Question 1

Which of the following groups is most likely to benefit from a strengthening of the U.S. dollar against other major currencies?

Accepted Answer

A) U.S.exporters 
B) The U.S.government 
C) U.S.consumers 
D) Foreign consumers 
A) U.S.exporters 
B) The U.S.government 
C) U.S.consumers 
D) Foreign consumers

Question 2

Shifts in demand away from French products and toward the U.S. products (caused by forces other than changes in the exchange rate) would result in extra attempts to:

Accepted Answer

A) buy both euros and dollars. 
B) sell both euros and dollars. 
C) sell Euros and buy dollars. 
D) buy Euros and sell dollars. 
A) buy both euros and dollars. 
B) sell both euros and dollars. 
C) sell Euros and buy dollars. 
D) buy Euros and sell dollars.

Question 3

As the value of the yen falls relative to the U.S. dollar in the foreign exchange market:

Accepted Answer

A) Japanese goods become more expensive to the U.S.consumers. 
B) the supply of dollars will fall. 
C) the demand for Japanese goods will increase in the U.S.market 
D) U.S.goods become less expensive to Japanese consumers. 
A) Japanese goods become more expensive to the U.S.consumers. 
B) the supply of dollars will fall. 
C) the demand for Japanese goods will increase in the U.S.market 
D) U.S.goods become less expensive to Japanese consumers.

Question 4

Triangular arbitrage does not cause the cross rate between two foreign currencies to be consistent with the dollar exchange rates of these two currencies.

Accepted Answer

A) True 
 B)False

Question 5

The greater part of the money assets traded in foreign exchange markets is demand deposits in banks.

Accepted Answer

A) True 
 B)False

Question 6

If the price of British pounds in terms of the U.S. dollars is $1.80 per pound, then the price of U.S. dollars in terms of British pounds is:

Accepted Answer

A) £1.80 per dollar. 
B) £0.555 per dollar. 
C) £0.90 per dollar. 
D) £3.60 per dollar. 
A) £1.80 per dollar. 
B) £0.555 per dollar. 
C) £0.90 per dollar. 
D) £3.60 per dollar.

Question 7

When the exchange rate is set now for a currency trade that will take place sometime more than a few days in the future is often referred to as a:

Accepted Answer

A) spot exchange rate. 
B) forward exchange rate. 
C) pegged exchange rate. 
D) managed exchange rate. 
A) spot exchange rate. 
B) forward exchange rate. 
C) pegged exchange rate. 
D) managed exchange rate.

Question 8

A country's demand for foreign currency is derived from:

Accepted Answer

A) international transactions entering the debit side of its balance of payments accounts. 
B) international transactions entering the credit column of its balance of payments accounts. 
C) the government's attempt to revalue domestic currency. 
D) an increase in foreign capital inflows in the domestic country. 
A) international transactions entering the debit side of its balance of payments accounts. 
B) international transactions entering the credit column of its balance of payments accounts. 
C) the government's attempt to revalue domestic currency. 
D) an increase in foreign capital inflows in the domestic country.

Question 9

The figure given below illustrates the market for British pounds. D£ and S£ are the demand and supply curves of the British pounds respectively.   Suppose initially the exchange rate is pegged at $2.50 per pound. If the governments allow the pound to float, the pound will experience a(n):

Accepted Answer

A) surplus. 
B) buoyant period. 
C) appreciation. 
D) depreciation. 
A) surplus. 
B) buoyant period. 
C) appreciation. 
D) depreciation.

Question 10

Other things remaining unchanged, if American exports to Japan increase and American imports from Japan decrease, then under a floating exchange rate system, we would expect::

Accepted Answer

A) the U.S.dollar to appreciate 
B) the yen value of a U.S.dollar to be higher in Tokyo than in New York. 
C) the demand for Japanese yen to increase in the foreign exchange market. 
D) the supply curve of Japanese yen to shift inward. 
A) the U.S.dollar to appreciate 
B) the yen value of a U.S.dollar to be higher in Tokyo than in New York. 
C) the demand for Japanese yen to increase in the foreign exchange market. 
D) the supply curve of Japanese yen to shift inward.

Question 11

An increase in capital inflows in the United States will result in a(n) _____ foreign currency and a(n) _____ the U.S. dollars in the foreign exchange market.

Accepted Answer

A) increase in the demand for; increase in the supply of 
B) increase in the supply of; increase in the demand for 
C) shortage of foreign currency; surplus of 
D) decrease in the supply of; decrease in the demand for 
A) increase in the demand for; increase in the supply of 
B) increase in the supply of; increase in the demand for 
C) shortage of foreign currency; surplus of 
D) decrease in the supply of; decrease in the demand for

Question 12

The 2004-2014 rapid growth in global foreign exchange trading can be explained by:

Accepted Answer

A) large increases in trading by hedge funds, pension funds, and other financial institutions. 
B) increases in volume of global trade in the recent years. 
C) volatility in U.S.long term government bond yields. 
D) increase in the number of nations adopting floating exchange rate system. 
A) large increases in trading by hedge funds, pension funds, and other financial institutions. 
B) increases in volume of global trade in the recent years. 
C) volatility in U.S.long term government bond yields. 
D) increase in the number of nations adopting floating exchange rate system.

Question 13

French imports of goods and services will create a demand for foreign currency and a supply of euros.

Accepted Answer

A) True 
 B)False

Question 14

The Maastricht Treaty adopted by the EU countries set a process for establishing a monetary union and a single union wide currency.

Accepted Answer

A) True 
 B)False

Question 15

An increase in the U.S. imports of goods and services from the EU countries will result in a(n) _____ euro and a(n) _____ the U.S. dollars in the foreign exchange market.

Accepted Answer

A) increase in the supply of; increase in the demand for 
B) decrease in the demand for; decrease in the supply of 
C) surplus of; shortage of 
D) increase in the demand for; increase in the supply of 
A) increase in the supply of; increase in the demand for 
B) decrease in the demand for; decrease in the supply of 
C) surplus of; shortage of 
D) increase in the demand for; increase in the supply of

Question 16

The figure given below illustrates the market for British pounds. D£ and S£ are the demand and supply curves of the British pounds respectively.   If the exchange rate is pegged at $2.50 per pound::

Accepted Answer

A) the pound will be overvalued. 
B) the pound will be undervalued. 
C) the British goods will become cheap in U.S.markets. 
D) the demand for the American goods will fall in British markets. 
A) the pound will be overvalued. 
B) the pound will be undervalued. 
C) the British goods will become cheap in U.S.markets. 
D) the demand for the American goods will fall in British markets.

Exam 17: The Foreign Exchange Market

Which of the following groups is most likely to benefit from a strengthening of the U.S. dollar against other major currencies?

Shifts in demand away from French products and toward the U.S. products (caused by forces other than changes in the exchange rate) would result in extra attempts to:

As the value of the yen falls relative to the U.S. dollar in the foreign exchange market:

Triangular arbitrage does not cause the cross rate between two foreign currencies to be consistent with the dollar exchange rates of these two currencies.

The greater part of the money assets traded in foreign exchange markets is demand deposits in banks.

If the price of British pounds in terms of the U.S. dollars is $1.80 per pound, then the price of U.S. dollars in terms of British pounds is:

When the exchange rate is set now for a currency trade that will take place sometime more than a few days in the future is often referred to as a:

A country's demand for foreign currency is derived from:

The figure given below illustrates the market for British pounds. D£ and S£ are the demand and supply curves of the British pounds respectively. Suppose initially the exchange rate is pegged at $2.50 per pound. If the governments allow the pound to float, the pound will experience a(n):

Other things remaining unchanged, if American exports to Japan increase and American imports from Japan decrease, then under a floating exchange rate system, we would expect::

An increase in capital inflows in the United States will result in a(n) _____ foreign currency and a(n) _____ the U.S. dollars in the foreign exchange market.

The 2004-2014 rapid growth in global foreign exchange trading can be explained by:

French imports of goods and services will create a demand for foreign currency and a supply of euros.

The Maastricht Treaty adopted by the EU countries set a process for establishing a monetary union and a single union wide currency.

An increase in the U.S. imports of goods and services from the EU countries will result in a(n) _____ euro and a(n) _____ the U.S. dollars in the foreign exchange market.

The figure given below illustrates the market for British pounds. D£ and S£ are the demand and supply curves of the British pounds respectively. If the exchange rate is pegged at $2.50 per pound::

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

The figure given below illustrates the market for British pounds. D_£ and S_£ are the demand and supply curves of the British pounds respectively. Suppose initially the exchange rate is pegged at $2.50 per pound. If the governments allow the pound to float, the pound will experience a(n):

An increase in capital inflows in the United States will result in a(n) _ foreign currency and a(n) _ the U.S. dollars in the foreign exchange market.

An increase in the U.S. imports of goods and services from the EU countries will result in a(n) _ euro and a(n) _ the U.S. dollars in the foreign exchange market.

The figure given below illustrates the market for British pounds. D_£ and S_£ are the demand and supply curves of the British pounds respectively. If the exchange rate is pegged at $2.50 per pound::