Question 1

If U.S.securities pay 7 percent interest, and if Great Britain's securities pay 5 percent interest, then

Accepted Answer

A) pounds depreciate relative to dollars. 
B) pounds appreciate relative to dollars. 
C) Great Britain's imports will rise. 
D) Great Britain's exports will fall. 
A) pounds depreciate relative to dollars. 
B) pounds appreciate relative to dollars. 
C) Great Britain's imports will rise. 
D) Great Britain's exports will fall.

Question 2

A country devaluing its currency reduces the official value of its currency.

Accepted Answer

A) True 
 B)False

Question 3

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

Accepted Answer

A) its money supply. 
B) its interest rates. 
C) its level of real GDP. 
D) aggregate demand. 
A) its money supply. 
B) its interest rates. 
C) its level of real GDP. 
D) aggregate demand.

Question 4

Purchasing power parity explains how exchange rates cause price differences between two countries.

Accepted Answer

A) True 
 B)False

Question 5

Is it possible for a currency to appreciate relative to one currency, and depreciate relative to another?

Accepted Answer

A) No, a currency rises or falls against all currencies. 
B) No, this could happen only under the gold standard. 
C) Yes, but only if all governments agree on the new rates. 
D) Yes, this is possible in a world of floating rates. 
A) No, a currency rises or falls against all currencies. 
B) No, this could happen only under the gold standard. 
C) Yes, but only if all governments agree on the new rates. 
D) Yes, this is possible in a world of floating rates.

Question 6

If the exchange rate of the Swiss franc is 1.61 francs per dollar, then the Swiss franc is worth about

Accepted Answer

A) 15 cents. 
B) 57 cents 
C) 62 cents. 
D) $15.70. 
A) 15 cents. 
B) 57 cents 
C) 62 cents. 
D) $15.70.

Question 7

From the beginning of 2007, the value of the U.S.dollar

Accepted Answer

A) dropped sharply against major currencies. 
B) increased mildly against major currencies. 
C) remained stable relative to major currencies. 
D) fluctuated with no major trend against major currencies. 
A) dropped sharply against major currencies. 
B) increased mildly against major currencies. 
C) remained stable relative to major currencies. 
D) fluctuated with no major trend against major currencies.

Question 8

Fixed exchange rates are determined in free markets by the forces of demand and supply.

Accepted Answer

A) True 
 B)False

Question 9

Because the United States has had substantial deficits in goods and services, it has also necessarily had surpluses in

Accepted Answer

A) the federal budget. 
B) the sales of assets. 
C) the sales of military goods. 
D) its gold supplies. 
A) the federal budget. 
B) the sales of assets. 
C) the sales of military goods. 
D) its gold supplies.

Question 10

If the dollar appreciates, it can be said that

Accepted Answer

A) foreigners respect the United States more. 
B) it increases in value within the United States. 
C) other currencies depreciate. 
D) it takes more dollars to buy foreign currencies. 
A) foreigners respect the United States more. 
B) it increases in value within the United States. 
C) other currencies depreciate. 
D) it takes more dollars to buy foreign currencies.

Question 11

If a currency increases in value in response to market forces, this process is known as

Accepted Answer

A) reflation. 
B) revaluation. 
C) appreciation. 
D) value-added. 
A) reflation. 
B) revaluation. 
C) appreciation. 
D) value-added.

Question 12

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls, U.S.

Accepted Answer

A) tariffs will automatically rise. 
B) exports will rise. 
C) imports will fall. 
D) exports will fall. 
A) tariffs will automatically rise. 
B) exports will rise. 
C) imports will fall. 
D) exports will fall.

Question 13

Discuss the problems associated with the Bretton Woods system.

Accepted Answer

Under the Bretton Woods system, changes

Question 14

Domestic monetary policy is essentially useless under

Accepted Answer

A) a floating exchange rate system. 
B) a fixed exchange rate system. 
C) the gold standard. 
D) conditions of balance of payments surpluses. 
A) a floating exchange rate system. 
B) a fixed exchange rate system. 
C) the gold standard. 
D) conditions of balance of payments surpluses.

Question 15

Figure 19-1
  
-Of the graphs in Figure 19-1, which one shows the effects of an economic boom in the United States and a depreciation of the dollar?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 16

If the quantity supplied of euro were greater than the quantity demanded, then the price of the

Accepted Answer

A) euro would rise. 
B) euro would fall. 
C) dollar would fall. 
D) euro would be in equilibrium. 
A) euro would rise. 
B) euro would fall. 
C) dollar would fall. 
D) euro would be in equilibrium.

Question 17

If the United States experiences an economic boom, compared to other countries, how will this affect the 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 supply of dollars. 
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. 
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 supply of dollars. 
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.

Question 18

On May 12, 2011, it cost U.S.$1.44 to buy one euro.How many euros would U.S.$1 buy?

Accepted Answer

A) 0.69 
B) 1.44 
C) 1.69 
D) 2.44 
A) 0.69 
B) 1.44 
C) 1.69 
D) 2.44

Question 19

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

Accepted Answer

A) True 
 B)False

Question 20

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

Accepted Answer

A) fixed exchange rates. 
B) expansionary monetary policies. 
C) contractionary monetary policies. 
D) state ownership of industry. 
A) fixed exchange rates. 
B) expansionary monetary policies. 
C) contractionary monetary policies. 
D) state ownership of industry.

Exam 36: The International Monetary System: Order or Disorder

If U.S.securities pay 7 percent interest, and if Great Britain's securities pay 5 percent interest, then

A country devaluing its currency reduces the official value of its currency.

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

Purchasing power parity explains how exchange rates cause price differences between two countries.

Is it possible for a currency to appreciate relative to one currency, and depreciate relative to another?

If the exchange rate of the Swiss franc is 1.61 francs per dollar, then the Swiss franc is worth about

From the beginning of 2007, the value of the U.S.dollar

Fixed exchange rates are determined in free markets by the forces of demand and supply.

Because the United States has had substantial deficits in goods and services, it has also necessarily had surpluses in

If the dollar appreciates, it can be said that

If a currency increases in value in response to market forces, this process is known as

A recession in the United States will tend to cause recessions in other countries because as U.S.GDP falls, U.S.

Discuss the problems associated with the Bretton Woods system.

Domestic monetary policy is essentially useless under

Figure 19-1 -Of the graphs in Figure 19-1, which one shows the effects of an economic boom in the United States and a depreciation of the dollar?

If the quantity supplied of euro were greater than the quantity demanded, then the price of the

If the United States experiences an economic boom, compared to other countries, how will this affect the value of the U.S.dollar?

On May 12, 2011, it cost U.S.$1.44 to buy one euro.How many euros would U.S.$1 buy?

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

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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