Question 1

If the British price level rose relative to the Swiss price level,there would be

Accepted Answer

A)  a rightward movement along the supply of Swiss francs curve in the pound-franc market 
B)  a leftward movement along the supply of Swiss francs curve in the pound-franc market 
C)  an increased supply of Swiss francs to the pound-franc market 
D)  a decreased supply of Swiss francs to the pound-franc market 
E)  no change of the supply of Swiss francs curve in the pound-franc market 
A)  a rightward movement along the supply of Swiss francs curve in the pound-franc market 
B)  a leftward movement along the supply of Swiss francs curve in the pound-franc market 
C)  an increased supply of Swiss francs to the pound-franc market 
D)  a decreased supply of Swiss francs to the pound-franc market 
E)  no change of the supply of Swiss francs curve in the pound-franc market

Question 2

If a government runs a fixed exchange rate system and increases the dollar price of its currency,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 3

One reason why purchasing power parity may not work perfectly has to do with barriers to trade such as tariffs and quotas on imports.

Accepted Answer

A) True 
 B)False

Question 4

If the demand for British pounds decreases,

Accepted Answer

A)  the equilibrium price of the pound will increase 
B)  the equilibrium price of the pound will decrease 
C)  the equilibrium price of the pound will not change 
D)  the equilibrium price of the pound will change,but we need additional information to predict the direction of the change 
E)  no one can predict what will happen 
A)  the equilibrium price of the pound will increase 
B)  the equilibrium price of the pound will decrease 
C)  the equilibrium price of the pound will not change 
D)  the equilibrium price of the pound will change,but we need additional information to predict the direction of the change 
E)  no one can predict what will happen

Question 5

One of the major reasons why the US trade deficit with China has grown in the last 10 years is that

Accepted Answer

A)  the Yuan is seriously undervalued relative to where it would need to be to lead to a zero trade deficit. 
B)  the yuan is seriously overvalued relative to where it would need to be to lead to a zero trade deficit. 
C)  currency markets can never bring trade into balance,even in the long run. 
D)  US productivity has fallen recently. 
E)  the U.S.has suffered two sharp recessions. 
A)  the Yuan is seriously undervalued relative to where it would need to be to lead to a zero trade deficit. 
B)  the yuan is seriously overvalued relative to where it would need to be to lead to a zero trade deficit. 
C)  currency markets can never bring trade into balance,even in the long run. 
D)  US productivity has fallen recently. 
E)  the U.S.has suffered two sharp recessions.

Question 6

A managed float

Accepted Answer

A)  is an attempt to maintain a stable exchange rate 
B)  is invariably unsuccessful 
C)  is invariably successful 
D)  is an attempt to let the price level float upward 
E)  is an attempt to get the interest rate to float upward 
A)  is an attempt to maintain a stable exchange rate 
B)  is invariably unsuccessful 
C)  is invariably successful 
D)  is an attempt to let the price level float upward 
E)  is an attempt to get the interest rate to float upward

Question 7

In the long run,the currency of a country that has a higher inflation rate will appreciate against the currency of a country whose inflation rate is lower.

Accepted Answer

A) True 
 B)False

Question 8

An optimum currency area functions best when labor is immobile from country to country.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following changes would cause a movement along the U.S.demand curve for a foreign currency?

Accepted Answer

A)  An increase in U.S.real GDP 
B)  A fall in U.S.real GDP 
C)  A rise in the U.S.interest rate 
D)  A change in the exchange rate 
E)  An expectation that the exchange rate is going to fall. 
A)  An increase in U.S.real GDP 
B)  A fall in U.S.real GDP 
C)  A rise in the U.S.interest rate 
D)  A change in the exchange rate 
E)  An expectation that the exchange rate is going to fall.

Question 10

When a foreign currency crisis occurs,there is a(n)__________ in the supply of the currency and a(n)__________ in the demand for that currency.

Accepted Answer

A)  increase;increase 
B)  decrease;decrease 
C)  increase;decrease 
D)  decrease;increase 
E)  increase;no change. 
A)  increase;increase 
B)  decrease;decrease 
C)  increase;decrease 
D)  decrease;increase 
E)  increase;no change.

Question 11

-Refer to Figure 17-1.Assume the equilibrium exchange rate is $0.008 per yen at point A.If U.S.consumers decide to purchase more automobiles from Japan,then

Accepted Answer

A)  nothing will happen 
B)  the supply curve will shift to S' and the demand curve will shift to D' 
C)  the supply curve will shift to S' 
D)  the demand curve will shift to D' 
E)  exchange rate will return to $0.008 as soon as the market adjusts. 
A)  nothing will happen 
B)  the supply curve will shift to S' and the demand curve will shift to D' 
C)  the supply curve will shift to S' 
D)  the demand curve will shift to D' 
E)  exchange rate will return to $0.008 as soon as the market adjusts.

Question 12

If the dollar-pound exchange rate is $1.00 per pound,then a shirt priced at 25 pounds will cost an American

Accepted Answer

A)  $25 
B)  $50 
C)  $26 
D)  $27 
E)  an amount that cannot be calculated without additional information. 
A)  $25 
B)  $50 
C)  $26 
D)  $27 
E)  an amount that cannot be calculated without additional information.

Question 13

Which of the following determines the exchange rate between two currencies in the long run?

Accepted Answer

A)  Relative interest rates 
B)  Relative output levels 
C)  Expectations of future exchange rates 
D)  Relative price levels 
E)  Expectations of future interest rates. 
A)  Relative interest rates 
B)  Relative output levels 
C)  Expectations of future exchange rates 
D)  Relative price levels 
E)  Expectations of future interest rates.

Question 14

Which of the following describes the purchasing power parity theory of exchange rate determination?

Accepted Answer

A)  The exchange rate will adjust in the long run until the interest rate is roughly the same in both countries. 
B)  The exchange rate will adjust in the long run until real GDP per capita is roughly the same in both countries. 
C)  The exchange rate will adjust in the long run until the average price of goods is roughly the same in both countries. 
D)  The exchange rate will adjust in the short run until the average price of goods is roughly the same in both countries. 
E)  Prices adjust in the short run until the exchange rate is roughly the same in both countries. 
A)  The exchange rate will adjust in the long run until the interest rate is roughly the same in both countries. 
B)  The exchange rate will adjust in the long run until real GDP per capita is roughly the same in both countries. 
C)  The exchange rate will adjust in the long run until the average price of goods is roughly the same in both countries. 
D)  The exchange rate will adjust in the short run until the average price of goods is roughly the same in both countries. 
E)  Prices adjust in the short run until the exchange rate is roughly the same in both countries.

Question 15

Which of the following is a primary cause of exchange rate movements in the short run?

Accepted Answer

A)  Changes in relative interest rates. 
B)  Changes in expectations of future exchange rates. 
C)  Changes in relative prices. 
D)  Changes in economic conditions such as relative GDPs. 
E)  None of the above. 
A)  Changes in relative interest rates. 
B)  Changes in expectations of future exchange rates. 
C)  Changes in relative prices. 
D)  Changes in economic conditions such as relative GDPs. 
E)  None of the above.

Question 16

If British real GDP fell,there would be

Accepted Answer

A)  a rightward movement along the supply of British pounds curve in the dollar-pound market 
B)  a leftward movement along the supply of British pounds curve in the dollar-pound market 
C)  an increased supply of British pounds to the dollar-pound market 
D)  a decreased supply of British pounds to the dollar-pound market 
E)  the tendency for the supply of British pounds curve to become steeper in the dollar-pound market 
A)  a rightward movement along the supply of British pounds curve in the dollar-pound market 
B)  a leftward movement along the supply of British pounds curve in the dollar-pound market 
C)  an increased supply of British pounds to the dollar-pound market 
D)  a decreased supply of British pounds to the dollar-pound market 
E)  the tendency for the supply of British pounds curve to become steeper in the dollar-pound market

If the British price level rose relative to the Swiss price level,there would be

If a government runs a fixed exchange rate system and increases the dollar price of its currency,we say there has been a(n)

One reason why purchasing power parity may not work perfectly has to do with barriers to trade such as tariffs and quotas on imports.

If the demand for British pounds decreases,

One of the major reasons why the US trade deficit with China has grown in the last 10 years is that

A managed float

In the long run,the currency of a country that has a higher inflation rate will appreciate against the currency of a country whose inflation rate is lower.

An optimum currency area functions best when labor is immobile from country to country.

Which of the following changes would cause a movement along the U.S.demand curve for a foreign currency?

When a foreign currency crisis occurs,there is a(n) in the supply of the currency and a(n) in the demand for that currency.

-Refer to Figure 17-1.Assume the equilibrium exchange rate is $0.008 per yen at point A.If U.S.consumers decide to purchase more automobiles from Japan,then

If the dollar-pound exchange rate is $1.00 per pound,then a shirt priced at 25 pounds will cost an American

Which of the following determines the exchange rate between two currencies in the long run?

Which of the following describes the purchasing power parity theory of exchange rate determination?

Which of the following is a primary cause of exchange rate movements in the short run?

If British real GDP fell,there would be

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 the British price level rose relative to the Swiss price level,there would be

If a government runs a fixed exchange rate system and increases the dollar price of its currency,we say there has been a(n)

One reason why purchasing power parity may not work perfectly has to do with barriers to trade such as tariffs and quotas on imports.

If the demand for British pounds decreases,

One of the major reasons why the US trade deficit with China has grown in the last 10 years is that

A managed float

In the long run,the currency of a country that has a higher inflation rate will appreciate against the currency of a country whose inflation rate is lower.

An optimum currency area functions best when labor is immobile from country to country.

Which of the following changes would cause a movement along the U.S.demand curve for a foreign currency?

When a foreign currency crisis occurs,there is a(n)__________ in the supply of the currency and a(n)__________ in the demand for that currency.

-Refer to Figure 17-1.Assume the equilibrium exchange rate is $0.008 per yen at point A.If U.S.consumers decide to purchase more automobiles from Japan,then

If the dollar-pound exchange rate is $1.00 per pound,then a shirt priced at 25 pounds will cost an American

Which of the following determines the exchange rate between two currencies in the long run?

Which of the following describes the purchasing power parity theory of exchange rate determination?

Which of the following is a primary cause of exchange rate movements in the short run?

If British real GDP fell,there would be

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

When a foreign currency crisis occurs,there is a(n) in the supply of the currency and a(n) in the demand for that currency.