Question 1

Because central banks intervene in currency markets, the term ____ has been used to describe the system.

Accepted Answer

A)  planned float 
B)  controlled float 
C)  flexible 
D)  dirty float 
A)  planned float 
B)  controlled float 
C)  flexible 
D)  dirty float

Question 2

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Accepted Answer

A)  monies. 
B)  goods and services. 
C)  stocks and bonds. 
D)  physical assets. 
A)  monies. 
B)  goods and services. 
C)  stocks and bonds. 
D)  physical assets.

Question 3

If Japanese tourists visit Yellowstone Park, what is the effect in the foreign exchange market?

Accepted Answer

A)  It will increase demand for U.S.dollars. 
B)  It will decrease demand for U.S.dollars. 
C)  It will increase supply of U.S.dollars. 
D)  It will decrease supply of U.S.dollars. 
A)  It will increase demand for U.S.dollars. 
B)  It will decrease demand for U.S.dollars. 
C)  It will increase supply of U.S.dollars. 
D)  It will decrease supply of U.S.dollars.

Question 4

A federal deficit that raises interest rates will, everything else being equal,

Accepted Answer

A)  lead to a dollar depreciation. 
B)  decrease imports. 
C)  reduce exports. 
D)  reduce the balance of trade deficit. 
A)  lead to a dollar depreciation. 
B)  decrease imports. 
C)  reduce exports. 
D)  reduce the balance of trade deficit.

Question 5

One method for a deficit country to correct the situation under a fixed exchange rate system is to

Accepted Answer

A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy. 
A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy.

Question 6

The term "dirty float" is used to describe a

Accepted Answer

A)  black market in foreign currencies. 
B)  floating currency that is "managed" by central bank authorities. 
C)  nation that switches from free to fixed exchange rates. 
D)  currency system used only in inflationary periods. 
A)  black market in foreign currencies. 
B)  floating currency that is "managed" by central bank authorities. 
C)  nation that switches from free to fixed exchange rates. 
D)  currency system used only in inflationary periods.

Question 7

Figure 19-1
  
-Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 8

If the exchange rate of the Swiss franc is 1.61 francs per dollar, then the Swiss franc is worth about

Accepted Answer

A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70. 
A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70.

Question 9

An economic boom in the United States will tend to cause booms in other countries because as U.S.GDP rises, U.S.

Accepted Answer

A)  tariffs will automatically fall. 
B)  exports will rise. 
C)  imports will rise. 
D)  exports will fall. 
A)  tariffs will automatically fall. 
B)  exports will rise. 
C)  imports will rise. 
D)  exports will fall.

Question 10

Discuss the problems associated with the Bretton Woods system.

Accepted Answer

Under the Bretton Woods system, changes

Question 11

On May 12, 2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

Accepted Answer

A)  0.70 
B)  1.43 
C)  1.70 
D)  2.70 
A)  0.70 
B)  1.43 
C)  1.70 
D)  2.70

Question 12

Which of the following statements is correct?

Accepted Answer

A)  In the short run, interest rate differentials have the greatest impact on exchange rates. 
B)  In the medium run, differences in growth rates of aggregate demand have the greatest impact on exchange rates. 
C)  In the long run, price and inflation differentials have the greatest impact on exchange rates. 
D)  All of the above are correct. 
A)  In the short run, interest rate differentials have the greatest impact on exchange rates. 
B)  In the medium run, differences in growth rates of aggregate demand have the greatest impact on exchange rates. 
C)  In the long run, price and inflation differentials have the greatest impact on exchange rates. 
D)  All of the above are correct.

Question 13

The currency value of Agraria is set by government decree.Which of the following happens when the government alters the exchange rate so that its currency can buy more units of foreign currency?

Accepted Answer

A)  Reflation 
B)  Devaluation 
C)  Appreciation 
D)  Revaluation 
A)  Reflation 
B)  Devaluation 
C)  Appreciation 
D)  Revaluation

Question 14

In the current international monetary system, what is the role for gold?

Accepted Answer

A)  The system is a gold-exchange standard, based on a fixed value for a key currency. 
B)  Gold backs each currency, and therefore, the system as a whole. 
C)  It serves as the principal reserve asset. 
D)  It has no role. 
A)  The system is a gold-exchange standard, based on a fixed value for a key currency. 
B)  Gold backs each currency, and therefore, the system as a whole. 
C)  It serves as the principal reserve asset. 
D)  It has no role.

Question 15

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Accepted Answer

A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct. 
A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct.

Question 16

The demand for euros would come from

Accepted Answer

A)  American exports to Europe. 
B)  European demand for U.S.government bonds. 
C)  American demand for European real estate. 
D)  All of the above are correct. 
A)  American exports to Europe. 
B)  European demand for U.S.government bonds. 
C)  American demand for European real estate. 
D)  All of the above are correct.

Question 17

In 2007, the value of the U.S.dollar

Accepted Answer

A)  increased relative to the euro. 
B)  decreased relative to the euro. 
C)  remained stable relative to the euro. 
D)  was equal to the value of the euro. 
A)  increased relative to the euro. 
B)  decreased relative to the euro. 
C)  remained stable relative to the euro. 
D)  was equal to the value of the euro.

Question 18

As the U.S.dollar's foreign exchange value falls, we should expect to see

Accepted Answer

A)  more Americans travelling abroad. 
B)  American import levels rising. 
C)  more foreigners visiting the United States. 
D)  increased foreign investment by American firms. 
A)  more Americans travelling abroad. 
B)  American import levels rising. 
C)  more foreigners visiting the United States. 
D)  increased foreign investment by American firms.

Question 19

According to the purchasing power parity theory, which of the following is most likely to affect exchange rates?

Accepted Answer

A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates 
A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates

Question 20

One of the problems that monetary unions eliminate is

Accepted Answer

A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles. 
A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles.

Exam 36: The International Monetary System: Order or Disorder?

Because central banks intervene in currency markets, the term ____ has been used to describe the system.

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

If Japanese tourists visit Yellowstone Park, what is the effect in the foreign exchange market?

A federal deficit that raises interest rates will, everything else being equal,

One method for a deficit country to correct the situation under a fixed exchange rate system is to

The term "dirty float" is used to describe a

Figure 19-1 -Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

If the exchange rate of the Swiss franc is 1.61 francs per dollar, then the Swiss franc is worth about

An economic boom in the United States will tend to cause booms in other countries because as U.S.GDP rises, U.S.

Discuss the problems associated with the Bretton Woods system.

On May 12, 2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

Which of the following statements is correct?

The currency value of Agraria is set by government decree.Which of the following happens when the government alters the exchange rate so that its currency can buy more units of foreign currency?

In the current international monetary system, what is the role for gold?

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

The demand for euros would come from

In 2007, the value of the U.S.dollar

As the U.S.dollar's foreign exchange value falls, we should expect to see

According to the purchasing power parity theory, which of the following is most likely to affect exchange rates?

One of the problems that monetary unions eliminate is

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and the Macroeconomy

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