Question 1

Adhering to a strict gold standard necessarily means that

Accepted Answer

A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation. 
A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation.

Question 2

The most important single factor in determining the exchange rate in the short run is

Accepted Answer

A)  inflation differentials. 
B)  interest rate differentials. 
C)  monetary growth differentials. 
D)  price differentials. 
A)  inflation differentials. 
B)  interest rate differentials. 
C)  monetary growth differentials. 
D)  price differentials.

Question 3

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls, U.S.

Accepted Answer

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

Question 4

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

Accepted Answer

A)  goods 
B)  energy 
C)  assets 
D)  automobiles 
A)  goods 
B)  energy 
C)  assets 
D)  automobiles

Question 5

Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

Accepted Answer

A)  balance of payments surpluses. 
B)  runs on their currencies. 
C)  balance of payments deficits. 
D)  both b and c 
A)  balance of payments surpluses. 
B)  runs on their currencies. 
C)  balance of payments deficits. 
D)  both b and c

Question 6

If the quantity of euro demanded were greater than the quantity supplied, then the price of the

Accepted Answer

A)  euro would rise. 
B)  euro would fall. 
C)  dollar would rise. 
D)  euro would be in equilibrium. 
A)  euro would rise. 
B)  euro would fall. 
C)  dollar would rise. 
D)  euro would be in equilibrium.

Question 7

On May 12, 2011, it cost U.S.$1.44 to buy one euro.How many euros would U.S.$1 buy?

Accepted Answer

A)  0.69 
B)  1.44 
C)  1.69 
D)  2.44 
A)  0.69 
B)  1.44 
C)  1.69 
D)  2.44

Question 8

How did the gold standard help countries rectify the balance of payment problem? What were the problems associated with the gold standard?

Accepted Answer

Under gold standard all currencies were

Question 9

On May 12, 2011, it cost U.S.$1.64 to buy one British pound.How many British pounds would U.S.$1 buy?

Accepted Answer

A)  0.56 
B)  0.61 
C)  1.64 
D)  2.64 
A)  0.56 
B)  0.61 
C)  1.64 
D)  2.64

Question 10

For developing countries, one of the dangers inherent in the inflows of capital that finance investment is

Accepted Answer

A)  increasing unemployment that accompanies foreign investment. 
B)  rapid outflows of funds that put pressure on exchange rates. 
C)  the deflation that accompanies inflows of foreign capital. 
D)  the inflation that accompanies outflows of foreign capital. 
A)  increasing unemployment that accompanies foreign investment. 
B)  rapid outflows of funds that put pressure on exchange rates. 
C)  the deflation that accompanies inflows of foreign capital. 
D)  the inflation that accompanies outflows of foreign capital.

Question 11

If U.S.securities pay 6 percent interest, and if Great Britain's securities pay 8 percent interest, then

Accepted Answer

A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will fall. 
D)  Great Britain's exports will rise. 
A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will fall. 
D)  Great Britain's exports will rise.

Question 12

The International Monetary Fund was established to manage the Bretton Woods System.

Accepted Answer

A) True 
 B)False

Question 13

In 2007, the value of the American dollar rose relative to the euro.

Accepted Answer

A) True 
 B)False

Question 14

When a government influences the exchange rate of its currency, it is said to be practicing "dirty floating."

Accepted Answer

A) True 
 B)False

Question 15

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Accepted Answer

A)  1.19 
B)  1.61 
C)  1.64 
D)  2.19 
A)  1.19 
B)  1.61 
C)  1.64 
D)  2.19

Question 16

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

Accepted Answer

A) True 
 B)False

Question 17

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars, how many U.S.dollars does it cost to ski at Whistler?

Accepted Answer

A)  $16.00 
B)  $34.00 
C)  $73.50 
D)  $156.25 
A)  $16.00 
B)  $34.00 
C)  $73.50 
D)  $156.25

Question 18

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Accepted Answer

A)  inflation for deficit countries and recessions for surplus countries. 
B)  no change for surplus countries, tax cuts for deficit countries. 
C)  inflation for surplus countries and recessions for deficit countries. 
D)  sales of gold for deficit countries and revaluations for surplus countries. 
A)  inflation for deficit countries and recessions for surplus countries. 
B)  no change for surplus countries, tax cuts for deficit countries. 
C)  inflation for surplus countries and recessions for deficit countries. 
D)  sales of gold for deficit countries and revaluations for surplus countries.

Question 19

Under a gold standard,

Accepted Answer

A)  with a balance of payments deficit, interest rates would fall and attract foreign capital. 
B)  a deficit in the balance of payments increased a nation's money supply automatically. 
C)  all currencies were defined in terms of gold. 
D)  when a nation had a deficit in its balance of payments, more gold was flowing in than was flowing out. 
E)  All of the above are correct. 
A)  with a balance of payments deficit, interest rates would fall and attract foreign capital. 
B)  a deficit in the balance of payments increased a nation's money supply automatically. 
C)  all currencies were defined in terms of gold. 
D)  when a nation had a deficit in its balance of payments, more gold was flowing in than was flowing out. 
E)  All of the above are correct.

Question 20

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

Accepted Answer

A) True 
 B)False

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

Adhering to a strict gold standard necessarily means that

The most important single factor in determining the exchange rate in the short run is

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls, U.S.

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

If the quantity of euro demanded were greater than the quantity supplied, then the price of the

On May 12, 2011, it cost U.S.$1.44 to buy one euro.How many euros would U.S.$1 buy?

How did the gold standard help countries rectify the balance of payment problem? What were the problems associated with the gold standard?

On May 12, 2011, it cost U.S.$1.64 to buy one British pound.How many British pounds would U.S.$1 buy?

For developing countries, one of the dangers inherent in the inflows of capital that finance investment is

If U.S.securities pay 6 percent interest, and if Great Britain's securities pay 8 percent interest, then

The International Monetary Fund was established to manage the Bretton Woods System.

In 2007, the value of the American dollar rose relative to the euro.

When a government influences the exchange rate of its currency, it is said to be practicing "dirty floating."

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars, how many U.S.dollars does it cost to ski at Whistler?

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Under a gold standard,

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

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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