Question 1

Which of the following would lead to a leftward movement along the supply curve of euros?

Accepted Answer

A)  An increase in the U.S.interest rate relative to the European interest rate 
B)  An increase in the dollars per euro exchange rate 
C)  A decrease in Europe's GDP 
D)  A decrease in the dollar price of the euros 
E)  A decrease in the U.S.price level relative to the European price level. 
A)  An increase in the U.S.interest rate relative to the European interest rate 
B)  An increase in the dollars per euro exchange rate 
C)  A decrease in Europe's GDP 
D)  A decrease in the dollar price of the euros 
E)  A decrease in the U.S.price level relative to the European price level.

Question 2

Which of the following is an example of a managed float?

Accepted Answer

A)  The Fed buys or sells U.S.dollars in order to maintain a fixed $1.05 per euro exchange rate. 
B)  The European Central Bank buys or sells euros in order to "peg" the price level. 
C)  The Bank of England buys or sells British pounds in order to maintain a fixed exchange rate with the U.S.dollar. 
D)  The Bank of Japan intervenes in the foreign exchange market to prevent a rapid depreciation of the yen. 
E)  The Bank of Japan intervenes to set the tax rate very close to the tax rates of other countries. 
A)  The Fed buys or sells U.S.dollars in order to maintain a fixed $1.05 per euro exchange rate. 
B)  The European Central Bank buys or sells euros in order to "peg" the price level. 
C)  The Bank of England buys or sells British pounds in order to maintain a fixed exchange rate with the U.S.dollar. 
D)  The Bank of Japan intervenes in the foreign exchange market to prevent a rapid depreciation of the yen. 
E)  The Bank of Japan intervenes to set the tax rate very close to the tax rates of other countries.

Question 3

Suppose the current exchange rate is $1.60 per pound.A sweater purchased by an American in London costing 50 pounds would cost

Accepted Answer

A)  $31.25 
B)  $80.00 
C)  $51.60 
D)  $48.40 
E)  $100.00 
A)  $31.25 
B)  $80.00 
C)  $51.60 
D)  $48.40 
E)  $100.00

Question 4

The scenario in which the dollar plummets in value is called the

Accepted Answer

A)  soft-landing scenario. 
B)  hard-landing scenario. 
C)  fair-trade scenario. 
D)  free-trade scenario. 
E)  cap-and-trade scenario. 
A)  soft-landing scenario. 
B)  hard-landing scenario. 
C)  fair-trade scenario. 
D)  free-trade scenario. 
E)  cap-and-trade scenario.

Question 5

If the price of a British pound increases,more Britons will be willing to supply pounds to the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 6

At which of the following exchange rates would the quantity of British pounds demanded be the highest?

Accepted Answer

A)  $5.00 per pound. 
B)  $2.50 per pound 
C)  $3.00 per pound. 
D)  $1.50 per pound. 
E)  $2.00 per pound. 
A)  $5.00 per pound. 
B)  $2.50 per pound 
C)  $3.00 per pound. 
D)  $1.50 per pound. 
E)  $2.00 per pound.

Question 7

In the __________,the currency of a country with the higher inflation rate will __________ against the currency of a country whose inflation rate is lower.

Accepted Answer

A)  short run;appreciate. 
B)  short run;depreciate. 
C)  long run;appreciate. 
D)  long run;depreciate. 
E)  long run;remain stable. 
A)  short run;appreciate. 
B)  short run;depreciate. 
C)  long run;appreciate. 
D)  long run;depreciate. 
E)  long run;remain stable.

Question 8

-Refer to Figure 17-6 above.If the Central Bank has fixed the exchange rate at $0.95 and the supply and demand for euros are as depicted,

Accepted Answer

A)  the Central Bank must buy additional dollars. 
B)  the Central Bank must sell additional euros. 
C)  the Central Bank must buy additional euros. 
D)  the Central Bank cannot influence the exchange rate. 
E)  there is an excess supply of dollars. 
A)  the Central Bank must buy additional dollars. 
B)  the Central Bank must sell additional euros. 
C)  the Central Bank must buy additional euros. 
D)  the Central Bank cannot influence the exchange rate. 
E)  there is an excess supply of dollars.

Question 9

In a floating exchange rate system,the equilibrium exchange rate is determined

Accepted Answer

A)  by the price of the foreign currency 
B)  by the government of the country issuing the foreign currency 
C)  by the interest rate in the country issuing the foreign currency 
D)  by the Federal Reserve 
E)  at the intersection of the demand curve and supply curve for the foreign currency 
A)  by the price of the foreign currency 
B)  by the government of the country issuing the foreign currency 
C)  by the interest rate in the country issuing the foreign currency 
D)  by the Federal Reserve 
E)  at the intersection of the demand curve and supply curve for the foreign currency

Question 10

If the exchange rate (dollars per unit of foreign currency)has decreased because of a shift of the supply curve,the demand curve,or both,we say there has been a(n)

Accepted Answer

A)  appreciation of the foreign currency 
B)  depreciation of the foreign currency 
C)  revaluation of the foreign currency 
D)  devaluation of the foreign currency 
E)  fixing of the foreign currency 
A)  appreciation of the foreign currency 
B)  depreciation of the foreign currency 
C)  revaluation of the foreign currency 
D)  devaluation of the foreign currency 
E)  fixing of the foreign currency

Question 11

In the long run,exchange rates

Accepted Answer

A)  are determined by business cycle fluctuations 
B)  are determined by movements of hot money 
C)  will adjust until the price of a bundle of goods is the same in both countries 
D)  will reflect economic fluctuations in both countries 
E)  are still a mystery to most economists 
A)  are determined by business cycle fluctuations 
B)  are determined by movements of hot money 
C)  will adjust until the price of a bundle of goods is the same in both countries 
D)  will reflect economic fluctuations in both countries 
E)  are still a mystery to most economists

Question 12

Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds are demanded at a price of $1.65 per pound.If the current exchange rate is $1.80 per pound,there is will be a(n)

Accepted Answer

A)  rightward movement along the supply of British pounds curve 
B)  leftward movement along the supply of British pounds curve 
C)  rightward shift of the supply of British pounds curve 
D)  leftward shift of the supply of British pounds curve 
E)  increase in the exchange rate 
A)  rightward movement along the supply of British pounds curve 
B)  leftward movement along the supply of British pounds curve 
C)  rightward shift of the supply of British pounds curve 
D)  leftward shift of the supply of British pounds curve 
E)  increase in the exchange rate

Question 13

The foreign exchange rate is controlled by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 14

The United States has run large trade deficits with most of the world since the early

Accepted Answer

A)  1940s 
B)  1960s 
C)  1970s 
D)  1980s 
E)  1990s 
A)  1940s 
B)  1960s 
C)  1970s 
D)  1980s 
E)  1990s

Question 15

A fixed exchange rate

Accepted Answer

A)  is a declared rate that is maintained by central bank intervention in the foreign exchange market 
B)  is a rate that is fixed by the forces of supply and demand 
C)  is a rate that is determined by trilateral arbitrage 
D)  "fixes" the value of a nation's price level 
E)  is a mechanism for eliminating a trade deficit 
A)  is a declared rate that is maintained by central bank intervention in the foreign exchange market 
B)  is a rate that is fixed by the forces of supply and demand 
C)  is a rate that is determined by trilateral arbitrage 
D)  "fixes" the value of a nation's price level 
E)  is a mechanism for eliminating a trade deficit

Question 16

Under a managed float,

Accepted Answer

A)  a central bank allows the forces of supply and demand to determine the exchange rate 
B)  a nation can have neither a trade deficit nor a trade surplus 
C)  a nation "pegs" its price level to a foreign currency 
D)  a nation "pegs" its price level at some fixed value 
E)  a central bank intervenes in the foreign exchange market to stabilize its exchange rate 
A)  a central bank allows the forces of supply and demand to determine the exchange rate 
B)  a nation can have neither a trade deficit nor a trade surplus 
C)  a nation "pegs" its price level to a foreign currency 
D)  a nation "pegs" its price level at some fixed value 
E)  a central bank intervenes in the foreign exchange market to stabilize its exchange rate

Question 17

Suppose there has been decreased interest in European goods by Americans.Which of the following would we expect to observe?

Accepted Answer

A)  A rightward shift of the demand curve for euros,a depreciation of the euro,and a smaller number of euros traded. 
B)  A leftward shift of the demand curve for euros,an appreciation of the euro,and a smaller number of euros traded. 
C)  A leftward shift of the demand curve for euros,a depreciation of the euro,and a smaller number of euros traded. 
D)  A leftward shift of the demand curve for euros,a depreciation of the euro,and a larger number of euros traded. 
E)  A leftward shift of the demand curve for euros,an appreciation of the euro,and a larger number of euros traded. 
A)  A rightward shift of the demand curve for euros,a depreciation of the euro,and a smaller number of euros traded. 
B)  A leftward shift of the demand curve for euros,an appreciation of the euro,and a smaller number of euros traded. 
C)  A leftward shift of the demand curve for euros,a depreciation of the euro,and a smaller number of euros traded. 
D)  A leftward shift of the demand curve for euros,a depreciation of the euro,and a larger number of euros traded. 
E)  A leftward shift of the demand curve for euros,an appreciation of the euro,and a larger number of euros traded.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If you know the number of euros that can be exchanged for one dollar,you can easily figure out the number of dollars needed to obtain one euro by finding the reciprocal of the exchange rate for dollars per euro.

Accepted Answer

A) True 
 B)False

Question 20

If the U.S.inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

Accepted Answer

A)  Depreciate by 5 percent 
B)  Appreciate by 3 percent 
C)  Appreciate by 5 percent 
D)  Depreciate by 2 percent 
E)  Appreciate by 2 percent. 
A)  Depreciate by 5 percent 
B)  Appreciate by 3 percent 
C)  Appreciate by 5 percent 
D)  Depreciate by 2 percent 
E)  Appreciate by 2 percent.

Which of the following would lead to a leftward movement along the supply curve of euros?

Which of the following is an example of a managed float?

Suppose the current exchange rate is $1.60 per pound.A sweater purchased by an American in London costing 50 pounds would cost

The scenario in which the dollar plummets in value is called the

If the price of a British pound increases,more Britons will be willing to supply pounds to the foreign exchange market.

At which of the following exchange rates would the quantity of British pounds demanded be the highest?

In the ,the currency of a country with the higher inflation rate will against the currency of a country whose inflation rate is lower.

-Refer to Figure 17-6 above.If the Central Bank has fixed the exchange rate at $0.95 and the supply and demand for euros are as depicted,

In a floating exchange rate system,the equilibrium exchange rate is determined

If the exchange rate (dollars per unit of foreign currency)has decreased because of a shift of the supply curve,the demand curve,or both,we say there has been a(n)

In the long run,exchange rates

Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds are demanded at a price of $1.65 per pound.If the current exchange rate is $1.80 per pound,there is will be a(n)

The foreign exchange rate is controlled by the Federal Reserve.

The United States has run large trade deficits with most of the world since the early

A fixed exchange rate

Under a managed float,

Suppose there has been decreased interest in European goods by Americans.Which of the following would we expect to observe?

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

If you know the number of euros that can be exchanged for one dollar,you can easily figure out the number of dollars needed to obtain one euro by finding the reciprocal of the exchange rate for dollars per euro.

If the U.S.inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

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

Which of the following would lead to a leftward movement along the supply curve of euros?

Which of the following is an example of a managed float?

Suppose the current exchange rate is $1.60 per pound.A sweater purchased by an American in London costing 50 pounds would cost

The scenario in which the dollar plummets in value is called the

If the price of a British pound increases,more Britons will be willing to supply pounds to the foreign exchange market.

At which of the following exchange rates would the quantity of British pounds demanded be the highest?

In the __________,the currency of a country with the higher inflation rate will __________ against the currency of a country whose inflation rate is lower.

-Refer to Figure 17-6 above.If the Central Bank has fixed the exchange rate at $0.95 and the supply and demand for euros are as depicted,

In a floating exchange rate system,the equilibrium exchange rate is determined

If the exchange rate (dollars per unit of foreign currency)has decreased because of a shift of the supply curve,the demand curve,or both,we say there has been a(n)

In the long run,exchange rates

Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds are demanded at a price of $1.65 per pound.If the current exchange rate is $1.80 per pound,there is will be a(n)

The foreign exchange rate is controlled by the Federal Reserve.

The United States has run large trade deficits with most of the world since the early

A fixed exchange rate

Under a managed float,

Suppose there has been decreased interest in European goods by Americans.Which of the following would we expect to observe?

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

If you know the number of euros that can be exchanged for one dollar,you can easily figure out the number of dollars needed to obtain one euro by finding the reciprocal of the exchange rate for dollars per euro.

If the U.S.inflation rate is 3 percent annually and the Swiss inflation rate is 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

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

In the ,the currency of a country with the higher inflation rate will against the currency of a country whose inflation rate is lower.