Question 1

The prospect of a recession in the United States would probably cause the dollar to

Accepted Answer

A)  depreciate because interest rates would be expected to rise. 
B)  depreciate because imports would be expected to rise. 
C)  appreciate because imports would be expected to fall. 
D)  appreciate because interest rates would be expected to decrease. 
A)  depreciate because interest rates would be expected to rise. 
B)  depreciate because imports would be expected to rise. 
C)  appreciate because imports would be expected to fall. 
D)  appreciate because interest rates would be expected to decrease.

Question 2

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Under a gold standard, a discovery of gold will

Accepted Answer

A)  decrease the general price level. 
B)  increase the general price level. 
C)  cause increased unemployment. 
D)  cause decreased rates of economic growth. 
A)  decrease the general price level. 
B)  increase the general price level. 
C)  cause increased unemployment. 
D)  cause decreased rates of economic growth.

Question 5

The gold standard prevented a nation from controlling its domestic economy through monetary policy.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

Accepted Answer

A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard 
A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard

Question 7

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 8

In order to "defend" its overvalued currency, Argentina in 2002 had to reduce its

Accepted Answer

A)  interest rates. 
B)  tax levels. 
C)  holdings of foreign reserves. 
D)  balance of payments surpluses. 
A)  interest rates. 
B)  tax levels. 
C)  holdings of foreign reserves. 
D)  balance of payments surpluses.

Question 9

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 10

If a Mexican pension fund decides to purchase U.S. government bonds, 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 11

The supply of a country's currency arises from its imports and from foreign investment by its own citizens.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

The current account balance includes international purchases and sales of goods and services, cross-border interest and dividend payments, and cross-border gifts to and from both private individuals and governments. It is approximately the same as net exports.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

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

Question 16

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 17

One method for a deficit country to correct the situation under a fixed exchange rate system is to

Accepted Answer

A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy. 
A)  increase aggregate demand with stimulative monetary policy. 
B)  increase aggregate supply with tax cuts. 
C)  decrease aggregate demand with restrictive fiscal and monetary policy. 
D)  decrease aggregate supply with restrictive fiscal policy.

Question 18

Figure 19-1
 
Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

Accepted Answer

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

Question 19

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 20

In the long run, the chief determinant of exchange rate changes is a change in

Accepted Answer

A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels. 
A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels.

Exam 35: The International Monetary System: Order or Disorder

The prospect of a recession in the United States would probably cause the dollar to

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

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

Under a gold standard, a discovery of gold will

The gold standard prevented a nation from controlling its domestic economy through monetary policy.

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

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

In order to "defend" its overvalued currency, Argentina in 2002 had to reduce its

Under the Bretton Woods system of fixed exchange rates,

If a Mexican pension fund decides to purchase U.S. government bonds, what is the effect in the foreign-exchange market?

The supply of a country's currency arises from its imports and from foreign investment by its own citizens.

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.

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

The current account balance includes international purchases and sales of goods and services, cross-border interest and dividend payments, and cross-border gifts to and from both private individuals and governments. It is approximately the same as net exports.

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

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

One method for a deficit country to correct the situation under a fixed exchange rate system is to

Figure 19-1 Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

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

In the long run, the chief determinant of exchange rate changes is a change in

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

Filters