Question 1

If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency,it will generally

Accepted Answer

A)  sell its own currency for foreign currencies. 
B)  buy its own currency with foreign reserves. 
C)  decrease taxes to increase domestic disposable income. 
D)  increase the money supply to keep interest rates down. 
A)  sell its own currency for foreign currencies. 
B)  buy its own currency with foreign reserves. 
C)  decrease taxes to increase domestic disposable income. 
D)  increase the money supply to keep interest rates down.

Question 2

A country with an overvalued currency

Accepted Answer

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

Question 3

Purchasing power parity explains how the exchange rate will adjust to differences in price levels between two countries.

Accepted Answer

A) True 
 B)False

Question 4

An economic boom in America should increase the

Accepted Answer

A)  demand for U.S. dollars. 
B)  demand for U.S. goods and services. 
C)  demand for foreign currencies. 
D)  supply of foreign currencies. 
A)  demand for U.S. dollars. 
B)  demand for U.S. goods and services. 
C)  demand for foreign currencies. 
D)  supply of foreign currencies.

Question 5

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Accepted Answer

Argentina was maintaining a fixed exchan

Question 6

If a country is in a strong upward phase of the business cycle,one can expect that its currency will

Accepted Answer

A)  revalue. 
B)  devalue. 
C)  appreciate. 
D)  depreciate. 
A)  revalue. 
B)  devalue. 
C)  appreciate. 
D)  depreciate.

Question 7

Figure 19-1
  
-Of the graphs in Figure 19-1,which one shows the effects of an economic boom in the United States and a depreciation of the dollar?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 8

International trade under a floating exchange rate system

Accepted Answer

A)  has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B)  has suffered from so many problems that the volume of trade has declined significantly. 
C)  exposes businesses to unavoidable risks when exchange rates change. 
D)  has been subject to wild runs on currencies that were on the verge of devaluation. 
A)  has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B)  has suffered from so many problems that the volume of trade has declined significantly. 
C)  exposes businesses to unavoidable risks when exchange rates change. 
D)  has been subject to wild runs on currencies that were on the verge of devaluation.

Question 9

Under the Bretton Woods system of fixed exchange rates,

Accepted Answer

A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency. 
A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency.

Question 10

The dollar appreciates against the euro when U.S.demand for European goods increases.

Accepted Answer

A) True 
 B)False

Question 11

If U.S.securities pay 6 percent interest,and if Great Britain's securities pay 8 percent interest,then

Accepted Answer

A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will fall. 
D)  Great Britain's exports will rise. 
A)  pounds depreciate relative to dollars. 
B)  pounds appreciate relative to dollars. 
C)  Great Britain's imports will fall. 
D)  Great Britain's exports will rise.

Question 12

When one currency appreciates,another currency must depreciate.

Accepted Answer

A) True 
 B)False

Question 13

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

Accepted Answer

A) 0.01 
B) 0.04 
C) 0.28 
D) 0.40 
A) 0.01 
B) 0.04 
C) 0.28 
D) 0.40

Question 14

One of the problems that monetary unions eliminate is

Accepted Answer

A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles. 
A)  inflationary gaps. 
B)  recessionary gaps. 
C)  exchange rate instability. 
D)  business cycles.

Question 15

Figure 19-2
  
-Of the graphs in Figure 19-2,where the broken line represents the fixed exchange rates,which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 16

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

Accepted Answer

A)  the federal budget. 
B)  the sales of assets. 
C)  the sales of military goods. 
D)  its gold supplies. 
A)  the federal budget. 
B)  the sales of assets. 
C)  the sales of military goods. 
D)  its gold supplies.

Question 17

If a country is in a major recessionary phase of the business cycle,one can expect that its currency will

Accepted Answer

A)  revalue. 
B)  devalue. 
C)  appreciate. 
D)  depreciate. 
A)  revalue. 
B)  devalue. 
C)  appreciate. 
D)  depreciate.

Question 18

The chief cause of short-run changes in exchange rates is

Accepted Answer

A)  the world's political situation. 
B)  "hot money" chasing high interest rates. 
C)  changes in consumer tastes. 
D)  central bank interventions. 
A)  the world's political situation. 
B)  "hot money" chasing high interest rates. 
C)  changes in consumer tastes. 
D)  central bank interventions.

Question 19

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

Accepted Answer

A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard 
A)  Huge current account deficit 
B)  Currency pegged to the dollar 
C)  Floating rate policy 
D)  Adherence to the old gold standard

Question 20

After being introduced in 1999,the euro

Accepted Answer

A)  increased in value through 2008. 
B)  decreased in value through 2008. 
C)  increased in value through 2000 but then decreased in value through 2008. 
D)  decreased in value through 2000 but then increased in value through 2008. 
A)  increased in value through 2008. 
B)  decreased in value through 2008. 
C)  increased in value through 2000 but then decreased in value through 2008. 
D)  decreased in value through 2000 but then increased in value through 2008.

If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency,it will generally

A country with an overvalued currency

Purchasing power parity explains how the exchange rate will adjust to differences in price levels between two countries.

An economic boom in America should increase the

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

If a country is in a strong upward phase of the business cycle,one can expect that its currency will

Figure 19-1 -Of the graphs in Figure 19-1,which one shows the effects of an economic boom in the United States and a depreciation of the dollar?

International trade under a floating exchange rate system

Under the Bretton Woods system of fixed exchange rates,

The dollar appreciates against the euro when U.S.demand for European goods increases.

If U.S.securities pay 6 percent interest,and if Great Britain's securities pay 8 percent interest,then

When one currency appreciates,another currency must depreciate.

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

One of the problems that monetary unions eliminate is

Figure 19-2 -Of the graphs in Figure 19-2,where the broken line represents the fixed exchange rates,which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

If a country is in a major recessionary phase of the business cycle,one can expect that its currency will

The chief cause of short-run changes in exchange rates is

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

After being introduced in 1999,the euro

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?

If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency,it will generally

A country with an overvalued currency

Purchasing power parity explains how the exchange rate will adjust to differences in price levels between two countries.

An economic boom in America should increase the

In the spring of 2002,Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

If a country is in a strong upward phase of the business cycle,one can expect that its currency will

Figure 19-1 -Of the graphs in Figure 19-1,which one shows the effects of an economic boom in the United States and a depreciation of the dollar?

International trade under a floating exchange rate system

Under the Bretton Woods system of fixed exchange rates,

The dollar appreciates against the euro when U.S.demand for European goods increases.

If U.S.securities pay 6 percent interest,and if Great Britain's securities pay 8 percent interest,then

When one currency appreciates,another currency must depreciate.

On May 12,2011,the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

One of the problems that monetary unions eliminate is

Figure 19-2 -Of the graphs in Figure 19-2,where the broken line represents the fixed exchange rates,which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Because the United States has had substantial deficits in goods and services,it has also necessarily had surpluses in

If a country is in a major recessionary phase of the business cycle,one can expect that its currency will

The chief cause of short-run changes in exchange rates is

Which of the following had prompted the Chinese authorities to stand ready to buy or sell dollars steadily and in large volume?

After being introduced in 1999,the euro

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