Question 1

A currency board

Accepted Answer

A) issues domestic currency in exchange for foreign currency at an exchange rate of its choosing. 
B) is responsible for the conduct of the nation's monetary policy. 
C) promises to continue redeeming the issued currency at a fixed rate. 
D) does all of the above. 
A) issues domestic currency in exchange for foreign currency at an exchange rate of its choosing. 
B) is responsible for the conduct of the nation's monetary policy. 
C) promises to continue redeeming the issued currency at a fixed rate. 
D) does all of the above.

Question 2

If the exchange rate value of one U.S.dollar changes from 120 Japanese yen to 140 yen,

Accepted Answer

A) the U.S.dollar has appreciated relative to the yen. 
B) the Japanese yen has depreciated relative to the dollar. 
C) the U.S.dollar has depreciated relative to the yen. 
D) both a and b have occurred. 
A) the U.S.dollar has appreciated relative to the yen. 
B) the Japanese yen has depreciated relative to the dollar. 
C) the U.S.dollar has depreciated relative to the yen. 
D) both a and b have occurred.

Question 3

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen,then

Accepted Answer

A) exports to Japan will likely decrease. 
B) Japanese tourists will be more likely to visit the United States. 
C) U.S.businesses will be more likely to use Japanese shipping lines to transport their products. 
D) U.S.consumers will be more likely to buy Japanese-made automobiles. 
A) exports to Japan will likely decrease. 
B) Japanese tourists will be more likely to visit the United States. 
C) U.S.businesses will be more likely to use Japanese shipping lines to transport their products. 
D) U.S.consumers will be more likely to buy Japanese-made automobiles.

Question 4

If the exchange rate between the U.S.dollar and the euro was 1.20 ($1.20 = one euro),what would be the price in dollars of a bottle of French wine selling for 40 euro?

Accepted Answer

A) $33.33 
B) $40 
C) $48 
D) $120 
A) $33.33 
B) $40 
C) $48 
D) $120

Question 5

A nation has a merchandise trade deficit when

Accepted Answer

A) it has a surplus in its balance of payments. 
B) it has a deficit in its balance of payments. 
C) the value of its imports of goods is greater than the value of its exports of goods. 
D) its current account is in surplus and its capital account is in deficit. 
A) it has a surplus in its balance of payments. 
B) it has a deficit in its balance of payments. 
C) the value of its imports of goods is greater than the value of its exports of goods. 
D) its current account is in surplus and its capital account is in deficit.

Question 6

An inflow of capital and a trade deficit are more dangerous when

Accepted Answer

A) the inflow of capital is channeled into private investment. 
B) the inflow of capital is used to finance current consumption and/or channeled into unproductive projects. 
C) the unemployment rate of the country is low,because this will mean the capital inflow will be inflationary. 
D) the investment rate is already high and the unemployment rate low. 
A) the inflow of capital is channeled into private investment. 
B) the inflow of capital is used to finance current consumption and/or channeled into unproductive projects. 
C) the unemployment rate of the country is low,because this will mean the capital inflow will be inflationary. 
D) the investment rate is already high and the unemployment rate low.

Question 7

If the exchange rate between the U.S.dollar and the Japanese yen were such that one U.S.dollar equals 100 yen,what would be the price in dollars of a Japanese automobile that cost 2,000,000 yen?

Accepted Answer

A) $100 
B) $20,000 
C) $120,000 
D) $2,000,000 
A) $100 
B) $20,000 
C) $120,000 
D) $2,000,000

Question 8

An appreciation in the U.S.dollar on the foreign exchange market will

Accepted Answer

A) make U.S.exports more expensive to foreigners. 
B) make imports more expensive for U.S.consumers. 
C) make U.S.exports cheaper for foreign consumers. 
D) discourage U.S.consumers from traveling abroad. 
A) make U.S.exports more expensive to foreigners. 
B) make imports more expensive for U.S.consumers. 
C) make U.S.exports cheaper for foreign consumers. 
D) discourage U.S.consumers from traveling abroad.

Question 9

The U.S.dollar will appreciate if

Accepted Answer

A) the U.S.demand for foreign exchange decreases. 
B) the U.S.demand for foreign exchange increases. 
C) the U.S.supply of foreign exchange decreases. 
D) Americans want to buy more foreign goods. 
E) foreigners want fewer American goods. 
A) the U.S.demand for foreign exchange decreases. 
B) the U.S.demand for foreign exchange increases. 
C) the U.S.supply of foreign exchange decreases. 
D) Americans want to buy more foreign goods. 
E) foreigners want fewer American goods.

Question 10

If the United States experiences an economic boom,how will this affect the foreign exchange value of the U.S.dollar?

Accepted Answer

A) It will fall because other nations would be forced to raise their interest rates. 
B) It will fall because the United States will import more goods and services,leading to an increased demand for foreign currencies. 
C) It will rise because U.S.GDP would be rising faster than other countries. 
D) It will rise because the Fed will have to lower U.S.interest rates. 
E) It will rise because the United States will import more goods and services,leading to an increased demand for foreign currencies. 
A) It will fall because other nations would be forced to raise their interest rates. 
B) It will fall because the United States will import more goods and services,leading to an increased demand for foreign currencies. 
C) It will rise because U.S.GDP would be rising faster than other countries. 
D) It will rise because the Fed will have to lower U.S.interest rates. 
E) It will rise because the United States will import more goods and services,leading to an increased demand for foreign currencies.

Question 11

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 12

If the exchange rate of the English pound goes from $1.80 to $1.60,the pound has

Accepted Answer

A) appreciated,and the English will find U.S.goods cheaper. 
B) appreciated,and the English will find U.S.goods more expensive. 
C) depreciated,and the English will find U.S.goods more expensive. 
D) depreciated,and the English will find U.S.goods cheaper. 
A) appreciated,and the English will find U.S.goods cheaper. 
B) appreciated,and the English will find U.S.goods more expensive. 
C) depreciated,and the English will find U.S.goods more expensive. 
D) depreciated,and the English will find U.S.goods cheaper.

Question 13

When a group of nations adhere to a strict fixed exchange rate system,then

Accepted Answer

A) no country will experience inflation or recession. 
B) each nation loses some control of its monetary policy and its domestic economy. 
C) each nation is able to exercise more control of its fiscal policy and aggregate demand. 
D) each nation is able to exercise more control of its monetary policy and its domestic economy. 
A) no country will experience inflation or recession. 
B) each nation loses some control of its monetary policy and its domestic economy. 
C) each nation is able to exercise more control of its fiscal policy and aggregate demand. 
D) each nation is able to exercise more control of its monetary policy and its domestic economy.

Question 14

Which of the following is a current account transaction?

Accepted Answer

A) the purchase of a foreign engineering firm by a domestic investor 
B) the import of shoes by a domestic retailer 
C) a loan by a domestic bank to a foreigner 
D) a loan by a foreign bank to a domestic manufacturer 
A) the purchase of a foreign engineering firm by a domestic investor 
B) the import of shoes by a domestic retailer 
C) a loan by a domestic bank to a foreigner 
D) a loan by a foreign bank to a domestic manufacturer

Question 15

Under a flexible exchange rate system,the rate that equates demand and supply in the exchange rate market also equates the

Accepted Answer

A) value of the nation's merchandise exports with the value of its merchandise imports. 
B) value of the nation's purchases of goods,services,and assets from foreigners with the value of the nation's sales of these items to foreigners. 
C) debit and credit items on current account transactions. 
D) debit and credit items on capital account transactions. 
A) value of the nation's merchandise exports with the value of its merchandise imports. 
B) value of the nation's purchases of goods,services,and assets from foreigners with the value of the nation's sales of these items to foreigners. 
C) debit and credit items on current account transactions. 
D) debit and credit items on capital account transactions.

Question 16

Over time,which of the following will most likely result from a depreciation in the exchange rate of the dollar?

Accepted Answer

A) Inflation will decline. 
B) Foreign goods will cost Americans less,and therefore,the imports of Americans will rise. 
C) U.S.goods exported abroad will cost less in foreign countries,so foreigners will buy more of them. 
D) U.S.goods exported abroad will cost more in foreign countries,so foreigners will buy fewer of them. 
A) Inflation will decline. 
B) Foreign goods will cost Americans less,and therefore,the imports of Americans will rise. 
C) U.S.goods exported abroad will cost less in foreign countries,so foreigners will buy more of them. 
D) U.S.goods exported abroad will cost more in foreign countries,so foreigners will buy fewer of them.

Question 17

Other things constant,if Americans suddenly decreased their desire for Mexican tequila,the exchange rate value of the Mexican peso would

Accepted Answer

A) increase,which is an appreciation of the Mexican peso. 
B) increase,which is a depreciation of the Mexican peso. 
C) decrease,which is an appreciation of the Mexican peso. 
D) decrease,which is a depreciation of the Mexican peso. 
A) increase,which is an appreciation of the Mexican peso. 
B) increase,which is a depreciation of the Mexican peso. 
C) decrease,which is an appreciation of the Mexican peso. 
D) decrease,which is a depreciation of the Mexican peso.

Question 18

During 1981-1985,the United States pursued a restrictive monetary policy that sharply lowered inflation.At the same time,large budget deficits helped push real interest rates to an all-time high.What would you expect to happen to the value of the dollar on the foreign exchange market?

Accepted Answer

Both the lower inflation rate

Question 19

Which one of the following would supply dollars to the foreign exchange market?

Accepted Answer

A) the spending of U.S.tourists in Europe 
B) the purchase of U.S.automobiles by Japanese consumers 
C) the sale of U.S.automobiles to European consumers 
D) the purchase of an American electronics factory by a Japanese investor 
A) the spending of U.S.tourists in Europe 
B) the purchase of U.S.automobiles by Japanese consumers 
C) the sale of U.S.automobiles to European consumers 
D) the purchase of an American electronics factory by a Japanese investor

Question 20

There is no reason to worry about a balance of trade deficit if it is the result of an inflow of capital

Accepted Answer

A) that is being channeled into productive investments. 
B) that will make it less costly to increase government spending on programs that will help incumbent legislators get re-elected. 
C) that is used to finance unemployment compensation benefits for a longer time period. 
D) that is used to finance a large budget deficit. 
A) that is being channeled into productive investments. 
B) that will make it less costly to increase government spending on programs that will help incumbent legislators get re-elected. 
C) that is used to finance unemployment compensation benefits for a longer time period. 
D) that is used to finance a large budget deficit.

Exam 19: International Finance and the Foreign Exchange Market

A currency board

If the exchange rate value of one U.S.dollar changes from 120 Japanese yen to 140 yen,

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen,then

If the exchange rate between the U.S.dollar and the euro was 1.20 ($1.20 = one euro),what would be the price in dollars of a bottle of French wine selling for 40 euro?

A nation has a merchandise trade deficit when

An inflow of capital and a trade deficit are more dangerous when

If the exchange rate between the U.S.dollar and the Japanese yen were such that one U.S.dollar equals 100 yen,what would be the price in dollars of a Japanese automobile that cost 2,000,000 yen?

An appreciation in the U.S.dollar on the foreign exchange market will

The U.S.dollar will appreciate if

If the United States experiences an economic boom,how will this affect the foreign exchange 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?

If the exchange rate of the English pound goes from $1.80 to $1.60,the pound has

When a group of nations adhere to a strict fixed exchange rate system,then

Which of the following is a current account transaction?

Under a flexible exchange rate system,the rate that equates demand and supply in the exchange rate market also equates the

Over time,which of the following will most likely result from a depreciation in the exchange rate of the dollar?

Other things constant,if Americans suddenly decreased their desire for Mexican tequila,the exchange rate value of the Mexican peso would

During 1981-1985,the United States pursued a restrictive monetary policy that sharply lowered inflation.At the same time,large budget deficits helped push real interest rates to an all-time high.What would you expect to happen to the value of the dollar on the foreign exchange market?

Which one of the following would supply dollars to the foreign exchange market?

There is no reason to worry about a balance of trade deficit if it is the result of an inflow of capital

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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