Question 1

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen, then the dollar has

Accepted Answer

A) appreciated. 
B) depreciated. 
C) been revalued. 
D) been devalued. 
A) appreciated. 
B) depreciated. 
C) been revalued. 
D) been devalued.

Question 2

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 3

Under the Bretton Woods system, devaluation was

Accepted Answer

A) normal. 
B) routine. 
C) rare. 
D) a last resort. 
A) normal. 
B) routine. 
C) rare. 
D) a last resort.

Question 4

There is an exchange rate between

Accepted Answer

A) every pair of currencies. 
B) the world's major currencies but not between the currencies of less-developed countries. 
C) currencies on a fixed exchange rate system but not for those on a floating rate system. 
D) the currencies of the European Union but not for the nations outside the European Union. 
A) every pair of currencies. 
B) the world's major currencies but not between the currencies of less-developed countries. 
C) currencies on a fixed exchange rate system but not for those on a floating rate system. 
D) the currencies of the European Union but not for the nations outside the European Union.

Question 5

Differentiate between the current account balance and the capital account balance.

Accepted Answer

The current account balance includes int

Question 6

The purchasing power parity theory is useful in making ____ predictions about exchange rates and their fluctuations.

Accepted Answer

A) long-run 
B) intermediate-run 
C) medium-run 
D) short-run 
A) long-run 
B) intermediate-run 
C) medium-run 
D) short-run

Question 7

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 and 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 and 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 8

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 9

In the winter of 2001-2002, Argentina's overvalued currency reflected a(n)

Accepted Answer

A) balance of payments surplus. 
B) balance of payments deficit. 
C) surplus of exports over imports. 
D) excess demand for Thai currency. 
A) balance of payments surplus. 
B) balance of payments deficit. 
C) surplus of exports over imports. 
D) excess demand for Thai currency.

Question 10

Demand for a country's financial assets leads to demand for its currency.

Accepted Answer

A) True 
 B)False

Question 11

The demand for euros would come from

Accepted Answer

A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct. 
A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct.

Question 12

If one country has higher inflation than another, its exchange rate should depreciate.

Accepted Answer

A) True 
 B)False

Question 13

The principal result of the rising value of the U.S.dollar in the mid-1990s was the

Accepted Answer

A) lower foreign inflation. 
B) lower U.S.interest rates. 
C) opportunities for currency speculation. 
D) attractive investments in U.S.technology. 
A) lower foreign inflation. 
B) lower U.S.interest rates. 
C) opportunities for currency speculation. 
D) attractive investments in U.S.technology.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 16

A revaluation is an increase in the official value of a currency.

Accepted Answer

A) True 
 B)False

Question 17

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 18

One disadvantage of the gold standard was that no nation had control of its domestic monetary policies.

Accepted Answer

A) True 
 B)False

Question 19

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.

Question 20

An important effect of foreign currency speculators is that

Accepted Answer

A) they have consistently lost money and have left the market. 
B) they have pushed exchange rates to wider extremes than most economists predicted. 
C) they actually limit the volatility of exchange rate movements. 
D) they have had no effect at all on exchange rate volatility. 
A) they have consistently lost money and have left the market. 
B) they have pushed exchange rates to wider extremes than most economists predicted. 
C) they actually limit the volatility of exchange rate movements. 
D) they have had no effect at all on exchange rate volatility.

Exam 35: The International Monetary System: Order or Disorder

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen, then the dollar has

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

Under the Bretton Woods system, devaluation was

There is an exchange rate between

Differentiate between the current account balance and the capital account balance.

The purchasing power parity theory is useful in making ____ predictions about exchange rates and their fluctuations.

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

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

In the winter of 2001-2002, Argentina's overvalued currency reflected a(n)

Demand for a country's financial assets leads to demand for its currency.

The demand for euros would come from

If one country has higher inflation than another, its exchange rate should depreciate.

The principal result of the rising value of the U.S.dollar in the mid-1990s was the

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

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

A revaluation is an increase in the official value of a currency.

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

One disadvantage of the gold standard was that no nation had control of its domestic monetary policies.

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

An important effect of foreign currency speculators is that

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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