Question 1

Explain why a target exchange rate announcement has little effect on the exchange rate in the foreign exchange market

Accepted Answer

When the exchange rate is pegged at a hi

Question 2

The nominal exchange rate is the ________.

Accepted Answer

A)  ratio of imports to exports 
B)  interest rate charged on international capital flows 
C)  price of domestic currency in terms of foreign currency 
D)  ratio of prices of domestic goods to prices of foreign goods 
A)  ratio of imports to exports 
B)  interest rate charged on international capital flows 
C)  price of domestic currency in terms of foreign currency 
D)  ratio of prices of domestic goods to prices of foreign goods

Question 3

Which of the following statements is true of Black Wednesday?

Accepted Answer

A)  Following Black Wednesday, the British pound became more valuable relative to the German mark. 
B)  Following Black Wednesday, the German mark became less valuable relative to the British pound. 
C)  Currency traders who had borrowed pounds to buy German marks incurred huge losses due to Black Wednesday. 
D)  Following Black Wednesday, the British government incurred great losses from selling foreign currency reserves. 
A)  Following Black Wednesday, the British pound became more valuable relative to the German mark. 
B)  Following Black Wednesday, the German mark became less valuable relative to the British pound. 
C)  Currency traders who had borrowed pounds to buy German marks incurred huge losses due to Black Wednesday. 
D)  Following Black Wednesday, the British government incurred great losses from selling foreign currency reserves.

Question 4

A currency union is a form of flexible exchange rate.

Accepted Answer

A) True 
 B)False

Question 5

The following table shows the exchange rate between several foreign currencies and the U.S. dollar.
  
-Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has ________ against the euro,the yuan has ________ against the U.S.dollar,and the British pound has ________ against the U.S.dollar.

Accepted Answer

A)  appreciated; appreciated; depreciated 
B)  depreciated; appreciated; depreciated 
C)  appreciated; depreciated; appreciated 
D)  appreciated; depreciated; depreciated 
A)  appreciated; appreciated; depreciated 
B)  depreciated; appreciated; depreciated 
C)  appreciated; depreciated; appreciated 
D)  appreciated; depreciated; depreciated

Question 6

The demand for dollars slopes downward because as the dollar appreciates,________,which leads to fewer dollars being demanded.

Accepted Answer

A)  the exchange rate rises and exported goods become more expensive 
B)  the exchange rate falls and exported goods become less expensive 
C)  the exchange rate rises and exported goods become less expensive 
D)  the exchange rate falls and exported goods become more expensive 
A)  the exchange rate rises and exported goods become more expensive 
B)  the exchange rate falls and exported goods become less expensive 
C)  the exchange rate rises and exported goods become less expensive 
D)  the exchange rate falls and exported goods become more expensive

Question 7

Everything else being equal,when the domestic currency appreciates against a foreign currency,________.

Accepted Answer

A)  the nominal exchange rate goes up 
B)  the nominal exchange rate goes down 
C)  there is no change in the nominal exchange rate 
D)  there is no change in the real exchange rate 
A)  the nominal exchange rate goes up 
B)  the nominal exchange rate goes down 
C)  there is no change in the nominal exchange rate 
D)  there is no change in the real exchange rate

Question 8

The supply of dollars slopes upward because as the dollar appreciates,________.

Accepted Answer

A)  the exchange rate rises and imported goods become more expensive, which leads to more dollars being supplied 
B)  the exchange rate falls and imported goods become less expensive, which leads to more dollars being supplied 
C)  the exchange rate rises and imported goods become less expensive, which leads to more dollars being supplied 
D)  the exchange rate falls and imported goods become more expensive, which leads to fewer dollars being demanded 
A)  the exchange rate rises and imported goods become more expensive, which leads to more dollars being supplied 
B)  the exchange rate falls and imported goods become less expensive, which leads to more dollars being supplied 
C)  the exchange rate rises and imported goods become less expensive, which leads to more dollars being supplied 
D)  the exchange rate falls and imported goods become more expensive, which leads to fewer dollars being demanded

Question 9

The following table shows the exchange rate between several foreign currencies and the U.S. dollar.
  
-Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has ________ against the yuan and has ________ against the British pound,and the yen has ________ against the U.S.dollar.

Accepted Answer

A)  appreciated; appreciated; depreciated 
B)  depreciated; appreciated; depreciated 
C)  appreciated; depreciated; appreciated 
D)  appreciated; depreciated; depreciated 
A)  appreciated; appreciated; depreciated 
B)  depreciated; appreciated; depreciated 
C)  appreciated; depreciated; appreciated 
D)  appreciated; depreciated; depreciated

Question 10

Why did the Chinese central bank increase its holdings of foreign reserves between 1990 and 2014?

Accepted Answer

The Chinese central bank was b

Question 11

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is greater than one,retailers in the United States should ________.

Accepted Answer

A)  buy the toys from American suppliers 
B)  buy the toys from Chinese suppliers 
C)  buy the toys from both Chinese suppliers and U.S. suppliers 
D)  should not buy the toys from both Chinese suppliers and U.S. suppliers 
A)  buy the toys from American suppliers 
B)  buy the toys from Chinese suppliers 
C)  buy the toys from both Chinese suppliers and U.S. suppliers 
D)  should not buy the toys from both Chinese suppliers and U.S. suppliers

Question 12

A decrease in the value of the domestic currency in terms of the foreign currency means that ________.

Accepted Answer

A)  the domestic currency has appreciated and the nominal exchange rate has risen 
B)  the domestic currency has depreciated and the nominal exchange rate has risen 
C)  the foreign currency has appreciated and the nominal exchange rate has fallen 
D)  the foreign currency has depreciated and the nominal exchange rate has fallen 
A)  the domestic currency has appreciated and the nominal exchange rate has risen 
B)  the domestic currency has depreciated and the nominal exchange rate has risen 
C)  the foreign currency has appreciated and the nominal exchange rate has fallen 
D)  the foreign currency has depreciated and the nominal exchange rate has fallen

Question 13

When a country announces a target exchange rate,________.

Accepted Answer

A)  currencies will be traded at the target exchange rate in the foreign exchange market 
B)  there will be a permanent surplus of dollars in the foreign exchange market 
C)  there will be a permanent shortage of dollars in the foreign exchange market 
D)  there will be no effect on the equilibrium exchange rate in the foreign exchange market 
A)  currencies will be traded at the target exchange rate in the foreign exchange market 
B)  there will be a permanent surplus of dollars in the foreign exchange market 
C)  there will be a permanent shortage of dollars in the foreign exchange market 
D)  there will be no effect on the equilibrium exchange rate in the foreign exchange market

Question 14

Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar.
-Refer to the scenario above.The amount of the loan in rupees is ________.

Accepted Answer

A)  50 
B)  10,000 
C)  30,000 
D)  500,000 
A)  50 
B)  10,000 
C)  30,000 
D)  500,000

Question 15

Which of the following statements is true?

Accepted Answer

A)  An overvalued domestic currency encourages exports. 
B)  An undervalued domestic currency leads to inflation. 
C)  A country can keep its currency overvalued against the dollar as long as it can print its own currency. 
D)  A country can keep its currency overvalued against the dollar as long as its dollar reserves last. 
A)  An overvalued domestic currency encourages exports. 
B)  An undervalued domestic currency leads to inflation. 
C)  A country can keep its currency overvalued against the dollar as long as it can print its own currency. 
D)  A country can keep its currency overvalued against the dollar as long as its dollar reserves last.

Question 16

If the Mexican government wants to keep the peso overvalued against the dollar,it will need to ________ in the foreign exchange market.

Accepted Answer

A)  sell both dollars and pesos 
B)  buy both dollars and pesos 
C)  buy pesos in exchange for dollars 
D)  buy dollars in exchange for pesos 
A)  sell both dollars and pesos 
B)  buy both dollars and pesos 
C)  buy pesos in exchange for dollars 
D)  buy dollars in exchange for pesos

Question 17

Which of the following statements is true of a flexible exchange rate system?

Accepted Answer

A)  Market forces tend to overvalue a currency over time. 
B)  Market forces tend to undervalue a currency over time. 
C)  Market forces do not affect exchange rates between different currencies. 
D)  Market forces tend to push the exchange rate of a currency to market clearing levels over time. 
A)  Market forces tend to overvalue a currency over time. 
B)  Market forces tend to undervalue a currency over time. 
C)  Market forces do not affect exchange rates between different currencies. 
D)  Market forces tend to push the exchange rate of a currency to market clearing levels over time.

Question 18

In most circumstances,the nominal and real exchange rates depreciate and appreciate together.

Accepted Answer

A) True 
 B)False

Question 19

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan.
  
-Refer to the figure above.If the government of China wants to peg the exchange rate above E yuan per dollar,________.

Accepted Answer

A)  it will have to sell both dollars and yuan 
B)  it will have to buy both dollars and yuan 
C)  it will have to buy dollars and sell yuan 
D)  it will have to buy yuan and sell dollars 
A)  it will have to sell both dollars and yuan 
B)  it will have to buy both dollars and yuan 
C)  it will have to buy dollars and sell yuan 
D)  it will have to buy yuan and sell dollars

Question 20

The supply curve of dollars in the foreign exchange market is ________.

Accepted Answer

A)  vertical 
B)  horizontal 
C)  downward-sloping 
D)  upward-sloping 
A)  vertical 
B)  horizontal 
C)  downward-sloping 
D)  upward-sloping

Explain why a target exchange rate announcement has little effect on the exchange rate in the foreign exchange market

The nominal exchange rate is the ________.

Which of the following statements is true of Black Wednesday?

A currency union is a form of flexible exchange rate.

The following table shows the exchange rate between several foreign currencies and the U.S. dollar. -Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has against the euro,the yuan has against the U.S.dollar,and the British pound has against the U.S.dollar.

The demand for dollars slopes downward because as the dollar appreciates,________,which leads to fewer dollars being demanded.

Everything else being equal,when the domestic currency appreciates against a foreign currency,________.

The supply of dollars slopes upward because as the dollar appreciates,________.

The following table shows the exchange rate between several foreign currencies and the U.S. dollar. -Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has against the yuan and has against the British pound,and the yen has against the U.S.dollar.

Why did the Chinese central bank increase its holdings of foreign reserves between 1990 and 2014?

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is greater than one,retailers in the United States should ________.

A decrease in the value of the domestic currency in terms of the foreign currency means that ________.

When a country announces a target exchange rate,________.

Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar. -Refer to the scenario above.The amount of the loan in rupees is ________.

Which of the following statements is true?

If the Mexican government wants to keep the peso overvalued against the dollar,it will need to ________ in the foreign exchange market.

Which of the following statements is true of a flexible exchange rate system?

In most circumstances,the nominal and real exchange rates depreciate and appreciate together.

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the government of China wants to peg the exchange rate above E yuan per dollar,________.

The supply curve of dollars in the foreign exchange market is ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Filters

Exam 15: Open Economy Macroeconomics

Explain why a target exchange rate announcement has little effect on the exchange rate in the foreign exchange market

The nominal exchange rate is the ________.

Which of the following statements is true of Black Wednesday?

A currency union is a form of flexible exchange rate.

The demand for dollars slopes downward because as the dollar appreciates,________,which leads to fewer dollars being demanded.

Everything else being equal,when the domestic currency appreciates against a foreign currency,________.

The supply of dollars slopes upward because as the dollar appreciates,________.

The following table shows the exchange rate between several foreign currencies and the U.S. dollar. -Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has ________ against the yuan and has ________ against the British pound,and the yen has ________ against the U.S.dollar.

Why did the Chinese central bank increase its holdings of foreign reserves between 1990 and 2014?

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is greater than one,retailers in the United States should ________.

A decrease in the value of the domestic currency in terms of the foreign currency means that ________.

When a country announces a target exchange rate,________.

Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar. -Refer to the scenario above.The amount of the loan in rupees is ________.

Which of the following statements is true?

If the Mexican government wants to keep the peso overvalued against the dollar,it will need to ________ in the foreign exchange market.

Which of the following statements is true of a flexible exchange rate system?

In most circumstances,the nominal and real exchange rates depreciate and appreciate together.

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the government of China wants to peg the exchange rate above E yuan per dollar,________.

The supply curve of dollars in the foreign exchange market is ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Filters

The following table shows the exchange rate between several foreign currencies and the U.S. dollar. -Refer to the table above.Between May 2016 and May 2017,the U.S.dollar has against the yuan and has against the British pound,and the yen has against the U.S.dollar.