Question 1

Suppose U.S.-produced wheat costs $5 per bushel and the exchange rate is 100 yen = $1.If the exchange rate changes to 90 yen = $1,the

Accepted Answer

A) wheat would now cost more dollars. 
B) wheat would now cost the Japanese citizen less yen. 
C) wheat would now cost less dollars. 
D) wheat would now cost the Japanese citizen more yen. 
E) yen has depreciated in value. 
A) wheat would now cost more dollars. 
B) wheat would now cost the Japanese citizen less yen. 
C) wheat would now cost less dollars. 
D) wheat would now cost the Japanese citizen more yen. 
E) yen has depreciated in value.

Question 2

A currency board is an entity that

Accepted Answer

A) issues a currency with a floating value relative to a widely accepted currency. 
B) promises to continue to redeem the issued currency at the prevailing market rate. 
C) controls the domestic supply of money by buying and selling bonds and other liquid assets. 
D) provides 100% backing for all currency issued. 
A) issues a currency with a floating value relative to a widely accepted currency. 
B) promises to continue to redeem the issued currency at the prevailing market rate. 
C) controls the domestic supply of money by buying and selling bonds and other liquid assets. 
D) provides 100% backing for all currency issued.

Question 3

Unanticipated expansionary monetary policy will increase economic growth and push inflation upward while lowering real interest rates.This will cause

Accepted Answer

A) an increase in the demand for foreign currencies and a decline in the foreign exchange value of the dollar. 
B) a decrease in the demand for foreign currencies and a decline in the foreign exchange value of the dollar. 
C) an increase in the demand for foreign currencies and an increase in the foreign exchange value of the dollar. 
D) a decrease in the demand for foreign currencies and an increase in the foreign exchange value of the dollar. 
A) an increase in the demand for foreign currencies and a decline in the foreign exchange value of the dollar. 
B) a decrease in the demand for foreign currencies and a decline in the foreign exchange value of the dollar. 
C) an increase in the demand for foreign currencies and an increase in the foreign exchange value of the dollar. 
D) a decrease in the demand for foreign currencies and an increase in the foreign exchange value of the dollar.

Question 4

Which of the following would most likely cause a nation's currency to depreciate?

Accepted Answer

A) an increase in the nation's domestic inflation rate 
B) an increase in inflation of the nation's trading partners 
C) a decrease in the nation's domestic inflation rate 
D) an increase in domestic real interest rates 
A) an increase in the nation's domestic inflation rate 
B) an increase in inflation of the nation's trading partners 
C) a decrease in the nation's domestic inflation rate 
D) an increase in domestic real interest rates

Question 5

If the exchange rate between the U.S.dollar and the English pound went from $1.46 US = 1 pound to $1.60 US = 1 pound,then

Accepted Answer

A) English goods have become more expensive for Americans. 
B) English goods have become less expensive for Americans. 
C) American goods have become more expensive for English citizens. 
D) American exports to England are likely to fall. 
A) English goods have become more expensive for Americans. 
B) English goods have become less expensive for Americans. 
C) American goods have become more expensive for English citizens. 
D) American exports to England are likely to fall.

Question 6

A pair of Nike tennis shoes costs $90 in the United States.If the exchange rate between the United States and Mexico is 0.10 ($0.10 = 1 peso),then that same pair of shoes would cost ____ pesos.

Accepted Answer

A) 90 
B) 900 
C) 1,000 
D) 9,000 
A) 90 
B) 900 
C) 1,000 
D) 9,000

Question 7

If the dollar price of the English pound increases from $1.50 to $1.75,the dollar has

Accepted Answer

A) appreciated relative to the pound,and English goods have become less expensive to U.S.consumers. 
B) depreciated relative to the pound,and English goods have become less expensive to U.S.consumers. 
C) appreciated relative to the pound,and English goods have become more expensive to U.S.consumers. 
D) depreciated relative to the pound,and English goods have become more expensive to U.S.consumers. 
A) appreciated relative to the pound,and English goods have become less expensive to U.S.consumers. 
B) depreciated relative to the pound,and English goods have become less expensive to U.S.consumers. 
C) appreciated relative to the pound,and English goods have become more expensive to U.S.consumers. 
D) depreciated relative to the pound,and English goods have become more expensive to U.S.consumers.

Question 8

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

Accepted Answer

A) It will create demand for U.S.dollars. 
B) It will reduce demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will create demand for U.S.dollars. 
B) It will reduce demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 9

Other things constant,if Americans suddenly increased their desire to vacation in Mexico,the dollar price 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 10

Under a system of flexible exchange rates,transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

Accepted Answer

A) currency to depreciate in value. 
B) currency to appreciate in value. 
C) trade deficit to increase. 
D) products to become more expensive to foreigners. 
A) currency to depreciate in value. 
B) currency to appreciate in value. 
C) trade deficit to increase. 
D) products to become more expensive to foreigners.

Question 11

If the U.S.dollar depreciates,it means that

Accepted Answer

A) the value of the U.S.dollar has increased. 
B) the value of foreign exchange has decreased. 
C) fewer U.S.dollars are required to purchase foreign exchange. 
D) more U.S.dollars are required to purchase foreign exchange. 
E) exports will immediately fall. 
A) the value of the U.S.dollar has increased. 
B) the value of foreign exchange has decreased. 
C) fewer U.S.dollars are required to purchase foreign exchange. 
D) more U.S.dollars are required to purchase foreign exchange. 
E) exports will immediately fall.

Question 12

If a country fixes the exchange-rate value of its currency,it will have to

Accepted Answer

A) follow a highly expansionary monetary policy in order to maintain the convertibility of its currency. 
B) give up its monetary independence in order to maintain the convertibility of its currency. 
C) fix its domestic interest rates in order to maintain the convertibility of its currency. 
D) raise taxes in order to maintain the convertibility of its currency. 
A) follow a highly expansionary monetary policy in order to maintain the convertibility of its currency. 
B) give up its monetary independence in order to maintain the convertibility of its currency. 
C) fix its domestic interest rates in order to maintain the convertibility of its currency. 
D) raise taxes in order to maintain the convertibility of its currency.

Question 13

Suppose a German-produced car becomes very popular in the United States.This would tend to

Accepted Answer

A) affect the U.S.balance of payments but not the balance of trade. 
B) reduce any existing balance of trade deficit in the United States. 
C) increase a balance of trade surplus in the United States. 
D) increase a balance of trade deficit in the United States. 
A) affect the U.S.balance of payments but not the balance of trade. 
B) reduce any existing balance of trade deficit in the United States. 
C) increase a balance of trade surplus in the United States. 
D) increase a balance of trade deficit in the United States.

Question 14

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

Accepted Answer

A) the dollar will depreciate on the foreign exchange market and imports will grow relative to exports. 
B) the dollar will appreciate on the foreign exchange market,and exports will grow relative to imports. 
C) the dollar will depreciate on the foreign exchange market,and exports will grow relative to imports. 
D) the dollar will appreciate on the foreign exchange market,and imports will grow relative to exports. 
A) the dollar will depreciate on the foreign exchange market and imports will grow relative to exports. 
B) the dollar will appreciate on the foreign exchange market,and exports will grow relative to imports. 
C) the dollar will depreciate on the foreign exchange market,and exports will grow relative to imports. 
D) the dollar will appreciate on the foreign exchange market,and imports will grow relative to exports.

Question 15

If the U.S.purchases oil from Venezuela,what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 16

Under a system of flexible exchange rates,an increase in demand for a nation's currency in the foreign exchange market will

Accepted Answer

A) cause the nation's currency to appreciate. 
B) make it more expensive for the nation to import goods. 
C) cause the nation's balance on current account to shift toward a surplus. 
D) make it less expensive for foreigners to buy the nation's goods. 
A) cause the nation's currency to appreciate. 
B) make it more expensive for the nation to import goods. 
C) cause the nation's balance on current account to shift toward a surplus. 
D) make it less expensive for foreigners to buy the nation's goods.

Question 17

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars. 
A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 18

If the exchange rate between the U.S.dollar and the Euro were 1.50 ($1.50 = one Euro),what would be the price in dollars of a German automobile that cost 40,000 Euros?

Accepted Answer

A) $10,000 
B) $20,000 
C) $60,000 
D) $200,000 
A) $10,000 
B) $20,000 
C) $60,000 
D) $200,000

Question 19

During recent times,the United States has been running a trade deficit (our exports of goods and services have been less than our imports of goods and services).Which of the following is true regarding these trade deficits?

Accepted Answer

A) They were primarily caused by rapid economic growth in the United States stimulating imports and also the attractiveness of the United States as a place to invest causing a capital inflow. 
B) These trade deficits put the United States in debt to foreign economies and thus weaken future economic conditions in the United States. 
C) These trade deficits are evidence that other countries practice unfair trade against the United States because under fair trade exports equal imports to another country. 
D) None of the above are true regarding the trade deficits of the United States. 
A) They were primarily caused by rapid economic growth in the United States stimulating imports and also the attractiveness of the United States as a place to invest causing a capital inflow. 
B) These trade deficits put the United States in debt to foreign economies and thus weaken future economic conditions in the United States. 
C) These trade deficits are evidence that other countries practice unfair trade against the United States because under fair trade exports equal imports to another country. 
D) None of the above are true regarding the trade deficits of the United States.

Question 20

If real interest rates in the United States are higher than those of our trading partners,what will tend to happen to the foreign exchange value of the dollar and the U.S.current account deficit or surplus?

Accepted Answer

A) The dollar will depreciate;the current account will move toward a deficit. 
B) The dollar will depreciate;the current account will move toward a surplus. 
C) The dollar will appreciate;the current account will move toward a deficit. 
D) The dollar will appreciate;the current account will move toward a surplus. 
A) The dollar will depreciate;the current account will move toward a deficit. 
B) The dollar will depreciate;the current account will move toward a surplus. 
C) The dollar will appreciate;the current account will move toward a deficit. 
D) The dollar will appreciate;the current account will move toward a surplus.

Exam 19: International Finance and the Foreign Exchange Market

Suppose U.S.-produced wheat costs $5 per bushel and the exchange rate is 100 yen = $1.If the exchange rate changes to 90 yen = $1,the

A currency board is an entity that

Unanticipated expansionary monetary policy will increase economic growth and push inflation upward while lowering real interest rates.This will cause

Which of the following would most likely cause a nation's currency to depreciate?

If the exchange rate between the U.S.dollar and the English pound went from $1.46 US = 1 pound to $1.60 US = 1 pound,then

A pair of Nike tennis shoes costs $90 in the United States.If the exchange rate between the United States and Mexico is 0.10 ($0.10 = 1 peso),then that same pair of shoes would cost ____ pesos.

If the dollar price of the English pound increases from $1.50 to $1.75,the dollar has

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

Other things constant,if Americans suddenly increased their desire to vacation in Mexico,the dollar price of the Mexican peso would

Under a system of flexible exchange rates,transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

If the U.S.dollar depreciates,it means that

If a country fixes the exchange-rate value of its currency,it will have to

Suppose a German-produced car becomes very popular in the United States.This would tend to

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

If the U.S.purchases oil from Venezuela,what is the effect in the foreign exchange market?

Under a system of flexible exchange rates,an increase in demand for a nation's currency in the foreign exchange market will

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

If the exchange rate between the U.S.dollar and the Euro were 1.50 ($1.50 = one Euro),what would be the price in dollars of a German automobile that cost 40,000 Euros?

During recent times,the United States has been running a trade deficit (our exports of goods and services have been less than our imports of goods and services).Which of the following is true regarding these trade deficits?

If real interest rates in the United States are higher than those of our trading partners,what will tend to happen to the foreign exchange value of the dollar and the U.S.current account deficit or surplus?

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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