Question 1

Under the Bretton Woods system,a country with a balance of payments deficit

Accepted Answer

A)  could get loans from the U.S. government. 
B)  could devalue if deflationary policies failed to eliminate the deficit. 
C)  was not allowed to devalue under any circumstance. 
D)  was required to devalue its currency immediately. 
A)  could get loans from the U.S. government. 
B)  could devalue if deflationary policies failed to eliminate the deficit. 
C)  was not allowed to devalue under any circumstance. 
D)  was required to devalue its currency immediately.

Question 2

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Accepted Answer

A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct. 
A)  have destabilized several currencies that were at sustainable equilibrium levels. 
B)  have no effect in fixed rate systems. 
C)  in fact tend to stabilize exchange rates rather than destabilize them. 
D)  All of the above are correct.

Question 3

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

Accepted Answer

A)  Americans decrease their travel to Germany. 
B)  the Germans add to their holdings of U.S. Treasury bills. 
C)  Americans purchase land in Germany and build factories. 
D)  American exports to Germany increase. 
A)  Americans decrease their travel to Germany. 
B)  the Germans add to their holdings of U.S. Treasury bills. 
C)  Americans purchase land in Germany and build factories. 
D)  American exports to Germany increase.

Question 4

If British government bonds pay a higher interest rate than U.S.government bonds,the dollar should appreciate.

Accepted Answer

A) True 
 B)False

Question 5

Adhering to a strict gold standard necessarily means that

Accepted Answer

A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation. 
A)  each nation can vary its money supply in response to domestic economic conditions. 
B)  no country will experience inflation. 
C)  no country will have control over its monetary policy. 
D)  no country will experience deflation.

Question 6

Suppose that a nation has adopted a fixed exchange rate with another country,and has a persistent trade deficit.What is most likely to happen?

Accepted Answer

A)  a gradual increase in the value of its currency 
B)  a gradual decrease in the value of its currency 
C)  a "run" on its currency and a sudden appreciation 
D)  a "run" on its currency and a sudden devaluation 
A)  a gradual increase in the value of its currency 
B)  a gradual decrease in the value of its currency 
C)  a "run" on its currency and a sudden appreciation 
D)  a "run" on its currency and a sudden devaluation

Question 7

The purchasing power parity theory of exchange rate determination states that

Accepted Answer

A)  in the short run, rates will adjust to parity. 
B)  in the long run, the rate reflects differences in price levels between the two countries. 
C)  in the long run, a government agency sets the rate at parity. 
D)  in the short run, the cost of labor really sets the exchange rate. 
A)  in the short run, rates will adjust to parity. 
B)  in the long run, the rate reflects differences in price levels between the two countries. 
C)  in the long run, a government agency sets the rate at parity. 
D)  in the short run, the cost of labor really sets the exchange rate.

Question 8

The supply of euros would come from

Accepted Answer

A)  American demand for European real estate. 
B)  European demand for U.S. government bonds. 
C)  Americans vacationing in Barcelona, Spain. 
D)  French supplies of wine to U.S. importers. 
A)  American demand for European real estate. 
B)  European demand for U.S. government bonds. 
C)  Americans vacationing in Barcelona, Spain. 
D)  French supplies of wine to U.S. importers.

Question 9

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars,how many U.S.dollars does it cost to ski at Whistler?

Accepted Answer

A)  $16.00 
B)  $34.00 
C)  $73.50 
D)  $156.25 
A)  $16.00 
B)  $34.00 
C)  $73.50 
D)  $156.25

Question 10

The term "dirty float" is used to describe a

Accepted Answer

A)  black market in foreign currencies. 
B)  floating currency that is "managed" by central bank authorities. 
C)  nation that switches from free to fixed exchange rates. 
D)  currency system used only in inflationary periods. 
A)  black market in foreign currencies. 
B)  floating currency that is "managed" by central bank authorities. 
C)  nation that switches from free to fixed exchange rates. 
D)  currency system used only in inflationary periods.

Question 11

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

Accepted Answer

A)  floated 
B)  revalued 
C)  devalued 
D)  depreciated 
A)  floated 
B)  revalued 
C)  devalued 
D)  depreciated

Question 12

If the dollar depreciates relative to other currencies,which of the following is t?

Accepted Answer

A)  It takes more foreign currency to buy a dollar. 
B)  It takes more dollars to buy a foreign currency. 
C)  U.S. exports will decrease. 
D)  Foreign purchases of U.S. goods will decrease. 
A)  It takes more foreign currency to buy a dollar. 
B)  It takes more dollars to buy a foreign currency. 
C)  U.S. exports will decrease. 
D)  Foreign purchases of U.S. goods will decrease.

Question 13

In the long run,the chief determinant of exchange rate changes is a change in

Accepted Answer

A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels. 
A)  interest rates. 
B)  real GDP. 
C)  the price of gold. 
D)  price levels.

Question 14

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

Accepted Answer

A) True 
 B)False

Question 15

If interest rates in the United States are higher than interest rates in Europe,what is most likely to happen?

Accepted Answer

A)  Supply of dollars will increase, causing appreciation of the dollar. 
B)  Supply of euros will increase, causing appreciation of the euro. 
C)  Demand for dollars will increase causing appreciation of the dollar. 
D)  Demand for dollars will decrease, causing depreciation of the dollar. 
A)  Supply of dollars will increase, causing appreciation of the dollar. 
B)  Supply of euros will increase, causing appreciation of the euro. 
C)  Demand for dollars will increase causing appreciation of the dollar. 
D)  Demand for dollars will decrease, causing depreciation of the dollar.

Question 16

On May 12,2011,the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Accepted Answer

A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19 
A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19

Question 17

Assume that an economic boom occurs in the United States,so that the United States has a much higher growth rate than other nations.What will happen to the exchange rate of the U.S.dollar?

Accepted Answer

The boom in the United States will lead

Question 18

If the dollar appreciates relative to other currencies,which of the following is t?

Accepted Answer

A)  It takes more foreign currency to buy a dollar. 
B)  It takes more dollars to buy a foreign currency. 
C)  U.S. exports will increase. 
D)  Foreign purchases of U.S. goods will increase. 
A)  It takes more foreign currency to buy a dollar. 
B)  It takes more dollars to buy a foreign currency. 
C)  U.S. exports will increase. 
D)  Foreign purchases of U.S. goods will increase.

Question 19

The gold standard established fixed exchange rates among all countries.

Accepted Answer

A) True 
 B)False

Question 20

The exchange rate is

Accepted Answer

A)  another term for "interest rate." 
B)  another term for "growth rate." 
C)  the rate at which goods trade for one another across international borders. 
D)  the price of one currency in terms of another currency. 
A)  another term for "interest rate." 
B)  another term for "growth rate." 
C)  the rate at which goods trade for one another across international borders. 
D)  the price of one currency in terms of another currency.

Under the Bretton Woods system,a country with a balance of payments deficit

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

If British government bonds pay a higher interest rate than U.S.government bonds,the dollar should appreciate.

Adhering to a strict gold standard necessarily means that

Suppose that a nation has adopted a fixed exchange rate with another country,and has a persistent trade deficit.What is most likely to happen?

The purchasing power parity theory of exchange rate determination states that

The supply of euros would come from

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars,how many U.S.dollars does it cost to ski at Whistler?

The term "dirty float" is used to describe a

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

If the dollar depreciates relative to other currencies,which of the following is t?

In the long run,the chief determinant of exchange rate changes is a change in

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

If interest rates in the United States are higher than interest rates in Europe,what is most likely to happen?

On May 12,2011,the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Assume that an economic boom occurs in the United States,so that the United States has a much higher growth rate than other nations.What will happen to the exchange rate of the U.S.dollar?

If the dollar appreciates relative to other currencies,which of the following is t?

The gold standard established fixed exchange rates among all countries.

The exchange rate is

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?

Under the Bretton Woods system,a country with a balance of payments deficit

Speculation in exchange markets is often thought of as conducive to wild fluctuations in exchange rates.In practice it appears that speculators

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

If British government bonds pay a higher interest rate than U.S.government bonds,the dollar should appreciate.

Adhering to a strict gold standard necessarily means that

Suppose that a nation has adopted a fixed exchange rate with another country,and has a persistent trade deficit.What is most likely to happen?

The purchasing power parity theory of exchange rate determination states that

The supply of euros would come from

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars,how many U.S.dollars does it cost to ski at Whistler?

The term "dirty float" is used to describe a

When a country decreases the official value of its currency,for example,Russia changes the value of the ruble from $.16 to $.04,it is said to have ____ its currency.

If the dollar depreciates relative to other currencies,which of the following is t?

In the long run,the chief determinant of exchange rate changes is a change in

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

If interest rates in the United States are higher than interest rates in Europe,what is most likely to happen?

On May 12,2011,the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Assume that an economic boom occurs in the United States,so that the United States has a much higher growth rate than other nations.What will happen to the exchange rate of the U.S.dollar?

If the dollar appreciates relative to other currencies,which of the following is t?

The gold standard established fixed exchange rates among all countries.

The exchange rate is

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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