Question 1

Fixed exchange rates are rates set by government decisions and maintained by government actions.

Accepted Answer

A) True 
 B)False  True

Question 2

In order to "defend" its overvalued currency, Argentina in 2002 had to reduce its

Accepted Answer

A) interest rates. 
B) tax levels. 
C) holdings of foreign reserves. 
D) balance of payments surpluses. 
A) interest rates. 
B) tax levels. 
C) holdings of foreign reserves. 
D) balance of payments surpluses. C

Question 3

Under the Bretton Woods system of fixed exchange rates, the price of the U.S.dollar was fixed in terms of gold and the prices of all other currencies were fixed in terms of dollars.

Accepted Answer

A) True 
 B)False  True

Question 4

Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries.This concept is known as the

Accepted Answer

A) long-run equilibrium theory. 
B) exchange rate equalization theory. 
C) interest rate parity theory. 
D) purchasing power parity theory. 
A) long-run equilibrium theory. 
B) exchange rate equalization theory. 
C) interest rate parity theory. 
D) purchasing power parity theory.

Question 5

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

Accepted Answer

A) the government gains more control over the economy. 
B) floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. 
C) exchange controls become unnecessary. 
D) fiscal and monetary policy can focus more on domestic conditions. 
A) the government gains more control over the economy. 
B) floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. 
C) exchange controls become unnecessary. 
D) fiscal and monetary policy can focus more on domestic conditions.

Question 6

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 7

If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen, the dollar has appreciated

Accepted Answer

A) True 
 B)False

Question 8

If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?

Accepted Answer

A) Supply of dollars will increase, causing appreciation of the dollar. 
B) Supply of euros will increase, causing appreciation of the euro. 
C) Demand for dollars will increase causing appreciation of the dollar. 
D) Demand for dollars will decrease, causing depreciation of the dollar. 
A) Supply of dollars will increase, causing appreciation of the dollar. 
B) Supply of euros will increase, causing appreciation of the euro. 
C) Demand for dollars will increase causing appreciation of the dollar. 
D) Demand for dollars will decrease, causing depreciation of the dollar.

Question 9

In 2001, the Argentine peso was overvalued relative to the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 10

Under a gold standard, a discovery of gold will

Accepted Answer

A) decrease the general price level. 
B) increase the general price level. 
C) cause increased unemployment. 
D) cause decreased rates of economic growth. 
A) decrease the general price level. 
B) increase the general price level. 
C) cause increased unemployment. 
D) cause decreased rates of economic growth.

Question 11

Exchange rates determined by the forces of demand and supply are called

Accepted Answer

A) fixed exchange rates. 
B) floating exchange rates. 
C) equilibrium exchange rates. 
D) dirty exchange rates. 
A) fixed exchange rates. 
B) floating exchange rates. 
C) equilibrium exchange rates. 
D) dirty exchange rates.

Question 12

The exchange rate states the price, in terms of one currency at which another currency can be bought.

Accepted Answer

A) True 
 B)False

Question 13

Figure 19-2
​  
-Of the graphs in Figure 19-2, which one shows the effects on the exchange rate of an expansion in Japan?

Accepted Answer

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

Question 14

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 15

The Bretton Woods agreements in 1944

Accepted Answer

A) established the International Monetary Fund. 
B) sanctioned world trade on the gold-exchange system. 
C) allowed nations to devalue their currencies under certain conditions. 
D) All of the above are correct. 
A) established the International Monetary Fund. 
B) sanctioned world trade on the gold-exchange system. 
C) allowed nations to devalue their currencies under certain conditions. 
D) All of the above are correct.

Question 16

Why did the Bretton Woods system ultimately break down?

Accepted Answer

A) The refusal of OPEC countries to accept payment for oil in gold. 
B) The refusal of surplus countries to devalue as required by law. 
C) An inability to devalue the U.S.dollar despite chronic payments deficits. 
D) An inability to adequately measure balance of payments surpluses and deficits. 
A) The refusal of OPEC countries to accept payment for oil in gold. 
B) The refusal of surplus countries to devalue as required by law. 
C) An inability to devalue the U.S.dollar despite chronic payments deficits. 
D) An inability to adequately measure balance of payments surpluses and deficits.

Question 17

An economic boom in America should increase the

Accepted Answer

A) demand for U.S.dollars. 
B) demand for U.S.goods and services. 
C) demand for foreign currencies. 
D) supply of foreign currencies. 
A) demand for U.S.dollars. 
B) demand for U.S.goods and services. 
C) demand for foreign currencies. 
D) supply of foreign currencies.

Question 18

In a floating exchange market, the exchange rate for pesos and yen will not change when

Accepted Answer

A) the yen trades at a rate below the equilibrium level. 
B) the peso trades at a rate above the equilibrium level. 
C) the currencies trade at the equilibrium exchange rate. 
D) it will change in all of these situations. 
A) the yen trades at a rate below the equilibrium level. 
B) the peso trades at a rate above the equilibrium level. 
C) the currencies trade at the equilibrium exchange rate. 
D) it will change in all of these situations.

Question 19

The ¬_______ is a way to fix exchange rates by defining each participating currency in terms of gold and allowing holders of each participating currency to convert that currency into gold.

Accepted Answer

A) gold standard 
B) silver standard 
C) bronze standard 
D) none of these 
A) gold standard 
B) silver standard 
C) bronze standard 
D) none of these

Question 20

A country's imports will rise quickly when its economy booms and rise only slowly when its economy stagnates.

Accepted Answer

A) True 
 B)False

Exam 35: The International Monetary System: Order or Disorder

Fixed exchange rates are rates set by government decisions and maintained by government actions.

In order to "defend" its overvalued currency, Argentina in 2002 had to reduce its

Under the Bretton Woods system of fixed exchange rates, the price of the U.S.dollar was fixed in terms of gold and the prices of all other currencies were fixed in terms of dollars.

Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries.This concept is known as the

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

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

If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen, the dollar has appreciated

If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?

In 2001, the Argentine peso was overvalued relative to the U.S.dollar.

Under a gold standard, a discovery of gold will

Exchange rates determined by the forces of demand and supply are called

The exchange rate states the price, in terms of one currency at which another currency can be bought.

Figure 19-2 ​ -Of the graphs in Figure 19-2, which one shows the effects on the exchange rate of an expansion in Japan?

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

The Bretton Woods agreements in 1944

Why did the Bretton Woods system ultimately break down?

An economic boom in America should increase the

In a floating exchange market, the exchange rate for pesos and yen will not change when

The ¬_______ is a way to fix exchange rates by defining each participating currency in terms of gold and allowing holders of each participating currency to convert that currency into gold.

A country's imports will rise quickly when its economy booms and rise only slowly when its economy stagnates.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 19-2 -Of the graphs in Figure 19-2, which one shows the effects on the exchange rate of an expansion in Japan?