Question 1

If there is an excess supply of the domestic currency at a fixed exchange rate,

Accepted Answer

A)  the currency will undergo a devaluation 
B)  the currency will appreciate 
C)  the country must switch to a floating exchange rate 
D)  the central bank must buy up that excess supply or the exchange rate will fall 
E)  the central bank must be up that excess supply or the exchange rate will rise 
A)  the currency will undergo a devaluation 
B)  the currency will appreciate 
C)  the country must switch to a floating exchange rate 
D)  the central bank must buy up that excess supply or the exchange rate will fall 
E)  the central bank must be up that excess supply or the exchange rate will rise

Question 2

What does the supply curve for Mexican pesos tell us?

Accepted Answer

A)  The number of pesos people will want to sell at each different exchange rate 
B)  The number of pesos people will want to sell at each level of output 
C)  The number of pesos people will want to buy at each different exchange rate 
D)  The number of pesos people will want to buy in each different time period 
E)  The number of pesos people will want to sell at each different interest rate. 
A)  The number of pesos people will want to sell at each different exchange rate 
B)  The number of pesos people will want to sell at each level of output 
C)  The number of pesos people will want to buy at each different exchange rate 
D)  The number of pesos people will want to buy in each different time period 
E)  The number of pesos people will want to sell at each different interest rate.

Question 3

In the hard-landing scenario the ability of the Fed to respond

Accepted Answer

A)  is unlimited 
B)  is constrained because their inclination to raise interest rates would further compound the value of the dollar problem. 
C)  is constrained because their inclination to lower interest rates would further compound the value of the dollar problem. 
D)  limited because the resulting boom would run out of control. 
E)  is constrained because their inclination to lower taxes would depress tax revenues. 
A)  is unlimited 
B)  is constrained because their inclination to raise interest rates would further compound the value of the dollar problem. 
C)  is constrained because their inclination to lower interest rates would further compound the value of the dollar problem. 
D)  limited because the resulting boom would run out of control. 
E)  is constrained because their inclination to lower taxes would depress tax revenues.

Question 4

If the dollar-peso exchange rate is 0.01 dollars per peso,what is the rate of pesos per dollar?

Accepted Answer

A)  1 peso/dollar 
B)  10 pesos/dollar 
C)  0.1 peso/dollar 
D)  1,000 pesos/dollar 
E)  100 pesos/dollar 
A)  1 peso/dollar 
B)  10 pesos/dollar 
C)  0.1 peso/dollar 
D)  1,000 pesos/dollar 
E)  100 pesos/dollar

Question 5

If the dollars per euro exchange rate increased,

Accepted Answer

A)  Americans would purchase fewer European goods 
B)  more U.S.firms would want to relocate to Europe 
C)  more American tourists would travel to Europe 
D)  the demand for euros would increase 
E)  Europeans would become more highly respected 
A)  Americans would purchase fewer European goods 
B)  more U.S.firms would want to relocate to Europe 
C)  more American tourists would travel to Europe 
D)  the demand for euros would increase 
E)  Europeans would become more highly respected

Question 6

What is the main reason why monetary policy has a stronger effect in an open economy than in a closed economy?

Accepted Answer

A)  Changes in the price level affect net exports. 
B)  Changes in the price level affect exchange rates. 
C)  Changes in exchange rates affect output. 
D)  Changes in the interest rate affect exchange rates which,in turn,affect net exports. 
E)  Changes in exchange rates affect the interest rate which,in turn,affects net exports. 
A)  Changes in the price level affect net exports. 
B)  Changes in the price level affect exchange rates. 
C)  Changes in exchange rates affect output. 
D)  Changes in the interest rate affect exchange rates which,in turn,affect net exports. 
E)  Changes in exchange rates affect the interest rate which,in turn,affects net exports.

Question 7

The most dramatic and rapid increases and decreases in exchange rates occur in the

Accepted Answer

A)  very short run 
B)  short run 
C)  long run 
D)  very long run 
E)  triangular arbitrage market 
A)  very short run 
B)  short run 
C)  long run 
D)  very long run 
E)  triangular arbitrage market

Question 8

The 2005-2008 Chinese policy with respect to the Yuan has been to

Accepted Answer

A)  allow its currency to float. 
B)  allow its currency to rise in value quickly. 
C)  allow its currency to rise in value slowly. 
D)  allow its currency to fall in value slowly. 
E)  allow its currency to fall in value quickly. 
A)  allow its currency to float. 
B)  allow its currency to rise in value quickly. 
C)  allow its currency to rise in value slowly. 
D)  allow its currency to fall in value slowly. 
E)  allow its currency to fall in value quickly.

Question 9

Which of the following is not among the factors that could shift the supply of pounds curve? You may assume all other factors are held constant.

Accepted Answer

A)  A change in U.S.real GDP. 
B)  A change in British real GDP. 
C)  An increase in the U.S.interest rate. 
D)  A change in British tastes for American goods. 
E)  An increase in the U.S.price level. 
A)  A change in U.S.real GDP. 
B)  A change in British real GDP. 
C)  An increase in the U.S.interest rate. 
D)  A change in British tastes for American goods. 
E)  An increase in the U.S.price level.

Question 10

A decrease in the price of a foreign currency is represented graphically as

Accepted Answer

A)  rightward movement along the demand curve for that currency 
B)  an upward shift of the demand curve 
C)  a downward shift of the demand curve 
D)  a horizontal line 
E)  a vertical line 
A)  rightward movement along the demand curve for that currency 
B)  an upward shift of the demand curve 
C)  a downward shift of the demand curve 
D)  a horizontal line 
E)  a vertical line

Question 11

If we know that the exchange rate is 0.8 dollars per euro,then we know that the exchange rate of euros per dollars is

Accepted Answer

A)  0.8 
B)  1.8 
C)  1.25 
D)  less than 1.0 
E)  5 
A)  0.8 
B)  1.8 
C)  1.25 
D)  less than 1.0 
E)  5

Question 12

Suppose the same basket of goods costs $200 in the U.S.and 100 pounds in Britain and that the exchange rate is $3 per pound.According to purchasing power parity,if the two countries' price levels do not change,what will happen to exchange rate?

Accepted Answer

A)  The pound would appreciate until the exchange rate reaches $3 per pound. 
B)  The pound would depreciate until the exchange rate reaches $2 per pound. 
C)  The pound would depreciate until the exchange rate reaches $0.50 per pound. 
D)  The dollar price of a pound would remain at $10. 
E)  The pound would appreciate until the exchange rate reaches $4 per pound. 
A)  The pound would appreciate until the exchange rate reaches $3 per pound. 
B)  The pound would depreciate until the exchange rate reaches $2 per pound. 
C)  The pound would depreciate until the exchange rate reaches $0.50 per pound. 
D)  The dollar price of a pound would remain at $10. 
E)  The pound would appreciate until the exchange rate reaches $4 per pound.

Question 13

Where would a country such as Japan get U.S.dollars in order to engage in managed float?

Accepted Answer

A)  It would print them. 
B)  It would use its reserve of dollars. 
C)  It would sell yen on the open market in exchange for U.S.dollars. 
D)  Since Japan's currency is the yen,it would not be able to obtain U.S.dollars. 
E)  It would borrow U.S.dollars form the U.S. 
A)  It would print them. 
B)  It would use its reserve of dollars. 
C)  It would sell yen on the open market in exchange for U.S.dollars. 
D)  Since Japan's currency is the yen,it would not be able to obtain U.S.dollars. 
E)  It would borrow U.S.dollars form the U.S.

Question 14

If the pound-dollar exchange rate is 2 pounds per dollar,what is the rate of dollars per pound?

Accepted Answer

A)  4 dollars/pound 
B)  2 dollars/pound 
C)  5 dollars/pound 
D)  0.50 dollars/pound 
E)  2.50 dollars/pound 
A)  4 dollars/pound 
B)  2 dollars/pound 
C)  5 dollars/pound 
D)  0.50 dollars/pound 
E)  2.50 dollars/pound

Question 15

If a country fixes its exchange rate below the equilibrium value,

Accepted Answer

A)  the central bank must buy its own 
B)  there will be downward pressure on the exchange rate 
C)  its currency will appreciate 
D)  the result is an excess demand for that country's currency 
E)  its currency will depreciate 
A)  the central bank must buy its own 
B)  there will be downward pressure on the exchange rate 
C)  its currency will appreciate 
D)  the result is an excess demand for that country's currency 
E)  its currency will depreciate

Question 16

If the Bank of Japan buys yen to prevent the yen from appreciating,

Accepted Answer

A)  it is probably also trying to profit from that operation 
B)  it is probably also trying to maintain an interest rate target 
C)  it is engaging in bilateral arbitrage 
D)  it is engaging in a managed float 
E)  it is wasting its time and effort 
A)  it is probably also trying to profit from that operation 
B)  it is probably also trying to maintain an interest rate target 
C)  it is engaging in bilateral arbitrage 
D)  it is engaging in a managed float 
E)  it is wasting its time and effort

Question 17

Why do the British supply pounds to the dollar-pound market?

Accepted Answer

A)  To buy goods and services from American firms. 
B)  To buy American assets. 
C)  To buy stock in American firms on the London stock exchange. 
D)  Both (a)and (b)are correct. 
E)  None of the above. 
A)  To buy goods and services from American firms. 
B)  To buy American assets. 
C)  To buy stock in American firms on the London stock exchange. 
D)  Both (a)and (b)are correct. 
E)  None of the above.

Question 18

A devaluation of a currency means that the exchange rate (price of that currency)has changed to a lower fixed rate.

Accepted Answer

A) True 
 B)False

Question 19

What does the demand curve for British pounds tell us?

Accepted Answer

A)  The quantity of pounds people will want to sell at each different exchange rate 
B)  The quantity of pounds people will want to buy at each level of output 
C)  The quantity of pounds people will want to buy at each different exchange rate 
D)  The quantity of pounds people will want to sell in each different time period 
E)  The quantity of pounds people will want to buy at each different interest rate. 
A)  The quantity of pounds people will want to sell at each different exchange rate 
B)  The quantity of pounds people will want to buy at each level of output 
C)  The quantity of pounds people will want to buy at each different exchange rate 
D)  The quantity of pounds people will want to sell in each different time period 
E)  The quantity of pounds people will want to buy at each different interest rate.

Question 20

Wealth in the hands of Americans has been

Accepted Answer

A)  rising because of the trade deficit 
B)  rising in spite of the trade deficit 
C)  falling because of the trade deficit 
D)  falling in spite of the trade deficit 
E)  falling in the last twenty years. 
A)  rising because of the trade deficit 
B)  rising in spite of the trade deficit 
C)  falling because of the trade deficit 
D)  falling in spite of the trade deficit 
E)  falling in the last twenty years.

If there is an excess supply of the domestic currency at a fixed exchange rate,

What does the supply curve for Mexican pesos tell us?

In the hard-landing scenario the ability of the Fed to respond

If the dollar-peso exchange rate is 0.01 dollars per peso,what is the rate of pesos per dollar?

If the dollars per euro exchange rate increased,

What is the main reason why monetary policy has a stronger effect in an open economy than in a closed economy?

The most dramatic and rapid increases and decreases in exchange rates occur in the

The 2005-2008 Chinese policy with respect to the Yuan has been to

Which of the following is not among the factors that could shift the supply of pounds curve? You may assume all other factors are held constant.

A decrease in the price of a foreign currency is represented graphically as

If we know that the exchange rate is 0.8 dollars per euro,then we know that the exchange rate of euros per dollars is

Suppose the same basket of goods costs $200 in the U.S.and 100 pounds in Britain and that the exchange rate is $3 per pound.According to purchasing power parity,if the two countries' price levels do not change,what will happen to exchange rate?

Where would a country such as Japan get U.S.dollars in order to engage in managed float?

If the pound-dollar exchange rate is 2 pounds per dollar,what is the rate of dollars per pound?

If a country fixes its exchange rate below the equilibrium value,

If the Bank of Japan buys yen to prevent the yen from appreciating,

Why do the British supply pounds to the dollar-pound market?

A devaluation of a currency means that the exchange rate (price of that currency)has changed to a lower fixed rate.

What does the demand curve for British pounds tell us?

Wealth in the hands of Americans has been

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Filters

Exam 17: Exchange Rates and Macroeconomic Policy

If there is an excess supply of the domestic currency at a fixed exchange rate,

What does the supply curve for Mexican pesos tell us?

In the hard-landing scenario the ability of the Fed to respond

If the dollar-peso exchange rate is 0.01 dollars per peso,what is the rate of pesos per dollar?

If the dollars per euro exchange rate increased,

What is the main reason why monetary policy has a stronger effect in an open economy than in a closed economy?

The most dramatic and rapid increases and decreases in exchange rates occur in the

The 2005-2008 Chinese policy with respect to the Yuan has been to

Which of the following is not among the factors that could shift the supply of pounds curve? You may assume all other factors are held constant.

A decrease in the price of a foreign currency is represented graphically as

If we know that the exchange rate is 0.8 dollars per euro,then we know that the exchange rate of euros per dollars is

Suppose the same basket of goods costs $200 in the U.S.and 100 pounds in Britain and that the exchange rate is $3 per pound.According to purchasing power parity,if the two countries' price levels do not change,what will happen to exchange rate?

Where would a country such as Japan get U.S.dollars in order to engage in managed float?

If the pound-dollar exchange rate is 2 pounds per dollar,what is the rate of dollars per pound?

If a country fixes its exchange rate below the equilibrium value,

If the Bank of Japan buys yen to prevent the yen from appreciating,

Why do the British supply pounds to the dollar-pound market?

A devaluation of a currency means that the exchange rate (price of that currency)has changed to a lower fixed rate.

What does the demand curve for British pounds tell us?

Wealth in the hands of Americans has been

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Filters