Question 1

Discuss the problems associated with the Bretton Woods system.

Accepted Answer

Under the Bretton Woods system, changes

Question 2

International trade under a floating exchange rate system

Accepted Answer

A)  has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B)  has suffered from so many problems that the volume of trade has declined significantly. 
C)  exposes businesses to unavoidable risks when exchange rates change. 
D)  has been subject to wild runs on currencies that were on the verge of devaluation. 
A)  has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B)  has suffered from so many problems that the volume of trade has declined significantly. 
C)  exposes businesses to unavoidable risks when exchange rates change. 
D)  has been subject to wild runs on currencies that were on the verge of devaluation.

Question 3

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 4

The ¬_______ is a way to fix exchange rates by defining each participating currency in terms of gold and allowing holders of each participating currency to convert that currency into gold.

Accepted Answer

A)  gold standard 
B)  silver standard 
C)  bronze standard 
D)  none of these 
A)  gold standard 
B)  silver standard 
C)  bronze standard 
D)  none of these

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The principal goal of the Treaty of Maastricht was the creation of a

Accepted Answer

A)  fixed exchange rate system. 
B)  floating exchange rate system. 
C)  gold-exchange system. 
D)  monetary union. 
A)  fixed exchange rate system. 
B)  floating exchange rate system. 
C)  gold-exchange system. 
D)  monetary union.

Question 7

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 8

Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates.

Accepted Answer

A) True 
 B)False

Question 9

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates. In practice it appears that speculators

Accepted Answer

A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct. 
A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct.

Question 10

The purchasing power parity theory of exchange rate determination states that

Accepted Answer

A)  in the short run, rates will adjust to parity. 
B)  in the long run, the rate reflects differences in price levels between the two countries. 
C)  in the long run, a government agency sets the rate at parity. 
D)  in the short run, the cost of labor really sets the exchange rate. 
A)  in the short run, rates will adjust to parity. 
B)  in the long run, the rate reflects differences in price levels between the two countries. 
C)  in the long run, a government agency sets the rate at parity. 
D)  in the short run, the cost of labor really sets the exchange rate.

Question 11

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 12

Define the following terms and explain their importance to the study of macroeconomics. 
a. Exchange rate 
b. Depreciation 
c. Devaluation 
d. Fixed exchange rates

Accepted Answer

a. The exchange rate states the price, i

Question 13

Adhering to a strict fixed exchange rate system means that

Accepted Answer

A)  no country will experience inflation or recession. 
B)  each nation improves control over its money supply. 
C)  each nation loses some control of its monetary policy and its domestic economy. 
D)  each nation improves control over its fiscal policy and aggregate demand. 
A)  no country will experience inflation or recession. 
B)  each nation improves control over its money supply. 
C)  each nation loses some control of its monetary policy and its domestic economy. 
D)  each nation improves control over its fiscal policy and aggregate demand.

Question 14

One of the problems that monetary unions eliminate is

Accepted Answer

A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles. 
A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles.

Question 15

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Accepted Answer

A)  monies. 
B)  goods and services. 
C)  stocks and bonds. 
D)  physical assets. 
A)  monies. 
B)  goods and services. 
C)  stocks and bonds. 
D)  physical assets.

Question 16

Fixed exchange rates are fixed by

Accepted Answer

A)  international speculators who manipulate the world's currencies. 
B)  international demand and supply. 
C)  national governments. 
D)  All of the above are correct. 
A)  international speculators who manipulate the world's currencies. 
B)  international demand and supply. 
C)  national governments. 
D)  All of the above are correct.

Question 17

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?

Accepted Answer

A)  A gradual increase in the value of its currency 
B)  A gradual decrease in the value of its currency 
C)  A "run" on its currency and a sudden appreciation 
D)  A "run" on its currency and a sudden devaluation 
A)  A gradual increase in the value of its currency 
B)  A gradual decrease in the value of its currency 
C)  A "run" on its currency and a sudden appreciation 
D)  A "run" on its currency and a sudden devaluation

Question 18

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 19

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 20

Table 19-1   Assume that the information in Table 19-1 applies to the cost per ton of coal in 1998. Assume that also over a 10-year period prices rise 100 percent in Great Britain and 200 percent in the United States. According to the purchasing power parity theory, the exchange rate between the dollar and the pound in the year 2008 will be

Accepted Answer

A)  1 dollar = 2 pounds. 
B)  1 pound = 2 dollars. 
C)  1 pound = 3 dollars. 
D)  1 dollar = 3 pounds. 
A)  1 dollar = 2 pounds. 
B)  1 pound = 2 dollars. 
C)  1 pound = 3 dollars. 
D)  1 dollar = 3 pounds.

Discuss the problems associated with the Bretton Woods system.

International trade under a floating exchange rate system

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

The ¬_______ is a way to fix exchange rates by defining each participating currency in terms of gold and allowing holders of each participating currency to convert that currency into gold.

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

The principal goal of the Treaty of Maastricht was the creation of a

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

Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates.

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates. In practice it appears that speculators

The purchasing power parity theory of exchange rate determination states that

Under a gold standard, a balance of payments surplus automatically

Define the following terms and explain their importance to the study of macroeconomics. a. Exchange rate b. Depreciation c. Devaluation d. Fixed exchange rates

Adhering to a strict fixed exchange rate system means that

One of the problems that monetary unions eliminate is

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Fixed exchange rates are fixed by

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?

Under the gold standard,

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

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

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Exam 35: The International Monetary System: Order or Disorder

Discuss the problems associated with the Bretton Woods system.

International trade under a floating exchange rate system

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

The ¬_______ is a way to fix exchange rates by defining each participating currency in terms of gold and allowing holders of each participating currency to convert that currency into gold.

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

The principal goal of the Treaty of Maastricht was the creation of a

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

Other things equal, countries that offer investors higher rates of return attract more capital than countries that offer lower rates.

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates. In practice it appears that speculators

The purchasing power parity theory of exchange rate determination states that

Under a gold standard, a balance of payments surplus automatically

Define the following terms and explain their importance to the study of macroeconomics. a. Exchange rate b. Depreciation c. Devaluation d. Fixed exchange rates

Adhering to a strict fixed exchange rate system means that

One of the problems that monetary unions eliminate is

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Fixed exchange rates are fixed by

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?

Under the gold standard,

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

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