Question 1

Table 19-1
​  
-From Table 19-1, what is the exchange rate between the dollar and the pound?

Accepted Answer

A) 1 dollar is worth 2 pounds. 
B) 1 pound is worth 2 dollars. 
C) 1 pound is worth 1 dollar. 
D) 1 pound is worth 50 cents. 
A) 1 dollar is worth 2 pounds. 
B) 1 pound is worth 2 dollars. 
C) 1 pound is worth 1 dollar. 
D) 1 pound is worth 50 cents.

Question 2

Under the Bretton Woods system, a country with a balance of payments deficit

Accepted Answer

A) could get loans from the U.S.government. 
B) could devalue if deflationary policies failed to eliminate the deficit. 
C) was not allowed to devalue under any circumstance. 
D) was required to devalue its currency immediately. 
A) could get loans from the U.S.government. 
B) could devalue if deflationary policies failed to eliminate the deficit. 
C) was not allowed to devalue under any circumstance. 
D) was required to devalue its currency immediately.

Question 3

Under the gold standard,

Accepted Answer

A) no nation had control of its domestic monetary policy, and therefore no nation could control its aggregate demand. 
B) the world's commerce was at the mercy of gold discoveries. 
C) discoveries of gold meant higher prices in the long run and higher real economic activity in the short run. 
D) All of the above are correct. 
A) no nation had control of its domestic monetary policy, and therefore no nation could control its aggregate demand. 
B) the world's commerce was at the mercy of gold discoveries. 
C) discoveries of gold meant higher prices in the long run and higher real economic activity in the short run. 
D) All of the above are correct.

Question 4

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 5

Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory, explain the exchange rate between the yen and the euro.

Accepted Answer

Purchasing power parity theory holds tha

Question 6

If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency, it will generally

Accepted Answer

A) sell its own currency for foreign currencies. 
B) buy its own currency with foreign reserves. 
C) decrease taxes to increase domestic disposable income. 
D) increase the money supply to keep interest rates down. 
A) sell its own currency for foreign currencies. 
B) buy its own currency with foreign reserves. 
C) decrease taxes to increase domestic disposable income. 
D) increase the money supply to keep interest rates down.

Question 7

Domestic monetary policy is essentially useless under

Accepted Answer

A) a floating exchange rate system. 
B) a fixed exchange rate system. 
C) the gold standard. 
D) conditions of balance of payments surpluses. 
A) a floating exchange rate system. 
B) a fixed exchange rate system. 
C) the gold standard. 
D) conditions of balance of payments surpluses.

Question 8

Under the gold standard of a century ago, the world's commerce

Accepted Answer

A) nearly collapsed before the beginning of World War I. 
B) was at the mercy of gold discoveries. 
C) grew steadily without interruption from monetary disturbances. 
D) grew when the gold stock grew slowly, and shrank when gold discoveries increased. 
A) nearly collapsed before the beginning of World War I. 
B) was at the mercy of gold discoveries. 
C) grew steadily without interruption from monetary disturbances. 
D) grew when the gold stock grew slowly, and shrank when gold discoveries increased.

Question 9

When the dollar buys more foreign currency, there has been appreciation of the dollar.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would cause an increase in the demand for U.S.dollars?

Accepted Answer

A) An interest rate cut in the United States 
B) An interest rate cut in Europe 
C) An interest rate increase in Europe 
D) A recession in Europe 
A) An interest rate cut in the United States 
B) An interest rate cut in Europe 
C) An interest rate increase in Europe 
D) A recession in Europe

Question 11

If Americans decide to buy more South African diamonds, what is the effect in the foreign market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 12

If the U.S.purchases oil from Venezuela, what is the effect in the foreign-exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 13

If U.S.securities pay 7 percent interest, and if Great Britain's securities pay 5 percent interest, then

Accepted Answer

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

Question 14

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

Accepted Answer

A) depreciate 
B) devalue 
C) revalue 
D) appreciate 
A) depreciate 
B) devalue 
C) revalue 
D) appreciate

Question 15

If a country is in a major recessionary phase of the business cycle, one can expect that its currency will

Accepted Answer

A) revalue. 
B) devalue. 
C) appreciate. 
D) depreciate. 
A) revalue. 
B) devalue. 
C) appreciate. 
D) depreciate.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Explain three factors that would cause the dollar to appreciate.

Accepted Answer

An increase in the demand for U.S.export

Question 18

If a currency increases in value in response to market forces, this process is known as

Accepted Answer

A) reflation. 
B) revaluation. 
C) appreciation. 
D) value-added. 
A) reflation. 
B) revaluation. 
C) appreciation. 
D) value-added.

Question 19

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 20

Explain the role of the International Monetary Fund.Discuss the criticisms leveled against this agency in the wake of economic crises of the 1990s.

Accepted Answer

The International Monetary Fund (IMF) ex

Exam 35: The International Monetary System: Order or Disorder

Table 19-1 ​ -From Table 19-1, what is the exchange rate between the dollar and the pound?

Under the Bretton Woods system, a country with a balance of payments deficit

Under the gold standard,

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

Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory, explain the exchange rate between the yen and the euro.

If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency, it will generally

Domestic monetary policy is essentially useless under

Under the gold standard of a century ago, the world's commerce

When the dollar buys more foreign currency, there has been appreciation of the dollar.

Which of the following would cause an increase in the demand for U.S.dollars?

If Americans decide to buy more South African diamonds, what is the effect in the foreign market?

If the U.S.purchases oil from Venezuela, what is the effect in the foreign-exchange market?

If U.S.securities pay 7 percent interest, and if Great Britain's securities pay 5 percent interest, then

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

If a country is in a major recessionary phase of the business cycle, one can expect that its currency will

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

Explain three factors that would cause the dollar to appreciate.

If a currency increases in value in response to market forces, this process is known as

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

Explain the role of the International Monetary Fund.Discuss the criticisms leveled against this agency in the wake of economic crises of the 1990s.

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

Table 19-1 -From Table 19-1, what is the exchange rate between the dollar and the pound?

Suppose a Lexus LS₄00 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory, explain the exchange rate between the yen and the euro.