventing trade between the two countries. 
D) how intervention in exchange markets by central banks influences prices in various countries. 
E) the day-to-day relationship between changes in the price level and the exchange rate of two countries.

Question 2

If the U.S.dollar depreciates in the foreign exchange market,American exports will _____ and American imports will _____.

Accepted Answer

A) be more expensive;be more expensive 
B) be more expensive;be less expensive 
C) be less expensive;be less expensive 
D) be less expensive;be more expensive 
E) decrease;increase 
A) be more expensive;be more expensive 
B) be more expensive;be less expensive 
C) be less expensive;be less expensive 
D) be less expensive;be more expensive 
E) decrease;increase

Question 3

A floating exchange rate:

Accepted Answer

A) is determined by the national governments involved. 
B) remains extremely stable over long periods of time. 
C) is determined by the actions of central banks. 
D) is allowed to vary only within a narrow range. 
E) adjusts in response to market forces. 
A) is determined by the national governments involved. 
B) remains extremely stable over long periods of time. 
C) is determined by the actions of central banks. 
D) is allowed to vary only within a narrow range. 
E) adjusts in response to market forces.

Question 4

If $1 equals 2 euros,then 1 euro equals _____.

Accepted Answer

A) $4.00 
B) $2.00 
C) $0.50 
D) $1.00 
E) $0.25 
A) $4.00 
B) $2.00 
C) $0.50 
D) $1.00 
E) $0.25

Question 5

Under fixed exchange rates,government officials have limited roles to play in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 6

As the price of foreign exchange decreases relative to the U.S.dollar,the:

Accepted Answer

A) products made in the U.S.become cheaper for foreigners. 
B) goods made in foreign countries become cheaper for Americans. 
C) amount of foreign currency required to purchase a unit of U.S.dollar increases. 
D) U.S.demand curve for foreign exchange shifts to the right. 
E) supply curve of foreign exchange to U.S.markets decreases. 
A) products made in the U.S.become cheaper for foreigners. 
B) goods made in foreign countries become cheaper for Americans. 
C) amount of foreign currency required to purchase a unit of U.S.dollar increases. 
D) U.S.demand curve for foreign exchange shifts to the right. 
E) supply curve of foreign exchange to U.S.markets decreases.

Question 7

Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?

Accepted Answer

A) Purchasing the basket of goods from the U.S.and selling it in Britain will lead to a profit. 
B) An increase in the demand for pounds will lead to an increase in the price of pounds. 
C) An increase in the demand for dollars will lead to an increase in the price of dollars. 
D) An increase in the demand for dollars will lead to a decrease in the price of dollars. 
E) An increase in the demand for pounds will lead to a decrease in the price of pounds. 
A) Purchasing the basket of goods from the U.S.and selling it in Britain will lead to a profit. 
B) An increase in the demand for pounds will lead to an increase in the price of pounds. 
C) An increase in the demand for dollars will lead to an increase in the price of dollars. 
D) An increase in the demand for dollars will lead to a decrease in the price of dollars. 
E) An increase in the demand for pounds will lead to a decrease in the price of pounds.

Question 8

If the U.S.dollar appreciates relative to the Brazilian real,then:

Accepted Answer

A) the U.S.dollar per real exchange rate will increase. 
B) U.S.goods become less expensive in Brazil. 
C) Brazilian goods become more expensive in the U.S. 
D) Brazilian investors will pay fewer reals to buy one unit of U.S.dollar. 
E) the U.S.will import more goods and services from Brazil. 
A) the U.S.dollar per real exchange rate will increase. 
B) U.S.goods become less expensive in Brazil. 
C) Brazilian goods become more expensive in the U.S. 
D) Brazilian investors will pay fewer reals to buy one unit of U.S.dollar. 
E) the U.S.will import more goods and services from Brazil.

Question 9

Managed float means:

Accepted Answer

A) a fixed exchange rate system with regularly scheduled periodic devaluations. 
B) a freely floating exchange rate system. 
C) a combination of freely floating exchange rates with occasional intervention by central banks. 
D) a fixed exchange rate system managed by the European Community. 
E) a flexible exchange rate system managed entirely by the IMF. 
A) a fixed exchange rate system with regularly scheduled periodic devaluations. 
B) a freely floating exchange rate system. 
C) a combination of freely floating exchange rates with occasional intervention by central banks. 
D) a fixed exchange rate system managed by the European Community. 
E) a flexible exchange rate system managed entirely by the IMF.

Question 10

According to the purchasing power parity theory,in the long run:

Accepted Answer

A) the exchange rate between any two currencies should be equal all over the world. 
B) the value of the U.S.dollar should equal the value of the pound which should equal the value of the yen. 
C) inflation rates should equalize around the world. 
D) interest rates should equalize around the world. 
E) the exchange rate between the currencies of two countries should reflect the differences in price levels in the two countries. 
A) the exchange rate between any two currencies should be equal all over the world. 
B) the value of the U.S.dollar should equal the value of the pound which should equal the value of the yen. 
C) inflation rates should equalize around the world. 
D) interest rates should equalize around the world. 
E) the exchange rate between the currencies of two countries should reflect the differences in price levels in the two countries.

Question 11

Which of the following events would not be recorded in the U.S.balance of payments?

Accepted Answer

A) The increase in the money supply of a foreign nation 
B) Oxfam America,a U.S.relief agency,sending rice to drought victims in sub-Saharan Africa 
C) Oxfam America,a U.S.relief agency,sending wheat to drought victims in sub-Saharan Africa 
D) The Pentagon stationing troops in Saudi Arabia 
E) U.S.exporting computer software and imports oil from Iraq 
A) The increase in the money supply of a foreign nation 
B) Oxfam America,a U.S.relief agency,sending rice to drought victims in sub-Saharan Africa 
C) Oxfam America,a U.S.relief agency,sending wheat to drought victims in sub-Saharan Africa 
D) The Pentagon stationing troops in Saudi Arabia 
E) U.S.exporting computer software and imports oil from Iraq

Question 12

The current international monetary system is a _____.

Accepted Answer

A) flexible exchange rate system 
B) fixed exchange rate system 
C) system combining fixed and flexible exchange rates 
D) gold standard 
E) gold exchange rate system 
A) flexible exchange rate system 
B) fixed exchange rate system 
C) system combining fixed and flexible exchange rates 
D) gold standard 
E) gold exchange rate system

Question 13

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen,the dollar is said to have appreciated and the yen is said to have depreciated.

Accepted Answer

A) True 
 B)False

Question 14

Fixed exchange rates are more volatile than floating exchange rates.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a basket of goods that costs $400 in the United States costs only £200 in Britain and the current exchange rate is $1 per pound.According to the purchasing power parity theory,which of the following statements explains the reason behind a higher equilibrium exchange rate than $1 per pound?

Accepted Answer

A) The same basket of goods could be purchased in Britain for £200 and sold in the United States for $400,and the $400 could be used to purchase £400 for a £200 profit. 
B) The basket of goods could be purchased in Britain for £200 and sold in the United States for $200,and the $200 could be used to buy £200 for a £500 profit. 
C) The basket of goods could be purchased in the United States for $400 and sold in Britain for £400,and the £400 could be used to buy $1,400 for a £1,000 profit. 
D) The basket of goods could be purchased in the United States for $200 and sold in Britain for £400,and the £400 could be used to buy $800 for a $400 profit. 
E) The basket of goods could be purchased in the United States for $200 and sold in Britain for £400,and the £400 could be used to buy $900 for a £500 profit. 
A) The same basket of goods could be purchased in Britain for £200 and sold in the United States for $400,and the $400 could be used to purchase £400 for a £200 profit. 
B) The basket of goods could be purchased in Britain for £200 and sold in the United States for $200,and the $200 could be used to buy £200 for a £500 profit. 
C) The basket of goods could be purchased in the United States for $400 and sold in Britain for £400,and the £400 could be used to buy $1,400 for a £1,000 profit. 
D) The basket of goods could be purchased in the United States for $200 and sold in Britain for £400,and the £400 could be used to buy $800 for a $400 profit. 
E) The basket of goods could be purchased in the United States for $200 and sold in Britain for £400,and the £400 could be used to buy $900 for a £500 profit.

Question 16

A country runs a deficit in its current account if:

Accepted Answer

A) it consumes less goods and services compared to what it produces. 
B) the interest and dividends earned by its residents on foreign assets exceed the interest and dividends earned by foreigners who invest in domestic assets. 
C) it follows the double-entry bookkeeping requirement that total debits must equal total credits. 
D) foreign currency received from exports and transfers exceeds the foreign exchange needed to pay for imports and to make unilateral transfers. 
E) foreign currency received from exports and transfers is less than the foreign exchange needed to pay for imports and to make unilateral transfers. 
A) it consumes less goods and services compared to what it produces. 
B) the interest and dividends earned by its residents on foreign assets exceed the interest and dividends earned by foreigners who invest in domestic assets. 
C) it follows the double-entry bookkeeping requirement that total debits must equal total credits. 
D) foreign currency received from exports and transfers exceeds the foreign exchange needed to pay for imports and to make unilateral transfers. 
E) foreign currency received from exports and transfers is less than the foreign exchange needed to pay for imports and to make unilateral transfers.

Question 17

The merchandise trade balance does not include:

Accepted Answer

A) exports of refrigerators. 
B) imports of automobiles. 
C) exports of agricultural products. 
D) shipping and insurance services. 
E) imports of food items with heavy tariffs. 
A) exports of refrigerators. 
B) imports of automobiles. 
C) exports of agricultural products. 
D) shipping and insurance services. 
E) imports of food items with heavy tariffs.

Question 18

The government of a country is not considered a resident while calculating the balance of payments.

Accepted Answer

A) True 
 B)False

Question 19

The International Monetary Fund was founded in _____.

Accepted Answer

A) Paris 
B) New York 
C) Washington 
D) Bretton Woods 
A) Paris 
B) New York 
C) Washington 
D) Bretton Woods

Question 20

If the U.S.dollar depreciates,it means that:

Accepted Answer

A) the value of the U.S.dollar has increased. 
B) the value of foreign exchange has decreased. 
C) fewer U.S.dollars are required to purchase foreign exchange. 
D) more U.S.dollars are required to purchase foreign exchange. 
E) exports will fall. 
A) the value of the U.S.dollar has increased. 
B) the value of foreign exchange has decreased. 
C) fewer U.S.dollars are required to purchase foreign exchange. 
D) more U.S.dollars are required to purchase foreign exchange. 
E) exports will fall.

The purchasing power parity theory is a good predictor of:

If the U.S.dollar depreciates in the foreign exchange market,American exports will _ and American imports will _.

A floating exchange rate:

If $1 equals 2 euros,then 1 euro equals _____.

Under fixed exchange rates,government officials have limited roles to play in the foreign exchange market.

As the price of foreign exchange decreases relative to the U.S.dollar,the:

Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?

If the U.S.dollar appreciates relative to the Brazilian real,then:

Managed float means:

According to the purchasing power parity theory,in the long run:

Which of the following events would not be recorded in the U.S.balance of payments?

The current international monetary system is a _____.

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen,the dollar is said to have appreciated and the yen is said to have depreciated.

Fixed exchange rates are more volatile than floating exchange rates.

Suppose a basket of goods that costs $400 in the United States costs only £200 in Britain and the current exchange rate is $1 per pound.According to the purchasing power parity theory,which of the following statements explains the reason behind a higher equilibrium exchange rate than $1 per pound?

A country runs a deficit in its current account if:

The merchandise trade balance does not include:

The government of a country is not considered a resident while calculating the balance of payments.

The International Monetary Fund was founded in _____.

If the U.S.dollar depreciates,it means that:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

Economic Development

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Exam 18: International Finance

The purchasing power parity theory is a good predictor of:

If the U.S.dollar depreciates in the foreign exchange market,American exports will _____ and American imports will _____.

A floating exchange rate:

If $1 equals 2 euros,then 1 euro equals _____.

Under fixed exchange rates,government officials have limited roles to play in the foreign exchange market.

As the price of foreign exchange decreases relative to the U.S.dollar,the:

Suppose a basket of goods costs $400 in the United States and £200 in Britain.If the exchange rate is $1 per pound,which of the following statements is true according to the purchasing power parity theory?

If the U.S.dollar appreciates relative to the Brazilian real,then:

Managed float means:

According to the purchasing power parity theory,in the long run:

Which of the following events would not be recorded in the U.S.balance of payments?

The current international monetary system is a _____.

If on Monday of a week $1 = 146 Japanese yen and on Friday of the same week $1 = 147 yen,the dollar is said to have appreciated and the yen is said to have depreciated.

Fixed exchange rates are more volatile than floating exchange rates.

Suppose a basket of goods that costs $400 in the United States costs only £200 in Britain and the current exchange rate is $1 per pound.According to the purchasing power parity theory,which of the following statements explains the reason behind a higher equilibrium exchange rate than $1 per pound?

A country runs a deficit in its current account if:

The merchandise trade balance does not include:

The government of a country is not considered a resident while calculating the balance of payments.

The International Monetary Fund was founded in _____.

If the U.S.dollar depreciates,it means that:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

Economic Development

Filters

If the U.S.dollar depreciates in the foreign exchange market,American exports will _ and American imports will _.