Question 1

Under the gold standard, a chance discovery of gold such as a gold rush would:

Accepted Answer

A) decrease the general price level. 
B) increase the general price level. 
C) increase the rate of unemployment. 
D) decrease the rate of economic growth. 
A) decrease the general price level. 
B) increase the general price level. 
C) increase the rate of unemployment. 
D) decrease the rate of economic growth.

Question 2

If the rate of inflation in Australia exceeds the rate of inflation in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

Accepted Answer

A) True 
 B)False

Question 3

One problem with the Bretton Woods System was that:

Accepted Answer

A) the total number of United States (US)dollar reserves held by central banks was greater than US gold reserves. 
B) some countries with overvalued currencies refused to devalue them. 
C) in the early days of the system, many currencies were undervalued versus the US dollar. 
D) gold discoveries caused worldwide inflation. 
A) the total number of United States (US)dollar reserves held by central banks was greater than US gold reserves. 
B) some countries with overvalued currencies refused to devalue them. 
C) in the early days of the system, many currencies were undervalued versus the US dollar. 
D) gold discoveries caused worldwide inflation.

Question 4

Your friend states that (i)a strong dollar (appreciation of the dollar)is a sign of a healthy economy and that (ii)a weak dollar (depreciation of the dollar)is a sign of a weak economy. Assuming that other factors that could affect the exchange rate do not change, explain that the opposite is true when the following are considered:
a.the effect of rapidly falling incomes in Australia during a recession
b.the effect of rapidly rising incomes in Australia during an economic expansion
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.When the Australian economy enters int

Question 5

Which of the following will cause the Australian dollar to depreciate against the Japanese yen?

Accepted Answer

A) Prices in Japan rise faster than prices in Australia. 
B) The average productivity of Japanese firms is higher than Australian firms. 
C) Australian consumers decrease their preferences for Japanese goods. 
D) A quota is placed on Australian products. 
A) Prices in Japan rise faster than prices in Australia. 
B) The average productivity of Japanese firms is higher than Australian firms. 
C) Australian consumers decrease their preferences for Japanese goods. 
D) A quota is placed on Australian products.

Question 6

Refer to Figure 15.3 for the following questions.
Figure 15.3
  
-If the Thai government wants to maintain an exchange rate of 0.04 baht per United States (US)dollar, as illustrated in Figure 15.3, then it must:

Accepted Answer

A) purchase 100 million baht per day with US dollars. 
B) purchase 50 million baht per day with US dollars. 
C) sell 100 million baht per day in exchange for US dollars. 
D) sell 50 million baht per day in exchange for US dollars. 
A) purchase 100 million baht per day with US dollars. 
B) purchase 50 million baht per day with US dollars. 
C) sell 100 million baht per day in exchange for US dollars. 
D) sell 50 million baht per day in exchange for US dollars.

Question 7

What are 'capital controls'? Why might a financial crisis lead to a reconsideration of using capital controls and what problems might result from the reinstatement of capital controls?

Accepted Answer

Capital controls refer to limits on the

Question 8

Refer to Figure 15.3 for the following questions.
Figure 15.3
  
-Assume that the Thai government wants to maintain an exchange rate of 0.04 baht per United States (US)dollar, as shown in Figure 15.3. If the Thai central bank pursues a contractionary monetary policy, how will that affect the number of baht the central bank must buy or sell to maintain the peg at 0.04 baht per US dollar?

Accepted Answer

A) They must purchase more than 100 million baht per day with US dollars. 
B) They must purchase less than 100 million baht per day with US dollars. 
C) They must purchase exactly 100 million baht per day with US dollars. 
D) They do not have to do anything. 
A) They must purchase more than 100 million baht per day with US dollars. 
B) They must purchase less than 100 million baht per day with US dollars. 
C) They must purchase exactly 100 million baht per day with US dollars. 
D) They do not have to do anything.

Question 9

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

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 10

Most economists have argued that in the 2000s, the Chinese yuan was ________ relative to the United States (US)dollar, causing the Chinese central bank to ________ US dollars to maintain the peg.

Accepted Answer

A) overvalued; sell 
B) overvalued; buy 
C) undervalued; sell 
D) undervalued; buy 
A) overvalued; sell 
B) overvalued; buy 
C) undervalued; sell 
D) undervalued; buy

Question 11

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates, except:

Accepted Answer

A) not all goods and services produced in any country are traded internationally. 
B) consumer preferences for goods and services differ across countries. 
C) some countries impose barriers to trade. 
D) most countries have free markets with little, if any, government regulation. 
A) not all goods and services produced in any country are traded internationally. 
B) consumer preferences for goods and services differ across countries. 
C) some countries impose barriers to trade. 
D) most countries have free markets with little, if any, government regulation.

Question 12

Refer to Figure 15.2 for the following questions.
Figure 15.2
  
-Which of the following would cause the change depicted in Figure 15.2? Note that the figure depicts the quantity of euros traded.

Accepted Answer

A) Australian productivity falls relative to European productivity. 
B) Australians decrease their preferences for goods produced in the European Union (EU)relative to Australian goods. 
C) The EU increases its quotas on Italian wine. 
D) The price level of goods produced in the EU decreases relative to the price level of goods produced in Australia. 
A) Australian productivity falls relative to European productivity. 
B) Australians decrease their preferences for goods produced in the European Union (EU)relative to Australian goods. 
C) The EU increases its quotas on Italian wine. 
D) The price level of goods produced in the EU decreases relative to the price level of goods produced in Australia.

Question 13

What determined the exchange rates among currencies under the gold standard and what caused the gold standard to collapse?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Under the gold standard, the exchange ra

Question 14

If foreign investment in Australian assets increased, we would expect the demand for Australian dollars to ________ and the dollar to ________.

Accepted Answer

A) decrease; depreciate 
B) decrease; appreciate 
C) increase; depreciate 
D) increase; appreciate 
A) decrease; depreciate 
B) decrease; appreciate 
C) increase; depreciate 
D) increase; appreciate

Question 15

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

Accepted Answer

A) True 
 B)False

Question 16

Suppose a tablet computer costs $200 in Australia and 25 000 in Japan. Suppose the exchange rate is $1 = 100 yen. According to purchasing power parity, what should happen to the exchange rate in the long run? What will be the new exchange rate?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

If purchasing power parity holds, then i

Question 17

Which of the following was not a source for growth in international capital markets over the last 20 years?

Accepted Answer

A) European governments eased restrictions on foreign investments in their financial markets. 
B) Improvements in technology improved the flow of timely information. 
C) World economic growth increased the amount of savings to be invested. 
D) The decline in Australian share prices. 
A) European governments eased restrictions on foreign investments in their financial markets. 
B) Improvements in technology improved the flow of timely information. 
C) World economic growth increased the amount of savings to be invested. 
D) The decline in Australian share prices.

Question 18

During the Chinese experience with pegging the yuan to the United States (US)dollar, the yuan was ________. As a result, there was a ________ of US dollars on the market and the Chinese government had to purchase US dollars to maintain the peg.

Accepted Answer

A) overvalued; shortage 
B) undervalued; surplus 
C) overvalued; surplus 
D) undervalued; shortage 
A) overvalued; shortage 
B) undervalued; surplus 
C) overvalued; surplus 
D) undervalued; shortage

Question 19

The United States capital market is larger than all other capital markets combined.

Accepted Answer

A) True 
 B)False

Question 20

The European Union countries that have adopted the euro still conduct independent monetary policies within their countries.

Accepted Answer

A) True 
 B)False

Under the gold standard, a chance discovery of gold such as a gold rush would:

If the rate of inflation in Australia exceeds the rate of inflation in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

One problem with the Bretton Woods System was that:

Which of the following will cause the Australian dollar to depreciate against the Japanese yen?

Refer to Figure 15.3 for the following questions. Figure 15.3 -If the Thai government wants to maintain an exchange rate of 0.04 baht per United States (US)dollar, as illustrated in Figure 15.3, then it must:

What are 'capital controls'? Why might a financial crisis lead to a reconsideration of using capital controls and what problems might result from the reinstatement of capital controls?

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

Most economists have argued that in the 2000s, the Chinese yuan was relative to the United States (US)dollar, causing the Chinese central bank to US dollars to maintain the peg.

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates, except:

Refer to Figure 15.2 for the following questions. Figure 15.2 -Which of the following would cause the change depicted in Figure 15.2? Note that the figure depicts the quantity of euros traded.

What determined the exchange rates among currencies under the gold standard and what caused the gold standard to collapse? _ _

If foreign investment in Australian assets increased, we would expect the demand for Australian dollars to and the dollar to .

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

Suppose a tablet computer costs $200 in Australia and 25 000 in Japan. Suppose the exchange rate is $1 = 100 yen. According to purchasing power parity, what should happen to the exchange rate in the long run? What will be the new exchange rate? _ _

Which of the following was not a source for growth in international capital markets over the last 20 years?

During the Chinese experience with pegging the yuan to the United States (US)dollar, the yuan was . As a result, there was a of US dollars on the market and the Chinese government had to purchase US dollars to maintain the peg.

The United States capital market is larger than all other capital markets combined.

The European Union countries that have adopted the euro still conduct independent monetary policies within their countries.

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

Under the gold standard, a chance discovery of gold such as a gold rush would:

If the rate of inflation in Australia exceeds the rate of inflation in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

One problem with the Bretton Woods System was that:

Which of the following will cause the Australian dollar to depreciate against the Japanese yen?

Refer to Figure 15.3 for the following questions. Figure 15.3 -If the Thai government wants to maintain an exchange rate of 0.04 baht per United States (US)dollar, as illustrated in Figure 15.3, then it must:

What are 'capital controls'? Why might a financial crisis lead to a reconsideration of using capital controls and what problems might result from the reinstatement of capital controls?

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

Most economists have argued that in the 2000s, the Chinese yuan was ________ relative to the United States (US)dollar, causing the Chinese central bank to ________ US dollars to maintain the peg.

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates, except:

Refer to Figure 15.2 for the following questions. Figure 15.2 -Which of the following would cause the change depicted in Figure 15.2? Note that the figure depicts the quantity of euros traded.

If foreign investment in Australian assets increased, we would expect the demand for Australian dollars to ________ and the dollar to ________.

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain, we would expect the Australian dollar to depreciate in value against the British pound.

Which of the following was not a source for growth in international capital markets over the last 20 years?

During the Chinese experience with pegging the yuan to the United States (US)dollar, the yuan was ________. As a result, there was a ________ of US dollars on the market and the Chinese government had to purchase US dollars to maintain the peg.

The United States capital market is larger than all other capital markets combined.

The European Union countries that have adopted the euro still conduct independent monetary policies within their countries.

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

Most economists have argued that in the 2000s, the Chinese yuan was relative to the United States (US)dollar, causing the Chinese central bank to US dollars to maintain the peg.

If foreign investment in Australian assets increased, we would expect the demand for Australian dollars to and the dollar to .

During the Chinese experience with pegging the yuan to the United States (US)dollar, the yuan was . As a result, there was a of US dollars on the market and the Chinese government had to purchase US dollars to maintain the peg.