Question 1

A fixed exchange rate can be maintained by a government as long as it has sufficient

Accepted Answer

A)  supplies of its own currency. 
B)  foreign reserves. 
C)  gold and other precious metals. 
D)  tax revenues. 
A)  supplies of its own currency. 
B)  foreign reserves. 
C)  gold and other precious metals. 
D)  tax revenues.

Question 2

Domestic monetary policy is essentially useless under

Accepted Answer

A)  a floating exchange rate system. 
B)  a fixed exchange rate system. 
C)  the gold standard. 
D)  conditions of balance of payments surpluses. 
A)  a floating exchange rate system. 
B)  a fixed exchange rate system. 
C)  the gold standard. 
D)  conditions of balance of payments surpluses.

Question 3

A prolonged recession in Europe should decrease the

Accepted Answer

A)  supply of U.S.dollars. 
B)  demand for U.S.dollars. 
C)  supply of U.S.goods and services. 
D)  demand by Americans for euros. 
A)  supply of U.S.dollars. 
B)  demand for U.S.dollars. 
C)  supply of U.S.goods and services. 
D)  demand by Americans for euros.

Question 4

Under the gold standard of a century ago, the world's commerce

Accepted Answer

A)  nearly collapsed before the beginning of World War I. 
B)  was at the mercy of gold discoveries. 
C)  grew steadily without interruption from monetary disturbances. 
D)  grew when the gold stock grew slowly, and shrank when gold discoveries increased. 
A)  nearly collapsed before the beginning of World War I. 
B)  was at the mercy of gold discoveries. 
C)  grew steadily without interruption from monetary disturbances. 
D)  grew when the gold stock grew slowly, and shrank when gold discoveries increased.

Question 5

The dollar appreciates against the euro when U.S.demand for European goods increases.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Accepted Answer

A)  Panama 
B)  Ecuador 
C)  Zimbabwe 
D)  all of the above 
A)  Panama 
B)  Ecuador 
C)  Zimbabwe 
D)  all of the above

Question 7

Many experts believe that the major determinant of exchange rates in the short run is relative

Accepted Answer

A)  price levels. 
B)  income levels. 
C)  money supplies. 
D)  interest rates. 
A)  price levels. 
B)  income levels. 
C)  money supplies. 
D)  interest rates.

Question 8

The current exchange rate system for most currencies is described most accurately as one of

Accepted Answer

A)  fixed exchange rates. 
B)  freely flexible exchange rates. 
C)  gold standard rates. 
D)  dirty or managed floating. 
A)  fixed exchange rates. 
B)  freely flexible exchange rates. 
C)  gold standard rates. 
D)  dirty or managed floating.

Question 9

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

Accepted Answer

A) True 
 B)False

Question 10

Under the Bretton Woods system of fixed exchange rates,

Accepted Answer

A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency. 
A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency.

Question 11

A balance of payments deficit is defined as the amount by which

Accepted Answer

A)  a country's exports exceed its imports. 
B)  a currency must appreciate in order to reach equilibrium. 
C)  quantity supplied of a country's currency exceeds quantity demanded. 
D)  quantity demanded of a country's currency exceeds quantity supplied. 
A)  a country's exports exceed its imports. 
B)  a currency must appreciate in order to reach equilibrium. 
C)  quantity supplied of a country's currency exceeds quantity demanded. 
D)  quantity demanded of a country's currency exceeds quantity supplied.

Question 12

Assume that an economic boom occurs in the United States, so that the United States has a much higher growth rate than other nations.What will happen to the exchange rate of the U.S.dollar?

Accepted Answer

The boom in the United States will lead

Question 13

If a currency increases in value in response to market forces, this process is known as

Accepted Answer

A)  reflation. 
B)  revaluation. 
C)  appreciation. 
D)  value-added. 
A)  reflation. 
B)  revaluation. 
C)  appreciation. 
D)  value-added.

Question 14

Define the following terms and explain their importance to the study of macroeconomics:
a.exchange rate
b.depreciation
c.devaluation
d.fixed exchange rates

Accepted Answer

a.The exchange rate states the price, in

Question 15

The chief cause of short-run changes in exchange rates is

Accepted Answer

A)  the world's political situation. 
B)  "hot money" chasing high interest rates. 
C)  changes in consumer tastes. 
D)  central bank interventions. 
A)  the world's political situation. 
B)  "hot money" chasing high interest rates. 
C)  changes in consumer tastes. 
D)  central bank interventions.

Question 16

If the U.S.purchases oil from Venezuela, 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 17

When exchange rates are set by government decree,

Accepted Answer

A)  appreciation is called devaluation. 
B)  depreciation is called devaluation. 
C)  depreciation is called deflation. 
D)  appreciation is called inflation. 
A)  appreciation is called devaluation. 
B)  depreciation is called devaluation. 
C)  depreciation is called deflation. 
D)  appreciation is called inflation.

Question 18

In the spring of 2002, Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Accepted Answer

Argentina was maintaining a fixed exchan

Question 19

What is the euro and why has it been created? How has its value changed relative to the U.S.dollar since its inception?

Accepted Answer

The euro is the currency created by the

Question 20

In 2008-2009, Iceland and several Baltic states increased their interest rates.One would expect which of the following?

Accepted Answer

A)  U.S.bond prices will fall and the dollar will appreciate. 
B)  U.S.bond prices will rise and the dollar will appreciate. 
C)  U.S.bond prices will fall and the dollar will depreciate. 
D)  U.S.bond prices will rise and the dollar will depreciate. 
A)  U.S.bond prices will fall and the dollar will appreciate. 
B)  U.S.bond prices will rise and the dollar will appreciate. 
C)  U.S.bond prices will fall and the dollar will depreciate. 
D)  U.S.bond prices will rise and the dollar will depreciate.

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

A fixed exchange rate can be maintained by a government as long as it has sufficient

Domestic monetary policy is essentially useless under

A prolonged recession in Europe should decrease the

Under the gold standard of a century ago, the world's commerce

The dollar appreciates against the euro when U.S.demand for European goods increases.

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Many experts believe that the major determinant of exchange rates in the short run is relative

The current exchange rate system for most currencies is described most accurately as one of

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

Under the Bretton Woods system of fixed exchange rates,

A balance of payments deficit is defined as the amount by which

Assume that an economic boom occurs in the United States, so that the United States has a much higher growth rate than other nations.What will happen to the exchange rate of the U.S.dollar?

If a currency increases in value in response to market forces, this process is known as

Define the following terms and explain their importance to the study of macroeconomics: a.exchange rate b.depreciation c.devaluation d.fixed exchange rates

The chief cause of short-run changes in exchange rates is

If the U.S.purchases oil from Venezuela, what is the effect in the foreign exchange market?

When exchange rates are set by government decree,

In the spring of 2002, Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

What is the euro and why has it been created? How has its value changed relative to the U.S.dollar since its inception?

In 2008-2009, Iceland and several Baltic states increased their interest rates.One would expect which of the following?

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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