Exam 35: The International Monetary System: Order or Disorder

The balance of payments surplus is the amount by which the quantity demanded of a country's currency (per year) exceeds the quantity supplied.

A country with an undervalued currency

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

If the dollar appreciates relative to other currencies, which of the following is true?

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

Domestic monetary policy is essentially useless under

Under the Bretton Woods system of fixed exchange rates, the price of the U.S. dollar was fixed in terms of gold and the prices of all other currencies were fixed in terms of dollars.

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

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

The decline in the value of the dollar from 1985 to 1988 was beneficial to

Figure 19-1 Of the graphs in Figure 19-1, which one shows the effects of an increase in interest rates in Japan and a depreciation of the dollar?

On May 12, 2011, the U.S. dollar was worth 0.70 euros. How many dollars did it take to buy 1 euro?

Prices of European goods are rising faster than prices of similar goods in the United States. Consequently Europeans substitute American goods for European goods and the euro depreciates. This phenomenon is the basis of

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

On May 12, 2011, it cost U.S. $1.64 to buy 1 British pound. How many British pounds would U.S. $1 buy?

Countries with relatively low inflation rates will have appreciating currencies.

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?

Figure 19-2 Of the graphs in Figure 19-2, which one shows the effects on the exchange rate of an expansion in Japan?