Question 1

The decline in the value of the dollar from 1985 to 1988 was beneficial to

Accepted Answer

A) American tourists travelling to Europe. 
B) firms importing goods into America. 
C) American exporting businesses. 
D) foreigners holding U.S.government bonds. 
A) American tourists travelling to Europe. 
B) firms importing goods into America. 
C) American exporting businesses. 
D) foreigners holding U.S.government bonds. C

Question 2

An important effect of foreign currency speculators is that

Accepted Answer

A) they have consistently lost money and have left the market. 
B) they have pushed exchange rates to wider extremes than most economists predicted. 
C) they actually limit the volatility of exchange rate movements. 
D) they have had no effect at all on exchange rate volatility. 
A) they have consistently lost money and have left the market. 
B) they have pushed exchange rates to wider extremes than most economists predicted. 
C) they actually limit the volatility of exchange rate movements. 
D) they have had no effect at all on exchange rate volatility. C

Question 3

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

Accepted Answer

A) True 
 B)False  True

Question 4

The exchange rate states the price, in terms of one currency, at which another currency can be bought.

Accepted Answer

A) True 
 B)False

Question 5

Exchange rates vis-a-vis the U.S.dollar have changed little over time.

Accepted Answer

A) True 
 B)False

Question 6

The chief cause of short-run changes in exchange rates is

Accepted Answer

A) the world's political situation. 
B) "hot money" chasing high interest rates. 
C) changes in consumer tastes. 
D) central bank interventions. 
A) the world's political situation. 
B) "hot money" chasing high interest rates. 
C) changes in consumer tastes. 
D) central bank interventions.

Question 7

When exchange rates are set by government decree,

Accepted Answer

A) appreciation is called devaluation. 
B) depreciation is called devaluation. 
C) depreciation is called deflation. 
D) appreciation is called inflation. 
A) appreciation is called devaluation. 
B) depreciation is called devaluation. 
C) depreciation is called deflation. 
D) appreciation is called inflation.

Question 8

In the winter of 2001-2002, Argentina's overvalued currency reflected a(n)

Accepted Answer

A) balance of payments surplus. 
B) balance of payments deficit. 
C) surplus of exports over imports. 
D) excess demand for Thai currency. 
A) balance of payments surplus. 
B) balance of payments deficit. 
C) surplus of exports over imports. 
D) excess demand for Thai currency.

Question 9

-Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries.This concept is known as the

Accepted Answer

A) long-run equilibrium theory. 
B) exchange rate equalization theory. 
C) interest rate parity theory. 
D) purchasing power parity theory. 
A) long-run equilibrium theory. 
B) exchange rate equalization theory. 
C) interest rate parity theory. 
D) purchasing power parity theory.

Question 10

To "cure" their balance of payments deficits without altering exchange rates, Southeast Asian countries in 1997 were forced to create

Accepted Answer

A) more inflation. 
B) recessions. 
C) faster economic growth. 
D) money at an accelerated rate. 
A) more inflation. 
B) recessions. 
C) faster economic growth. 
D) money at an accelerated rate.

Question 11

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 12

The principal result of the rising value of the U.S.dollar in the mid-1990s was the

Accepted Answer

A) lower foreign inflation. 
B) lower U.S.interest rates. 
C) opportunities for currency speculation. 
D) attractive investments in U.S.technology. 
A) lower foreign inflation. 
B) lower U.S.interest rates. 
C) opportunities for currency speculation. 
D) attractive investments in U.S.technology.

Question 13

Under the gold standard, a balance of payments surplus leads to an outflow of gold.

Accepted Answer

A) True 
 B)False

Question 14

On May 12, 2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

Accepted Answer

A) 0.70 
B) 1.43 
C) 1.70 
D) 2.70 
A) 0.70 
B) 1.43 
C) 1.70 
D) 2.70

Question 15

A country with an undervalued currency

Accepted Answer

A) will have a balance of payments deficit. 
B) will accumulate reserves of foreign currencies. 
C) will suffer losses of foreign reserves. 
D) must intervene in the foreign exchange market to buy its own currency. 
A) will have a balance of payments deficit. 
B) will accumulate reserves of foreign currencies. 
C) will suffer losses of foreign reserves. 
D) must intervene in the foreign exchange market to buy its own currency.

Question 16

An economic recession in the United States would shift the demand for foreign currencies outward, that is, increase demand.

Accepted Answer

A) True 
 B)False

Question 17

In general, speculators tend to make a floating exchange rate system more stable.

Accepted Answer

A) True 
 B)False

Question 18

Under the Bretton Woods system of fixed exchange rates,

Accepted Answer

A) devaluations were frequent and small. 
B) devaluations were usually unforeseen. 
C) the IMF ensured that exchange rates were never changed. 
D) speculators could profit from an attack on a weak currency. 
A) devaluations were frequent and small. 
B) devaluations were usually unforeseen. 
C) the IMF ensured that exchange rates were never changed. 
D) speculators could profit from an attack on a weak currency.

Question 19

Explain the role of the International Monetary Fund.Discuss the criticisms leveled against this agency in the wake of economic crises of the 1990s.

Accepted Answer

The International Monetary Fund (IMF) ex

Question 20

The gold standard established fixed exchange rates among all countries.

Accepted Answer

A) True 
 B)False

Exam 36: The International Monetary System: Order or Disorder

The decline in the value of the dollar from 1985 to 1988 was beneficial to

An important effect of foreign currency speculators is that

Balance of payments deficits arise whenever the exchange rate is set at an artificially high level.

The exchange rate states the price, in terms of one currency, at which another currency can be bought.

Exchange rates vis-a-vis the U.S.dollar have changed little over time.

The chief cause of short-run changes in exchange rates is

When exchange rates are set by government decree,

In the winter of 2001-2002, Argentina's overvalued currency reflected a(n)

-Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries.This concept is known as the

To "cure" their balance of payments deficits without altering exchange rates, Southeast Asian countries in 1997 were forced to create

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

The principal result of the rising value of the U.S.dollar in the mid-1990s was the

Under the gold standard, a balance of payments surplus leads to an outflow of gold.

On May 12, 2011 the U.S.dollar was worth 0.70 euros.How many dollars did it take to buy one euro?

A country with an undervalued currency

An economic recession in the United States would shift the demand for foreign currencies outward, that is, increase demand.

In general, speculators tend to make a floating exchange rate system more stable.

Under the Bretton Woods system of fixed exchange rates,

Explain the role of the International Monetary Fund.Discuss the criticisms leveled against this agency in the wake of economic crises of the 1990s.

The gold standard established fixed exchange rates among all countries.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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