Question 1

By 2017, there were ________ member countries in the European Union (still including the UK).

Accepted Answer

A) 12 
B) 16 
C) 28 
D) 57 
A) 12 
B) 16 
C) 28 
D) 57

Question 2

In the late 1960s, speculators were counting on the value of the German mark to ________ and the German central bank responded by ________ marks.

Accepted Answer

A) increase; selling more 
B) increase; selling less 
C) decrease; buying more 
D) decrease; buying less 
A) increase; selling more 
B) increase; selling less 
C) decrease; buying more 
D) decrease; buying less

Question 3

The demand by other countries for Australian dollars will increase when:

Accepted Answer

A) there is a decrease in demand by other countries for Australia's goods and services. 
B) more Australians travel overseas. 
C) Australians import more goods. 
D) foreigners purchase more Australian goods. 
A) there is a decrease in demand by other countries for Australia's goods and services. 
B) more Australians travel overseas. 
C) Australians import more goods. 
D) foreigners purchase more Australian goods.

Question 4

Refer to Figure 15.3 for the following questions.
Figure 15.3
  
-If the government of Thailand wants to peg the baht to the United States (US)dollar at a value below 0.03 baht per US dollar, as seen in Figure 15.3, then:

Accepted Answer

A) the baht will be overvalued. 
B) the supply of baht for US dollars will be greater than the demand of baht for US dollars. 
C) there will be a shortage of baht. 
D) the par exchange rate will be set above the equilibrium exchange rate. 
A) the baht will be overvalued. 
B) the supply of baht for US dollars will be greater than the demand of baht for US dollars. 
C) there will be a shortage of baht. 
D) the par exchange rate will be set above the equilibrium exchange rate.

Question 5

What is the 'theory of purchasing power parity'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The theory of purchasing power

Question 6

A 'speculative attack' is the result of investors' expectations that the future value of a currency will decline.

Accepted Answer

A) True 
 B)False

Question 7

During the Great Depression, many countries left the gold standard because:

Accepted Answer

A) central banks could not pursue active monetary policy under the gold standard. 
B) active fiscal policy could not be pursued under the gold standard. 
C) people began to lose faith in gold as a medium of exchange and would no longer accept it as a means of payment. 
D) gold supplies could be increased rapidly to expand the money supply. 
A) central banks could not pursue active monetary policy under the gold standard. 
B) active fiscal policy could not be pursued under the gold standard. 
C) people began to lose faith in gold as a medium of exchange and would no longer accept it as a means of payment. 
D) gold supplies could be increased rapidly to expand the money supply.

Question 8

What factors are most important for determining exchange rate fluctuations in the long run?

Accepted Answer

A) relative price levels across countries 
B) relative rates of productivity growth across countries 
C) preferences for domestic and foreign goods across countries 
D) All of these options are correct. 
A) relative price levels across countries 
B) relative rates of productivity growth across countries 
C) preferences for domestic and foreign goods across countries 
D) All of these options are correct.

Question 9

With a common currency such as the euro:

Accepted Answer

A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same, regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies. 
A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same, regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies.

Question 10

The three most important international financial centres are:

Accepted Answer

A) New York, London and Beijing. 
B) Frankfurt, Beijing and New York. 
C) Frankfurt, Tokyo and Washington. 
D) Tokyo, New York and London. 
A) New York, London and Beijing. 
B) Frankfurt, Beijing and New York. 
C) Frankfurt, Tokyo and Washington. 
D) Tokyo, New York and London.

Question 11

Under the 'gold standard', the government must have enough gold to back up any:

Accepted Answer

A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank. 
A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank.

Question 12

Under the 'gold standard':

Accepted Answer

A) there was no inflation. 
B) the central bank had more complete control over the money supply. 
C) technological change in the production of gold did not affect the money supply. 
D) the central bank lacked control over the money supply. 
A) there was no inflation. 
B) the central bank had more complete control over the money supply. 
C) technological change in the production of gold did not affect the money supply. 
D) the central bank lacked control over the money supply.

Question 13

Prior to the 1980s, most firms raised funds through the ________ stock and bond market. After the 1980s, firms have a greater access to ________ markets.

Accepted Answer

A) domestic; domestic 
B) domestic; foreign 
C) foreign; domestic 
D) foreign; foreign 
A) domestic; domestic 
B) domestic; foreign 
C) foreign; domestic 
D) foreign; foreign

Question 14

When the value of a currency is determined ________, the exchange rate system is defined as 'managed float'.

Accepted Answer

A) only by supply and demand 
B) by the country's government 
C) mostly by supply and demand, but with occasional government intervention 
D) by the country's government, with occasional readjustments in value 
A) only by supply and demand 
B) by the country's government 
C) mostly by supply and demand, but with occasional government intervention 
D) by the country's government, with occasional readjustments in value

Question 15

All else being equal, if the rate of growth in productivity in Spain is lower than the rate of growth in productivity in Australia, the euro will:

Accepted Answer

A) decrease in value relative to the Australian dollar. 
B) increase in value relative to the Australian dollar. 
C) nominally appreciate against the Australian dollar, but its real value relative to the dollar will remain unchanged. 
D) nominally depreciate against the Australian dollar, but its real value relative to the dollar will remain unchanged. 
A) decrease in value relative to the Australian dollar. 
B) increase in value relative to the Australian dollar. 
C) nominally appreciate against the Australian dollar, but its real value relative to the dollar will remain unchanged. 
D) nominally depreciate against the Australian dollar, but its real value relative to the dollar will remain unchanged.

Question 16

Under the gold standard, if one United States dollar could be traded for one half ounce of gold, and one British pound could be redeemed for one ounce gold, the exchange rate would be:

Accepted Answer

A) $1 = £4. 
B) $2 = £1. 
C) $4 = £1. 
D) $1 = £2. 
A) $1 = £4. 
B) $2 = £1. 
C) $4 = £1. 
D) $1 = £2.

Question 17

A 'fixed exchange rate system' is one in which:

Accepted Answer

A) the currency is backed by a fixed amount of gold. 
B) the government defines its currency to be worth a certain amount in terms of another currency and ensures that the rate remains at that level. 
C) foreign exchange traders accept only a fixed price for their goods, regardless of the demand and supply for the currency. 
D) demand and supply adjust so that there are no shortages or surpluses of currency in the market. 
A) the currency is backed by a fixed amount of gold. 
B) the government defines its currency to be worth a certain amount in terms of another currency and ensures that the rate remains at that level. 
C) foreign exchange traders accept only a fixed price for their goods, regardless of the demand and supply for the currency. 
D) demand and supply adjust so that there are no shortages or surpluses of currency in the market.

Question 18

The 'theory of purchasing power parity' implies that:

Accepted Answer

A) in the long run, the prices of goods in different countries will be the same when measured in a common currency. 
B) the prices of goods in different countries are always the same. 
C) the nominal exchange rates will equate over time. 
D) demand and supply have no influence over the exchange rate. 
A) in the long run, the prices of goods in different countries will be the same when measured in a common currency. 
B) the prices of goods in different countries are always the same. 
C) the nominal exchange rates will equate over time. 
D) demand and supply have no influence over the exchange rate.

Question 19

Suppose that an Xbox One X costs $150 in the United States of America (USA)and £75 in Great Britain. Suppose the exchange rate is $US1 = £1. Does purchasing power parity suggest that the dollar should appreciate or depreciate against the pound? What will happen if consumers in Great Britain like the Xbox One X less than United States (US)consumers?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Purchasing power parity states that in t

Question 20

When the value of a currency is fixed relative to a particular country's currency, this is referred to as a ________ exchange rate.

Accepted Answer

A) permanent 
B) variable 
C) floating 
D) pegged 
A) permanent 
B) variable 
C) floating 
D) pegged

By 2017, there were ________ member countries in the European Union (still including the UK).

In the late 1960s, speculators were counting on the value of the German mark to and the German central bank responded by marks.

The demand by other countries for Australian dollars will increase when:

Refer to Figure 15.3 for the following questions. Figure 15.3 -If the government of Thailand wants to peg the baht to the United States (US)dollar at a value below 0.03 baht per US dollar, as seen in Figure 15.3, then:

What is the 'theory of purchasing power parity'? _ _

A 'speculative attack' is the result of investors' expectations that the future value of a currency will decline.

During the Great Depression, many countries left the gold standard because:

What factors are most important for determining exchange rate fluctuations in the long run?

With a common currency such as the euro:

The three most important international financial centres are:

Under the 'gold standard', the government must have enough gold to back up any:

Under the 'gold standard':

Prior to the 1980s, most firms raised funds through the stock and bond market. After the 1980s, firms have a greater access to markets.

When the value of a currency is determined ________, the exchange rate system is defined as 'managed float'.

All else being equal, if the rate of growth in productivity in Spain is lower than the rate of growth in productivity in Australia, the euro will:

Under the gold standard, if one United States dollar could be traded for one half ounce of gold, and one British pound could be redeemed for one ounce gold, the exchange rate would be:

A 'fixed exchange rate system' is one in which:

The 'theory of purchasing power parity' implies that:

When the value of a currency is fixed relative to a particular country's currency, this is referred to as a ________ exchange rate.

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

Filters

Exam 15: The International Financial System

By 2017, there were ________ member countries in the European Union (still including the UK).

In the late 1960s, speculators were counting on the value of the German mark to ________ and the German central bank responded by ________ marks.

The demand by other countries for Australian dollars will increase when:

Refer to Figure 15.3 for the following questions. Figure 15.3 -If the government of Thailand wants to peg the baht to the United States (US)dollar at a value below 0.03 baht per US dollar, as seen in Figure 15.3, then:

What is the 'theory of purchasing power parity'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

A 'speculative attack' is the result of investors' expectations that the future value of a currency will decline.

During the Great Depression, many countries left the gold standard because:

What factors are most important for determining exchange rate fluctuations in the long run?

With a common currency such as the euro:

The three most important international financial centres are:

Under the 'gold standard', the government must have enough gold to back up any:

Under the 'gold standard':

Prior to the 1980s, most firms raised funds through the ________ stock and bond market. After the 1980s, firms have a greater access to ________ markets.

When the value of a currency is determined ________, the exchange rate system is defined as 'managed float'.

All else being equal, if the rate of growth in productivity in Spain is lower than the rate of growth in productivity in Australia, the euro will:

Under the gold standard, if one United States dollar could be traded for one half ounce of gold, and one British pound could be redeemed for one ounce gold, the exchange rate would be:

A 'fixed exchange rate system' is one in which:

The 'theory of purchasing power parity' implies that:

When the value of a currency is fixed relative to a particular country's currency, this is referred to as a ________ exchange rate.

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Inflation

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

Filters

In the late 1960s, speculators were counting on the value of the German mark to and the German central bank responded by marks.

What is the 'theory of purchasing power parity'? _ _

Prior to the 1980s, most firms raised funds through the stock and bond market. After the 1980s, firms have a greater access to markets.