Question 1

Everything else being equal,a depreciation of the dollar against the yuan ________.

Accepted Answer

A)  will not affect the quantity of dollars supplied in the foreign exchange market 
B)  will lead to an increase in the quantity of dollars supplied in the foreign exchange market 
C)  will lead to a decrease in the quantity of dollars supplied in the foreign exchange market 
D)  can either lead to an increase or a decrease in the quantity of dollars supplied, depending on the magnitude of the depreciation 
A)  will not affect the quantity of dollars supplied in the foreign exchange market 
B)  will lead to an increase in the quantity of dollars supplied in the foreign exchange market 
C)  will lead to a decrease in the quantity of dollars supplied in the foreign exchange market 
D)  can either lead to an increase or a decrease in the quantity of dollars supplied, depending on the magnitude of the depreciation

Question 2

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan.
  
-Refer to the figure above.If the yuan is allowed to float,at exchange rates below E yuan per dollar,________ the value of the dollar in the foreign exchange market.

Accepted Answer

A)  the excess demand for dollars in exchange for yuan increases 
B)  the excess demand for dollars in exchange for yuan lowers 
C)  the excess supply of dollars in exchange for yuan increases 
D)  the excess supply of dollars in exchange for yuan lowers 
A)  the excess demand for dollars in exchange for yuan increases 
B)  the excess demand for dollars in exchange for yuan lowers 
C)  the excess supply of dollars in exchange for yuan increases 
D)  the excess supply of dollars in exchange for yuan lowers

Question 3

Everything else being equal,a depreciation of the dollar against the yuan ________.

Accepted Answer

A)  will not affect the quantity of dollars demanded 
B)  will lead to an increase in the quantity of dollars demanded 
C)  will lead to a decrease in the quantity of dollars demanded 
D)  can either lead to an increase or a decrease in the quantity of dollars demanded, depending on the magnitude of the depreciation 
A)  will not affect the quantity of dollars demanded 
B)  will lead to an increase in the quantity of dollars demanded 
C)  will lead to a decrease in the quantity of dollars demanded 
D)  can either lead to an increase or a decrease in the quantity of dollars demanded, depending on the magnitude of the depreciation

Question 4

Everything else being equal,an appreciation of the real exchange rate ________ net exports and ________ GDP.

Accepted Answer

A)  increases; increases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; decreases 
A)  increases; increases 
B)  decreases; increases 
C)  decreases; decreases 
D)  increases; decreases

Question 5

When the real exchange rate depreciates,U.S.goods become ________ for foreign countries and U.S.exports ________.

Accepted Answer

A)  less expensive; increase 
B)  less expensive; decrease 
C)  more expensive; increase 
D)  more expensive; decrease 
A)  less expensive; increase 
B)  less expensive; decrease 
C)  more expensive; increase 
D)  more expensive; decrease

Question 6

An undervalued domestic currency ________.

Accepted Answer

A)  benefits all the economic agents in the country 
B)  harms all the economic agents in the country 
C)  makes imports less expensive for domestic consumers 
D)  makes imports more expensive for domestic consumers 
A)  benefits all the economic agents in the country 
B)  harms all the economic agents in the country 
C)  makes imports less expensive for domestic consumers 
D)  makes imports more expensive for domestic consumers

Question 7

Assume that the dollar price of a basket of goods in the United States is $4 and the rupee price of the same basket is 200 rupees.In addition,the dollar price of the same basket of goods in India is $20.Given this information,the rupee price of the basket in India will be ________.

Accepted Answer

A)  5 rupees 
B)  200 rupees 
C)  1,000 rupees 
D)  1,200 rupees 
A)  5 rupees 
B)  200 rupees 
C)  1,000 rupees 
D)  1,200 rupees

Question 8

Everything else being equal,an appreciation of the dollar will ________.

Accepted Answer

A)  cause U.S. GDP to fall 
B)  cause U.S. GDP to increase 
C)  not affect U.S. GDP 
D)  cause the net exports of the United States to increase 
A)  cause U.S. GDP to fall 
B)  cause U.S. GDP to increase 
C)  not affect U.S. GDP 
D)  cause the net exports of the United States to increase

Question 9

Which of the following statements is true?

Accepted Answer

A)  An undervalued currency can be maintained indefinitely, while an overvalued currency can be maintained only for a limited time. 
B)  An overvalued currency can be maintained indefinitely, while an undervalued currency can be maintained only for a limited time. 
C)  Both undervalued and overvalued currencies can be maintained indefinitely. 
D)  Both undervalued and overvalued currencies can be maintained only for a limited time. 
A)  An undervalued currency can be maintained indefinitely, while an overvalued currency can be maintained only for a limited time. 
B)  An overvalued currency can be maintained indefinitely, while an undervalued currency can be maintained only for a limited time. 
C)  Both undervalued and overvalued currencies can be maintained indefinitely. 
D)  Both undervalued and overvalued currencies can be maintained only for a limited time.

Question 10

If an overvalued currency is allowed to float,________.

Accepted Answer

A)  its value will appreciate relative to other currencies 
B)  its value will depreciate relative to other currencies 
C)  its quantity supplied in exchange for other currencies will increase 
D)  its quantity demanded in exchange for other currencies will decrease 
A)  its value will appreciate relative to other currencies 
B)  its value will depreciate relative to other currencies 
C)  its quantity supplied in exchange for other currencies will increase 
D)  its quantity demanded in exchange for other currencies will decrease

Question 11

The following figure shows the net exports curve for a country:
  
-Refer to the figure above.When the real exchange rate is below R*,________.

Accepted Answer

A)  net exports are negative 
B)  net exports are positive 
C)  net exports are zero 
D)  net exports can be positive or negative depending on the value of R* 
A)  net exports are negative 
B)  net exports are positive 
C)  net exports are zero 
D)  net exports can be positive or negative depending on the value of R*

Question 12

What will be the likely impact of an increase in the demand for U.S.goods in Mexico on the demand for dollars and the exchange rate between dollars and pesos?

Accepted Answer

An increase in the demand for

Question 13

If the Fed lowers the interest rate in the United States,________.

Accepted Answer

A)  the demand curve for dollars will shift to the left 
B)  the demand curve for dollars will shift to the right 
C)  the real exchange rate for the United States will appreciate 
D)  the U.S. net exports will decrease 
A)  the demand curve for dollars will shift to the left 
B)  the demand curve for dollars will shift to the right 
C)  the real exchange rate for the United States will appreciate 
D)  the U.S. net exports will decrease

Question 14

An overvalued domestic currency ________.

Accepted Answer

A)  benefits all the economic agents in the country 
B)  harms all the economic agents in the country 
C)  makes imports more expensive for domestic consumers 
D)  makes imports less expensive for domestic consumers 
A)  benefits all the economic agents in the country 
B)  harms all the economic agents in the country 
C)  makes imports more expensive for domestic consumers 
D)  makes imports less expensive for domestic consumers

Question 15

If a country wants to keep its domestic currency overvalued against a foreign currency,________.

Accepted Answer

A)  it will buy both the foreign and the domestic currency 
B)  it will sell both the foreign and the domestic currency 
C)  it will buy the domestic currency and sell the foreign currency 
D)  it will buy the foreign currency and sell the domestic currency 
A)  it will buy both the foreign and the domestic currency 
B)  it will sell both the foreign and the domestic currency 
C)  it will buy the domestic currency and sell the foreign currency 
D)  it will buy the foreign currency and sell the domestic currency

Question 16

Are black markets for foreign currencies more likely to exist in countries with an overvalued currency or with an undervalued currency? Why?

Accepted Answer

Black markets for foreign currencies are

Question 17

Rank each exchange system according to the amount of government intervention needed (from highest to lowest).

Accepted Answer

A)  Flexible exchange rate followed by managed exchange rate followed by fixed exchange rate 
B)  Managed exchange rate followed by flexible exchange rate followed by fixed exchange rate 
C)  Fixed exchange rate followed by managed exchange rate followed by flexible exchanged rate 
D)  Managed exchange rate followed by fixed exchange rate followed by flexible exchange rate 
A)  Flexible exchange rate followed by managed exchange rate followed by fixed exchange rate 
B)  Managed exchange rate followed by flexible exchange rate followed by fixed exchange rate 
C)  Fixed exchange rate followed by managed exchange rate followed by flexible exchanged rate 
D)  Managed exchange rate followed by fixed exchange rate followed by flexible exchange rate

Question 18

When the real exchange rate appreciates,U.S.goods become ________ for foreign countries and U.S.exports ________.

Accepted Answer

A)  less expensive; increase 
B)  less expensive; decrease 
C)  more expensive; increase 
D)  more expensive; decrease 
A)  less expensive; increase 
B)  less expensive; decrease 
C)  more expensive; increase 
D)  more expensive; decrease

Question 19

Why do countries who are members of a currency union have

Accepted Answer

Countries with a flexible exchange rate

Question 20

When the yuan-dollar real exchange rate depreciates,________.

Accepted Answer

A)  both U.S. net exports to China and Chinese net exports to the United States increase 
B)  both U.S. net exports to China and Chinese net exports to the United States decrease 
C)  U.S. net exports to China decrease, while Chinese net exports to the United States increase 
D)  U.S. net exports to China increase, while Chinese net exports to the United States decrease 
A)  both U.S. net exports to China and Chinese net exports to the United States increase 
B)  both U.S. net exports to China and Chinese net exports to the United States decrease 
C)  U.S. net exports to China decrease, while Chinese net exports to the United States increase 
D)  U.S. net exports to China increase, while Chinese net exports to the United States decrease

Everything else being equal,a depreciation of the dollar against the yuan ________.

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the yuan is allowed to float,at exchange rates below E yuan per dollar,________ the value of the dollar in the foreign exchange market.

Everything else being equal,a depreciation of the dollar against the yuan ________.

Everything else being equal,an appreciation of the real exchange rate net exports and GDP.

When the real exchange rate depreciates,U.S.goods become for foreign countries and U.S.exports .

An undervalued domestic currency ________.

Assume that the dollar price of a basket of goods in the United States is $4 and the rupee price of the same basket is 200 rupees.In addition,the dollar price of the same basket of goods in India is $20.Given this information,the rupee price of the basket in India will be ________.

Everything else being equal,an appreciation of the dollar will ________.

Which of the following statements is true?

If an overvalued currency is allowed to float,________.

The following figure shows the net exports curve for a country: -Refer to the figure above.When the real exchange rate is below R*,________.

What will be the likely impact of an increase in the demand for U.S.goods in Mexico on the demand for dollars and the exchange rate between dollars and pesos?

If the Fed lowers the interest rate in the United States,________.

An overvalued domestic currency ________.

If a country wants to keep its domestic currency overvalued against a foreign currency,________.

Are black markets for foreign currencies more likely to exist in countries with an overvalued currency or with an undervalued currency? Why?

Rank each exchange system according to the amount of government intervention needed (from highest to lowest).

When the real exchange rate appreciates,U.S.goods become for foreign countries and U.S.exports .

Why do countries who are members of a currency union have

When the yuan-dollar real exchange rate depreciates,________.

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

Everything else being equal,a depreciation of the dollar against the yuan ________.

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the yuan is allowed to float,at exchange rates below E yuan per dollar,________ the value of the dollar in the foreign exchange market.

Everything else being equal,a depreciation of the dollar against the yuan ________.

Everything else being equal,an appreciation of the real exchange rate ________ net exports and ________ GDP.

When the real exchange rate depreciates,U.S.goods become ________ for foreign countries and U.S.exports ________.

An undervalued domestic currency ________.

Assume that the dollar price of a basket of goods in the United States is $4 and the rupee price of the same basket is 200 rupees.In addition,the dollar price of the same basket of goods in India is $20.Given this information,the rupee price of the basket in India will be ________.

Everything else being equal,an appreciation of the dollar will ________.

Which of the following statements is true?

If an overvalued currency is allowed to float,________.

The following figure shows the net exports curve for a country: -Refer to the figure above.When the real exchange rate is below R*,________.

What will be the likely impact of an increase in the demand for U.S.goods in Mexico on the demand for dollars and the exchange rate between dollars and pesos?

If the Fed lowers the interest rate in the United States,________.

An overvalued domestic currency ________.

If a country wants to keep its domestic currency overvalued against a foreign currency,________.

Are black markets for foreign currencies more likely to exist in countries with an overvalued currency or with an undervalued currency? Why?

Rank each exchange system according to the amount of government intervention needed (from highest to lowest).

When the real exchange rate appreciates,U.S.goods become ________ for foreign countries and U.S.exports ________.

Why do countries who are members of a currency union have

When the yuan-dollar real exchange rate depreciates,________.

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

Everything else being equal,an appreciation of the real exchange rate net exports and GDP.

When the real exchange rate depreciates,U.S.goods become for foreign countries and U.S.exports .

When the real exchange rate appreciates,U.S.goods become for foreign countries and U.S.exports .