Question 1

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 2

Fixed exchange rates are fixed by

Accepted Answer

A) international speculators who manipulate the world's currencies. 
B) international demand and supply. 
C) national governments. 
D) All of the above are correct. 
A) international speculators who manipulate the world's currencies. 
B) international demand and supply. 
C) national governments. 
D) All of the above are correct.

Question 3

The main component of the monetary union created by the Treaty of Maastricht is a(n)

Accepted Answer

A) single currency. 
B) gold standard. 
C) bilateral barter system of currencies. 
D) unified stock market. 
A) single currency. 
B) gold standard. 
C) bilateral barter system of currencies. 
D) unified stock market.

Question 4

Purchasing-power parity theory states that relative prices in any two countries determine the exchange rate between their currencies.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

Accepted Answer

A) Huge current account deficit 
B) Currency pegged to the dollar 
C) Floating rate policy 
D) Adherence to the old gold standard 
A) Huge current account deficit 
B) Currency pegged to the dollar 
C) Floating rate policy 
D) Adherence to the old gold standard

Question 6

A devaluation is a reduction in the official value of a currency.

Accepted Answer

A) True 
 B)False

Question 7

A country with an undervalued currency

Accepted Answer

A) will have a balance of payments deficit. 
B) will accumulate reserves of foreign currencies. 
C) will suffer losses of foreign reserves. 
D) must intervene in the foreign-exchange market to buy its own currency. 
A) will have a balance of payments deficit. 
B) will accumulate reserves of foreign currencies. 
C) will suffer losses of foreign reserves. 
D) must intervene in the foreign-exchange market to buy its own currency.

Question 8

If the dollar depreciates, it can be said that

Accepted Answer

A) foreign countries no longer respect the United States. 
B) it falls in value within the United States. 
C) it takes fewer dollars to buy foreign currencies. 
D) other currencies appreciate. 
A) foreign countries no longer respect the United States. 
B) it falls in value within the United States. 
C) it takes fewer dollars to buy foreign currencies. 
D) other currencies appreciate.

Question 9

Figure 19-2
​  
-Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Accepted Answer

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

Question 10

Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates.

Accepted Answer

A) True 
 B)False

Question 11

The Bretton Woods system worked fairly well for a number of years, but it finally broke down over

Accepted Answer

A) lack of agreement on how to settle the problems of the surplus nations. 
B) its inability to devalue the U.S.dollar. 
C) the huge debts of the IMF to less-developed countries. 
D) the controversies generated by surplus nations wanting to devalue their currencies. 
A) lack of agreement on how to settle the problems of the surplus nations. 
B) its inability to devalue the U.S.dollar. 
C) the huge debts of the IMF to less-developed countries. 
D) the controversies generated by surplus nations wanting to devalue their currencies.

Question 12

If inflation in the United States is higher than in Japan, what will happen to the exchange rate between the U.S.dollar and the Japanese yen?

Accepted Answer

A) The dollar and yen will both depreciate. 
B) The dollar and yen will both appreciate. 
C) The dollar will depreciate and the yen will appreciate. 
D) The dollar will appreciate and the yen will depreciate. 
A) The dollar and yen will both depreciate. 
B) The dollar and yen will both appreciate. 
C) The dollar will depreciate and the yen will appreciate. 
D) The dollar will appreciate and the yen will depreciate.

Question 13

If a currency decreases in value as a result of government decree rather than market forces, the process is known as

Accepted Answer

A) devaluation. 
B) depreciation. 
C) deflation. 
D) degeneration. 
A) devaluation. 
B) depreciation. 
C) deflation. 
D) degeneration.

Question 14

Under a gold standard, a balance of payments deficit automatically

Accepted Answer

A) raised interest rates. 
B) decreased exports. 
C) increased domestic prices. 
D) increased imports. 
A) raised interest rates. 
B) decreased exports. 
C) increased domestic prices. 
D) increased imports.

Question 15

On May 11, 2011, it cost 11.601 Mexican pesos to buy 1 U.S.dollar.How many U.S.dollars did it take to buy a Mexican peso?

Accepted Answer

A) $11.11 
B) $10.82 
C) $8.92 
D) $0.09 
A) $11.11 
B) $10.82 
C) $8.92 
D) $0.09

Question 16

The purchasing power parity theory of exchange rate determination states that

Accepted Answer

A) in the short run, rates will adjust to parity. 
B) in the long run, the rate reflects differences in price levels between the two countries. 
C) in the long run, a government agency sets the rate at parity. 
D) in the short run, the cost of labor really sets the exchange rate. 
A) in the short run, rates will adjust to parity. 
B) in the long run, the rate reflects differences in price levels between the two countries. 
C) in the long run, a government agency sets the rate at parity. 
D) in the short run, the cost of labor really sets the exchange rate.

Question 17

The ________ balance includes purchases and sales of financial assets to and from citizens and companies of other countries.

Accepted Answer

A) capital account 
B) investment account 
C) current account 
D) none of these 
A) capital account 
B) investment account 
C) current account 
D) none of these

Question 18

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 19

Exchange rates in what is termed the "medium run"

Accepted Answer

A) will be altered by an economic upswing because consumers buy more goods including imports when disposable income goes up. 
B) will be unaffected by economic changes in personal income or consumption spending. 
C) will appreciate for a country having an economic boom when others are not. 
D) All of the above are correct. 
A) will be altered by an economic upswing because consumers buy more goods including imports when disposable income goes up. 
B) will be unaffected by economic changes in personal income or consumption spending. 
C) will appreciate for a country having an economic boom when others are not. 
D) All of the above are correct.

Question 20

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

Accepted Answer

A) Revalued 
B) Devalued 
C) Depreciated 
D) Appreciated 
A) Revalued 
B) Devalued 
C) Depreciated 
D) Appreciated

Exam 35: The International Monetary System: Order or Disorder

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

Fixed exchange rates are fixed by

The main component of the monetary union created by the Treaty of Maastricht is a(n)

Purchasing-power parity theory states that relative prices in any two countries determine the exchange rate between their currencies.

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

A devaluation is a reduction in the official value of a currency.

A country with an undervalued currency

If the dollar depreciates, it can be said that

Figure 19-2 ​ -Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates.

The Bretton Woods system worked fairly well for a number of years, but it finally broke down over

If inflation in the United States is higher than in Japan, what will happen to the exchange rate between the U.S.dollar and the Japanese yen?

If a currency decreases in value as a result of government decree rather than market forces, the process is known as

Under a gold standard, a balance of payments deficit automatically

On May 11, 2011, it cost 11.601 Mexican pesos to buy 1 U.S.dollar.How many U.S.dollars did it take to buy a Mexican peso?

The purchasing power parity theory of exchange rate determination states that

The ________ balance includes purchases and sales of financial assets to and from citizens and companies of other countries.

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

Exchange rates in what is termed the "medium run"

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

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, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?