Question 1

Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

Accepted Answer

A)  balance of payments surpluses. 
B)  runs on their currencies. 
C)  balance of payments deficits. 
D)  both b and c. 
A)  balance of payments surpluses. 
B)  runs on their currencies. 
C)  balance of payments deficits. 
D)  both b and c.

Question 2

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

Accepted Answer

A)  its money supply. 
B)  its interest rates. 
C)  its level of real GDP. 
D)  aggregate demand. 
A)  its money supply. 
B)  its interest rates. 
C)  its level of real GDP. 
D)  aggregate demand.

Question 3

On June 3,2005,it cost 1.22 U.S.dollars to buy one euro.How many euros did it take to buy one U.S.dollar?

Accepted Answer

A) 0.82 euros 
B) 0.88 euros 
C) 1.22 euros 
D)  88 euros 
A) 0.82 euros 
B) 0.88 euros 
C) 1.22 euros 
D)  88 euros

Question 4

The Bretton Woods agreements in 1944

Accepted Answer

A)  established the International Monetary Fund. 
B)  sanctioned world trade on the gold-exchange system. 
C)  allowed nations to devalue their currencies under certain conditions. 
D)  All of the above are correct. 
A)  established the International Monetary Fund. 
B)  sanctioned world trade on the gold-exchange system. 
C)  allowed nations to devalue their currencies under certain conditions. 
D)  All of the above are correct.

Question 5

The idea behind the "Big Mac index" is a test of

Accepted Answer

A)  interest rate parity theory. 
B)  long-run equilibrium theory. 
C)  purchasing power parity theory. 
D)  exchange rate equalization theory. 
A)  interest rate parity theory. 
B)  long-run equilibrium theory. 
C)  purchasing power parity theory. 
D)  exchange rate equalization theory.

Question 6

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

Accepted Answer

A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70. 
A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70.

Question 7

A country devaluing its currency reduces the official value of its currency.

Accepted Answer

A) True 
 B)False

Question 8

In 2007,the value of the U.S.dollar

Accepted Answer

A)  increased relative to the euro. 
B)  decreased relative to the euro. 
C)  remained stable relative to the euro. 
D)  was equal to the value of the euro. 
A)  increased relative to the euro. 
B)  decreased relative to the euro. 
C)  remained stable relative to the euro. 
D)  was equal to the value of the euro.

Question 9

If inflation in the United States is higher than in Japan,what will happen to the exchange rate between the U.S.dollar and the Japanese yen?

Accepted Answer

A)  The dollar and yen will both depreciate. 
B)  The dollar and yen will both appreciate. 
C)  The dollar will depreciate and the yen will appreciate. 
D)  The dollar will appreciate and the yen will depreciate. 
A)  The dollar and yen will both depreciate. 
B)  The dollar and yen will both appreciate. 
C)  The dollar will depreciate and the yen will appreciate. 
D)  The dollar will appreciate and the yen will depreciate.

Question 10

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

Accepted Answer

A)  fixed exchange rates. 
B)  expansionary monetary policies. 
C)  contractionary monetary policies. 
D)  state ownership of industry. 
A)  fixed exchange rates. 
B)  expansionary monetary policies. 
C)  contractionary monetary policies. 
D)  state ownership of industry.

Question 11

In order to "defend" its overvalued currency,Argentina in 2002 had to reduce its

Accepted Answer

A)  interest rates. 
B)  tax levels. 
C)  holdings of foreign reserves. 
D)  balance of payments surpluses. 
A)  interest rates. 
B)  tax levels. 
C)  holdings of foreign reserves. 
D)  balance of payments surpluses.

Question 12

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

Accepted Answer

A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates 
A)  differences in inflation rates 
B)  differences in interest rates 
C)  differences in income levels 
D)  differences in real GDP growth rates

Question 13

If a currency increases in value as a result of government decree rather than market forces,the process is known as

Accepted Answer

A)  reflation. 
B)  revaluation. 
C)  appreciation. 
D)  value-added. 
A)  reflation. 
B)  revaluation. 
C)  appreciation. 
D)  value-added.

Question 14

A country with an undervalued currency

Accepted Answer

A)  will have a balance of payments deficit. 
B)  will accumulate reserves of foreign currencies. 
C)  will suffer losses of foreign reserves. 
D)  must intervene in the foreign exchange market to buy its own currency. 
A)  will have a balance of payments deficit. 
B)  will accumulate reserves of foreign currencies. 
C)  will suffer losses of foreign reserves. 
D)  must intervene in the foreign exchange market to buy its own currency.

Question 15

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

Accepted Answer

A)  $1 = 2.79 pesos 
B)  $1 = 7.90 pesos 
C)  $1 = 9.30 pesos 
D)  $1 = 27.90 pesos 
A)  $1 = 2.79 pesos 
B)  $1 = 7.90 pesos 
C)  $1 = 9.30 pesos 
D)  $1 = 27.90 pesos

Question 16

Speculators play an important role in a system of floating exchange rates because

Accepted Answer

A)  to make a profit, they must buy a currency when its value is low and sell it when its value is high. 
B)  their purchases and sales lead to wild gyrations in exchange rates and thus increase instability. 
C)  they place additional risks on businesses that need to purchase and sell foreign currency. 
D)  All of the above are correct. 
A)  to make a profit, they must buy a currency when its value is low and sell it when its value is high. 
B)  their purchases and sales lead to wild gyrations in exchange rates and thus increase instability. 
C)  they place additional risks on businesses that need to purchase and sell foreign currency. 
D)  All of the above are correct.

Question 17

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

Accepted Answer

A)  appreciated. 
B)  depreciated. 
C)  been revalued. 
D)  been devalued. 
A)  appreciated. 
B)  depreciated. 
C)  been revalued. 
D)  been devalued.

Question 18

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

Accepted Answer

A) True 
 B)False

Question 19

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

Accepted Answer

A)  Revalued 
B)  Devalued 
C)  Depreciated 
D)  Appreciated 
A)  Revalued 
B)  Devalued 
C)  Depreciated 
D)  Appreciated

Question 20

The ability of a government to fix its currency's exchange rate is limited by the size of its reserves.

Accepted Answer

A) True 
 B)False

Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

On June 3,2005,it cost 1.22 U.S.dollars to buy one euro.How many euros did it take to buy one U.S.dollar?

The Bretton Woods agreements in 1944

The idea behind the "Big Mac index" is a test of

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

A country devaluing its currency reduces the official value of its currency.

In 2007,the value of the U.S.dollar

If inflation in the United States is higher than in Japan,what will happen to the exchange rate between the U.S.dollar and the Japanese yen?

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

In order to "defend" its overvalued currency,Argentina in 2002 had to reduce its

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

If a currency increases in value as a result of government decree rather than market forces,the process is known as

A country with an undervalued currency

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

Speculators play an important role in a system of floating exchange rates because

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

The ability of a government to fix its currency's exchange rate is limited by the size of its reserves.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and the Macroeconomy

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Exam 19: The International Monetary System: Order or Disorder?

Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

On June 3,2005,it cost 1.22 U.S.dollars to buy one euro.How many euros did it take to buy one U.S.dollar?

The Bretton Woods agreements in 1944

The idea behind the "Big Mac index" is a test of

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

A country devaluing its currency reduces the official value of its currency.

In 2007,the value of the U.S.dollar

If inflation in the United States is higher than in Japan,what will happen to the exchange rate between the U.S.dollar and the Japanese yen?

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

In order to "defend" its overvalued currency,Argentina in 2002 had to reduce its

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

If a currency increases in value as a result of government decree rather than market forces,the process is known as

A country with an undervalued currency

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico,what is the exchange rate between the dollar and the peso (assuming PPP holds)?

Speculators play an important role in a system of floating exchange rates because

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

The ability of a government to fix its currency's exchange rate is limited by the size of its reserves.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and the Macroeconomy

Filters