Question 1

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 2

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 3

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 4

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 5

The exchange rate of Country X is set by government decisions and maintained by government actions.Country X follows a

Accepted Answer

A) floating exchange rate policy. 
B) free market exchange rate policy. 
C) pegged exchange rate policy. 
D) fixed exchange rate policy. 
A) floating exchange rate policy. 
B) free market exchange rate policy. 
C) pegged exchange rate policy. 
D) fixed exchange rate policy.

Question 6

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 7

Inflation plays a major role in determining whether a currency is appreciating or depreciating.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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.

Question 10

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

Accepted Answer

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

Question 11

The Big Mac index is a measure of how well the purchasing power parity theory works.

Accepted Answer

A) True 
 B)False

Question 12

Under floating exchange rates, investors who speculate on international currency values provide a valuable service by assuming the risks of those who do not wish to speculate.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A rise in interest rates is expected to lead to an appreciation of the currency, and a drop in interest rates is expected to lead to a depreciation.

Accepted Answer

A) True 
 B)False

Question 15

A country that grows faster than the rest of the world should find its imports growing faster than its exports.

Accepted Answer

A) True 
 B)False

Question 16

To "cure" their balance of payments deficits without altering exchange rates, Southeast Asian countries in 1997 were forced to create

Accepted Answer

A) more inflation. 
B) recessions. 
C) faster economic growth. 
D) money at an accelerated rate. 
A) more inflation. 
B) recessions. 
C) faster economic growth. 
D) money at an accelerated rate.

Question 17

The rate at which one currency is traded for another is called a(n)

Accepted Answer

A) prime rate. 
B) trade rate. 
C) exchange rate. 
D) money rate. 
A) prime rate. 
B) trade rate. 
C) exchange rate. 
D) money rate.

Question 18

If the dollar appreciates, it can be said that

Accepted Answer

A) foreigners respect the United States more. 
B) it increases in value within the United States. 
C) other currencies depreciate. 
D) it takes more dollars to buy foreign currencies. 
A) foreigners respect the United States more. 
B) it increases in value within the United States. 
C) other currencies depreciate. 
D) it takes more dollars to buy foreign currencies.

Question 19

Assume that the information in Table 19-1 applies to the cost per ton of coal in 1998.Assume that also over a 10-year period prices rise 100 percent in Great Britain and 200 percent in the United States.According to the purchasing power parity theory, the exchange rate between the dollar and the pound in the year 2008 will be

Accepted Answer

A) 1 dollar = 2 pounds. 
B) 1 pound = 2 dollars. 
C) 1 pound = 3 dollars. 
D) 1 dollar = 3 pounds. 
A) 1 dollar = 2 pounds. 
B) 1 pound = 2 dollars. 
C) 1 pound = 3 dollars. 
D) 1 dollar = 3 pounds.

Question 20

Americans needing foreign currencies get those currencies from a bank.The ultimate source of these currencies is

Accepted Answer

A) U.S.investments abroad. 
B) U.S.exports to foreign countries. 
C) U.S.imports of foreign goods and services. 
D) the International Monetary Fund. 
A) U.S.investments abroad. 
B) U.S.exports to foreign countries. 
C) U.S.imports of foreign goods and services. 
D) the International Monetary Fund.

Exam 35: The International Monetary System: Order or Disorder

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

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?

Under the Bretton Woods system of fixed exchange rates,

The exchange rate of Country X is set by government decisions and maintained by government actions.Country X follows a

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

Inflation plays a major role in determining whether a currency is appreciating or depreciating.

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?

One of the problems that monetary unions eliminate is

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

The Big Mac index is a measure of how well the purchasing power parity theory works.

Under floating exchange rates, investors who speculate on international currency values provide a valuable service by assuming the risks of those who do not wish to speculate.

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

A rise in interest rates is expected to lead to an appreciation of the currency, and a drop in interest rates is expected to lead to a depreciation.

A country that grows faster than the rest of the world should find its imports growing faster than its exports.

To "cure" their balance of payments deficits without altering exchange rates, Southeast Asian countries in 1997 were forced to create

The rate at which one currency is traded for another is called a(n)

If the dollar appreciates, it can be said that

Americans needing foreign currencies get those currencies from a bank.The ultimate source of these currencies is

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

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