Question 1

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

Accepted Answer

A) fixed exchange rates. 
B) expansionary monetary policies. 
C) contractionary monetary policies. 
D) state ownership of industry. 
A) fixed exchange rates. 
B) expansionary monetary policies. 
C) contractionary monetary policies. 
D) state ownership of industry.

Question 2

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac, fries, and a Coke cost $3.91 in San Francisco, how much should the same order cost in yen in Osaka?

Accepted Answer

A) 0.03 
B) 325 
C) 392 
D) 422 
A) 0.03 
B) 325 
C) 392 
D) 422

Question 3

Capital movements are typically the dominant factor in determining exchange rates in the short and medium run.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following companies would gain from foreign currency depreciation?

Accepted Answer

A) Companies that borrow in foreign currency. 
B) Companies that export goods and services. 
C) Companies that invest in the foreign equity markets. 
D) Companies that buy bonds issued by the foreign government. 
A) Companies that borrow in foreign currency. 
B) Companies that export goods and services. 
C) Companies that invest in the foreign equity markets. 
D) Companies that buy bonds issued by the foreign government.

Question 5

When exchange rates are set by government decree,

Accepted Answer

A) appreciation is called devaluation. 
B) depreciation is called devaluation. 
C) depreciation is called deflation. 
D) appreciation is called inflation. 
A) appreciation is called devaluation. 
B) depreciation is called devaluation. 
C) depreciation is called deflation. 
D) appreciation is called inflation.

Question 6

Figure 19-3
​  
-Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Accepted Answer

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

Question 7

Under a gold standard,

Accepted Answer

A) with a balance of payments deficit, interest rates would fall and attract foreign capital. 
B) a deficit in the balance of payments increased a nation's money supply automatically. 
C) all currencies were defined in terms of gold. 
D) when a nation had a deficit in its balance of payments, more gold was flowing in than was flowing out. 
E) All of the above are correct. 
A) with a balance of payments deficit, interest rates would fall and attract foreign capital. 
B) a deficit in the balance of payments increased a nation's money supply automatically. 
C) all currencies were defined in terms of gold. 
D) when a nation had a deficit in its balance of payments, more gold was flowing in than was flowing out. 
E) All of the above are correct.

Question 8

The recent experiences in Greece, Portugal, and Ireland make the euro

Accepted Answer

A) seem very unlikely to fail because of decreasing debt levels. 
B) seem very unlikely to fail because of increasing interest rates. 
C) seem somewhat likely to fail because of increasing debt levels. 
D) seem somewhat likely to fail because of increasing interest rates. 
A) seem very unlikely to fail because of decreasing debt levels. 
B) seem very unlikely to fail because of increasing interest rates. 
C) seem somewhat likely to fail because of increasing debt levels. 
D) seem somewhat likely to fail because of increasing interest rates.

Question 9

Because the United States has had substantial deficits in goods and services, it has also necessarily had surpluses in

Accepted Answer

A) the federal budget. 
B) the sales of assets. 
C) the sales of military goods. 
D) its gold supplies. 
A) the federal budget. 
B) the sales of assets. 
C) the sales of military goods. 
D) its gold supplies.

Question 10

According to the purchasing power parity theory, which of the following is most likely to affect exchange rates?

Accepted Answer

A) Differences in inflation rates 
B) Differences in interest rates 
C) Differences in income levels 
D) Differences in real GDP growth rates 
A) Differences in inflation rates 
B) Differences in interest rates 
C) Differences in income levels 
D) Differences in real GDP growth rates

Question 11

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

Accepted Answer

A) True 
 B)False

Question 12

The supply of euros would come from

Accepted Answer

A) American demand for European real estate. 
B) European demand for U.S.government bonds. 
C) Americans vacationing in Barcelona, Spain. 
D) French supplies of wine to U.S.importers. 
A) American demand for European real estate. 
B) European demand for U.S.government bonds. 
C) Americans vacationing in Barcelona, Spain. 
D) French supplies of wine to U.S.importers.

Question 13

In 2007, the value of the U.S.dollar

Accepted Answer

A) increased relative to the euro. 
B) decreased relative to the euro. 
C) remained stable relative to the euro. 
D) was equal to the value of the euro. 
A) increased relative to the euro. 
B) decreased relative to the euro. 
C) remained stable relative to the euro. 
D) was equal to the value of the euro.

Question 14

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy 1 British pound?

Accepted Answer

A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19 
A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19

Question 15

If the price of the dollar changes from 135 Japanese yen to 127 Japanese yen, the dollar has

Accepted Answer

A) appreciated. 
B) depreciated. 
C) stayed the same. 
D) none of these. 
A) appreciated. 
B) depreciated. 
C) stayed the same. 
D) none of these.

Question 16

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

Accepted Answer

A) True 
 B)False

Question 17

Can the U.S.dollar and the European euro both appreciate relative to each other?

Accepted Answer

A) Yes, both countries can gain in this manner. 
B) Yes, provided the central banks permit it. 
C) No, unless there is a system of fixed exchange rates. 
D) No, if one currency appreciates, the other must depreciate. 
A) Yes, both countries can gain in this manner. 
B) Yes, provided the central banks permit it. 
C) No, unless there is a system of fixed exchange rates. 
D) No, if one currency appreciates, the other must depreciate.

Question 18

Under a gold standard, a balance of payments surplus automatically

Accepted Answer

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

Question 19

In each of the following scenarios, explain why the euro will appreciate or depreciate in a system of floating exchange rates.(A) A recession in Germany cuts German purchases of American goods.(B) American investors are attracted by prospects for profit on the Frankfurt Stock Exchange.(C) Interest rates on government bonds rise in the United States but remain stable in Germany.

Accepted Answer

(A) The recession leads to a drop in imp

Question 20

On May 12, 2011, it cost U.S.$1.44 to buy 1 euro.How many euros would U.S.$1 buy?

Accepted Answer

A) 0.69 
B) 1.44 
C) 1.69 
D) 2.44 
A) 0.69 
B) 1.44 
C) 1.69 
D) 2.44

Exam 35: The International Monetary System: Order or Disorder

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac, fries, and a Coke cost $3.91 in San Francisco, how much should the same order cost in yen in Osaka?

Capital movements are typically the dominant factor in determining exchange rates in the short and medium run.

Which of the following companies would gain from foreign currency depreciation?

When exchange rates are set by government decree,

Figure 19-3 ​ -Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Under a gold standard,

The recent experiences in Greece, Portugal, and Ireland make the euro

Because the United States has had substantial deficits in goods and services, it has also necessarily had surpluses in

According to the purchasing power parity theory, which of the following is most likely to affect exchange rates?

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

The supply of euros would come from

In 2007, the value of the U.S.dollar

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy 1 British pound?

If the price of the dollar changes from 135 Japanese yen to 127 Japanese yen, the dollar has

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

Can the U.S.dollar and the European euro both appreciate relative to each other?

Under a gold standard, a balance of payments surplus automatically

On May 12, 2011, it cost U.S.$1.44 to buy 1 euro.How many euros would U.S.$1 buy?

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 19-3 -Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?