Question 1

If, under a fixed exchange rate system, the dollar price of a Mexican peso is above its equilibrium level, then the

Accepted Answer

A) dollar is overvalued. 
B) peso is overvalued. 
C) dollar has appreciated. 
D) peso has depreciated. 
A) dollar is overvalued. 
B) peso is overvalued. 
C) dollar has appreciated. 
D) peso has depreciated.

Question 2

The proponents of fixed exchange rates argue that flexible exchange rates

Accepted Answer

A) hamper international trade because of uncertainty over what the exchange rate will be. 
B) force a nation to use its domestic macroeconomic policies to maintain an exchange rate. 
C) lead to trade protectionism. 
D) a and b 
E) a, b, and c 
A) hamper international trade because of uncertainty over what the exchange rate will be. 
B) force a nation to use its domestic macroeconomic policies to maintain an exchange rate. 
C) lead to trade protectionism. 
D) a and b 
E) a, b, and c

Question 3

Suppose that an increase in a nation's income causes the nation's residents to buy more domestic and foreign goods. Given this, if U.S. residents experience an increase in income, but Mexican residents do not, it is likely that, ceteris paribus,

Accepted Answer

A) both the U.S.dollar and the Mexican peso will depreciate. 
B) both the U.S.dollar and the Mexican peso will appreciate. 
C) the U.S.dollar will depreciate and the Mexican peso will appreciate. 
D) the U.S.dollar will appreciate and the Mexican peso will depreciate. 
A) both the U.S.dollar and the Mexican peso will depreciate. 
B) both the U.S.dollar and the Mexican peso will appreciate. 
C) the U.S.dollar will depreciate and the Mexican peso will appreciate. 
D) the U.S.dollar will appreciate and the Mexican peso will depreciate.

Question 4

According to the textbook, the _______________ is currently the primary reserve currency.

Accepted Answer

A) Chinese renmimbi 
B) euro 
C) U.S.dollar 
D) Japanese yen 
E) British pound 
A) Chinese renmimbi 
B) euro 
C) U.S.dollar 
D) Japanese yen 
E) British pound

Question 5

The foreign exchange market is the market in which

Accepted Answer

A) foreigners buy U.S.real estate. 
B) foreign stocks and bonds are bought and sold. 
C) ideas from different countries are exchanged. 
D) currencies of different countries are bought and sold. 
E) none of the above 
A) foreigners buy U.S.real estate. 
B) foreign stocks and bonds are bought and sold. 
C) ideas from different countries are exchanged. 
D) currencies of different countries are bought and sold. 
E) none of the above

Question 6

Exhibit 34-5
U.S. $ Equivalent Foreign Currency per U.S. $
   ​
​
-Refer to Exhibit 34-5. Based on the information provided in this table, between Monday and Tuesday, the U.S. dollar ____________ against the Japanese yen and the yen _____________ against the U.S. dollar.

Accepted Answer

A) appreciated; appreciated 
B) depreciated; appreciated 
C) appreciated; depreciated 
D) depreciated; depreciated 
A) appreciated; appreciated 
B) depreciated; appreciated 
C) appreciated; depreciated 
D) depreciated; depreciated

Question 7

When exports of American goods increase, this __________ the demand for U.S. dollars and at the same time __________ foreign currencies.

Accepted Answer

A) increases; increases the supply of 
B) decreases; increases the supply of 
C) increases; decreases the supply of 
D) increases; increases the demand for 
E) none of the above 
A) increases; increases the supply of 
B) decreases; increases the supply of 
C) increases; decreases the supply of 
D) increases; increases the demand for 
E) none of the above

Question 8

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.12 per peso, and then changes to $0.09 per peso. The result will be that Americans will buy __________ pesos because Mexican goods become relatively __________ expensive.

Accepted Answer

A) fewer; more 
B) fewer; less 
C) more; more 
D) more; less 
A) fewer; more 
B) fewer; less 
C) more; more 
D) more; less

Question 9

Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text) would agree with which of the following statements?

Accepted Answer

A) It is better to leave the international value of the domestic currency to the free market forces than to have to sacrifice domestic economic goals in order to support a certain predetermined value of the currency. 
B) There is too great a chance that the supported exchange rates will diverge significantly from the equilibrium exchange rates, which would create persistent problems and lead to an overall decrease in international trade. 
C) With no certainty of what one nation's currency will be worth in terms of other nations' currencies, international trade is held below what it could be. 
D) a and b 
A) It is better to leave the international value of the domestic currency to the free market forces than to have to sacrifice domestic economic goals in order to support a certain predetermined value of the currency. 
B) There is too great a chance that the supported exchange rates will diverge significantly from the equilibrium exchange rates, which would create persistent problems and lead to an overall decrease in international trade. 
C) With no certainty of what one nation's currency will be worth in terms of other nations' currencies, international trade is held below what it could be. 
D) a and b

Question 10

An American computer is priced at $1,350. If the exchange rate between the U.S. dollar and the Japanese yen is $0.009 per yen, the equivalent price of the computer in yen is approximately __________ yen.

Accepted Answer

A) 14,960 
B) 15 
C) 1,500,000 
D) 149,600 
A) 14,960 
B) 15 
C) 1,500,000 
D) 149,600

Question 11

Exhibit 34-4
​
  
-Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E1, the peso is __________ and there is a __________.

Accepted Answer

A) overvalued; surplus of dollars 
B) undervalued; shortage of pesos 
C) overvalued; shortage of dollars 
D) undervalued; surplus of pesos 
A) overvalued; surplus of dollars 
B) undervalued; shortage of pesos 
C) overvalued; shortage of dollars 
D) undervalued; surplus of pesos

Question 12

There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. An increase in income growth in Mexico relative to income growth in the United States will cause the

Accepted Answer

A) dollar to appreciate. 
B) peso to depreciate. 
C) dollar to depreciate. 
D) a and b 
E) There is not enough information to answer the question. 
A) dollar to appreciate. 
B) peso to depreciate. 
C) dollar to depreciate. 
D) a and b 
E) There is not enough information to answer the question.

Question 13

When the official dollar price of a foreign currency is lowered, the dollar is being

Accepted Answer

A) appreciated. 
B) overvalued. 
C) undervalued. 
D) devalued. 
E) revalued. 
A) appreciated. 
B) overvalued. 
C) undervalued. 
D) devalued. 
E) revalued.

Question 14

Some economists have found that U.S. imports of Chinese goods and resources

Accepted Answer

A) lower the price of goods for U.S.consumers. 
B) lower the cost of inputs for U.S.firms. 
C) increase the variety of products in U.S.markets. 
D) may enhance productivity of U.S.firms. 
E) all of the above 
A) lower the price of goods for U.S.consumers. 
B) lower the cost of inputs for U.S.firms. 
C) increase the variety of products in U.S.markets. 
D) may enhance productivity of U.S.firms. 
E) all of the above

Question 15

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will __________ and the supply of U.S. dollars will __________.

Accepted Answer

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

Question 16

There is demand for and supply of dollars and a demand for and supply of pesos. Under a flexible exchange rate system, if income growth in the United States is greater than income growth in Mexico, then

Accepted Answer

A) the demand for dollars will shift to the right and the demand for pesos will shift to the left. 
B) the demand for pesos will shift to the right and the supply of dollars will shift to the left. 
C) the demand for pesos will shift to the left and the supply of pesos will shift to the right. 
D) the supply of pesos will shift to the right and the supply of dollars will shift to the right. 
E) none of the above 
A) the demand for dollars will shift to the right and the demand for pesos will shift to the left. 
B) the demand for pesos will shift to the right and the supply of dollars will shift to the left. 
C) the demand for pesos will shift to the left and the supply of pesos will shift to the right. 
D) the supply of pesos will shift to the right and the supply of dollars will shift to the right. 
E) none of the above

Question 17

Exhibit 34-4
​
  
-Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E3, the peso is __________ and there is a __________.

Accepted Answer

A) overvalued; surplus of dollars 
B) undervalued; shortage of pesos 
C) overvalued; shortage of dollars 
D) undervalued; surplus of pesos 
A) overvalued; surplus of dollars 
B) undervalued; shortage of pesos 
C) overvalued; shortage of dollars 
D) undervalued; surplus of pesos

Question 18

Which of the following statements is false?

Accepted Answer

A) When the value of a country's imports is greater than the value of its exports, the country's net exports will be a positive value. 
B) A country is running a trade deficit when the value of its imports is greater than the value of its exports. 
C) A country is running a trade surplus when the value of its exports is greater than the value of its imports. 
D) Net exports are sometimes referred to as the balance of trade. 
A) When the value of a country's imports is greater than the value of its exports, the country's net exports will be a positive value. 
B) A country is running a trade deficit when the value of its imports is greater than the value of its exports. 
C) A country is running a trade surplus when the value of its exports is greater than the value of its imports. 
D) Net exports are sometimes referred to as the balance of trade.

Question 19

Advocates of a fixed exchange rate system argue that fixed exchange rates promote international trade.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following points would not be used as an argument in support of the current international monetary system?

Accepted Answer

A) It allows nations to pursue independent monetary policies. 
B) It results in stable exchange rates. 
C) It helps solve trade problems without trade restrictions. 
D) It is flexible and can easily adjust to shocks. 
E) All of the above could be used as arguments supporting the current system. 
A) It allows nations to pursue independent monetary policies. 
B) It results in stable exchange rates. 
C) It helps solve trade problems without trade restrictions. 
D) It is flexible and can easily adjust to shocks. 
E) All of the above could be used as arguments supporting the current system.

Exam 34: International Finance

If, under a fixed exchange rate system, the dollar price of a Mexican peso is above its equilibrium level, then the

The proponents of fixed exchange rates argue that flexible exchange rates

Suppose that an increase in a nation's income causes the nation's residents to buy more domestic and foreign goods. Given this, if U.S. residents experience an increase in income, but Mexican residents do not, it is likely that, ceteris paribus,

According to the textbook, the _______________ is currently the primary reserve currency.

The foreign exchange market is the market in which

Exhibit 34-5 U.S. $ Equivalent Foreign Currency per U.S. $ ​ ​ -Refer to Exhibit 34-5. Based on the information provided in this table, between Monday and Tuesday, the U.S. dollar ____________ against the Japanese yen and the yen _____________ against the U.S. dollar.

When exports of American goods increase, this __________ the demand for U.S. dollars and at the same time __________ foreign currencies.

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.12 per peso, and then changes to $0.09 per peso. The result will be that Americans will buy __________ pesos because Mexican goods become relatively __________ expensive.

Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text) would agree with which of the following statements?

An American computer is priced at $1,350. If the exchange rate between the U.S. dollar and the Japanese yen is $0.009 per yen, the equivalent price of the computer in yen is approximately __________ yen.

Exhibit 34-4 ​ -Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E1, the peso is __________ and there is a __________.

There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. An increase in income growth in Mexico relative to income growth in the United States will cause the

When the official dollar price of a foreign currency is lowered, the dollar is being

Some economists have found that U.S. imports of Chinese goods and resources

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will __________ and the supply of U.S. dollars will __________.

There is demand for and supply of dollars and a demand for and supply of pesos. Under a flexible exchange rate system, if income growth in the United States is greater than income growth in Mexico, then

Exhibit 34-4 ​ -Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E3, the peso is __________ and there is a __________.

Which of the following statements is false?

Advocates of a fixed exchange rate system argue that fixed exchange rates promote international trade.

Which of the following points would not be used as an argument in support of the current international monetary system?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

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Perfect Competition

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Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

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Exhibit 34-5 U.S. $ Equivalent Foreign Currency per U.S. $ -Refer to Exhibit 34-5. Based on the information provided in this table, between Monday and Tuesday, the U.S. dollar against the Japanese yen and the yen _ against the U.S. dollar.

When exports of American goods increase, this the demand for U.S. dollars and at the same time foreign currencies.

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.12 per peso, and then changes to $0.09 per peso. The result will be that Americans will buy pesos because Mexican goods become relatively expensive.

Exhibit 34-4 -Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E₁, the peso is and there is a .

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will and the supply of U.S. dollars will .

Exhibit 34-4 -Refer to Exhibit 34-4. Under a fixed exchange rate system, at the exchange rate of E₃, the peso is and there is a .