Question 1

To try and stave off a devaluation of its fixed currency, Argentina was required to

Accepted Answer

A) lower interest rates. 
B) reduce tax levels. 
C) increase their money supplies. 
D) increase interest rates. 
A) lower interest rates. 
B) reduce tax levels. 
C) increase their money supplies. 
D) increase interest rates.

Question 2

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Accepted Answer

A) monies. 
B) goods and services. 
C) stocks and bonds. 
D) physical assets. 
A) monies. 
B) goods and services. 
C) stocks and bonds. 
D) physical assets.

Question 3

Under the gold standard,

Accepted Answer

A) each nation had discretion over its monetary policy. 
B) trade-deficit nations had less control over their money supply than trade-surplus nations. 
C) trade-surplus nations had less control over their money supply than trade-deficit nations. 
D) no nation had control over its domestic monetary policy. 
A) each nation had discretion over its monetary policy. 
B) trade-deficit nations had less control over their money supply than trade-surplus nations. 
C) trade-surplus nations had less control over their money supply than trade-deficit nations. 
D) no nation had control over its domestic monetary policy.

Question 4

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

Accepted Answer

A) inflation for deficit countries and recessions for surplus countries. 
B) no change for surplus countries, tax cuts for deficit countries. 
C) inflation for surplus countries and recessions for deficit countries. 
D) sales of gold for deficit countries and revaluations for surplus countries. 
A) inflation for deficit countries and recessions for surplus countries. 
B) no change for surplus countries, tax cuts for deficit countries. 
C) inflation for surplus countries and recessions for deficit countries. 
D) sales of gold for deficit countries and revaluations for surplus countries.

Question 5

The currency value of Agraria is set by government decree.Which of the following happens when the government alters the exchange rate so that its currency can buy more units of foreign currency?

Accepted Answer

A) Reflation 
B) Devaluation 
C) Appreciation 
D) Revaluation 
A) Reflation 
B) Devaluation 
C) Appreciation 
D) Revaluation

Question 6

A balance of payments deficit is defined as the amount by which

Accepted Answer

A) a country's exports exceed its imports. 
B) a currency must appreciate in order to reach equilibrium. 
C) quantity supplied of a country's currency exceeds quantity demanded. 
D) quantity demanded of a country's currency exceeds quantity supplied. 
A) a country's exports exceed its imports. 
B) a currency must appreciate in order to reach equilibrium. 
C) quantity supplied of a country's currency exceeds quantity demanded. 
D) quantity demanded of a country's currency exceeds quantity supplied.

Question 7

In each of the following scenarios, explain why the euro will appreciate or depreciate in a system of floating exchange rates.
A) A recession in Germany cuts German purchases of American goods.
B) American investors are attracted by prospects for profit on the Frankfurt Stock Exchange.
C) Interest rates on government bonds rise in the U.S.but remain stable in Germany.

Accepted Answer

A) The recession leads to a drop in impo

Question 8

On May 12, 2011, the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

Accepted Answer

A) 0.01 
B) 0.04 
C) 0.28 
D) 0.40 
A) 0.01 
B) 0.04 
C) 0.28 
D) 0.40

Question 9

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

Accepted Answer

A) Ricardo's Law. 
B) comparative advantage. 
C) absolute advantage. 
D) purchasing power parity. 
A) Ricardo's Law. 
B) comparative advantage. 
C) absolute advantage. 
D) purchasing power parity.

Question 10

The Bretton Woods agreements in 1944

Accepted Answer

A) established the International Monetary Fund. 
B) sanctioned world trade on the gold-exchange system. 
C) allowed nations to devalue their currencies under certain conditions. 
D) All of the above are correct. 
A) established the International Monetary Fund. 
B) sanctioned world trade on the gold-exchange system. 
C) allowed nations to devalue their currencies under certain conditions. 
D) All of the above are correct.

Question 11

How did the gold standard help countries rectify the balance of payment problem?
 What were the problems associated with the gold standard?

Accepted Answer

Under gold standard all currencies were

Question 12

In the current international monetary system, what is the role for gold?

Accepted Answer

A) The system is a gold-exchange standard, based on a fixed value for a key currency. 
B) Gold backs each currency, and therefore, the system as a whole. 
C) It serves as the principal reserve asset. 
D) It has no role. 
A) The system is a gold-exchange standard, based on a fixed value for a key currency. 
B) Gold backs each currency, and therefore, the system as a whole. 
C) It serves as the principal reserve asset. 
D) It has no role.

Question 13

In the spring of 2002, Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Accepted Answer

Argentina was maintaining a fixed exchan

Question 14

Appreciation is the term used to describe

Accepted Answer

A) the conversion of one currency into another currency in the free market 
B) a reduction in the official value of a currency. 
C) the upward movement of currencies in a free market. 
D) an increase in the official value of a currency. 
A) the conversion of one currency into another currency in the free market 
B) a reduction in the official value of a currency. 
C) the upward movement of currencies in a free market. 
D) an increase in the official value of a currency.

Question 15

International trade under a floating exchange rate system

Accepted Answer

A) has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B) has suffered from so many problems that the volume of trade has declined significantly. 
C) exposes businesses to unavoidable risks when exchange rates change. 
D) has been subject to wild runs on currencies that were on the verge of devaluation. 
A) has been trouble-free owing to the stabilizing role of speculators in the currency markets. 
B) has suffered from so many problems that the volume of trade has declined significantly. 
C) exposes businesses to unavoidable risks when exchange rates change. 
D) has been subject to wild runs on currencies that were on the verge of devaluation.

Question 16

If a Mexican pension fund decides to purchase U.S.government bonds, 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 17

The currency of the European Union, the euro, was established as part of the Bretton Woods agreements.

Accepted Answer

A) True 
 B)False

Question 18

Exchange rates in what is termed the "medium run"

Accepted Answer

A) will be altered by an economic upswing because consumers buy more goods including imports when disposable income goes up. 
B) will be unaffected by economic changes in personal income or consumption spending. 
C) will appreciate for a country having an economic boom when others are not. 
D) All of the above are correct. 
A) will be altered by an economic upswing because consumers buy more goods including imports when disposable income goes up. 
B) will be unaffected by economic changes in personal income or consumption spending. 
C) will appreciate for a country having an economic boom when others are not. 
D) All of the above are correct.

Question 19

Adhering to a strict gold standard necessarily means that

Accepted Answer

A) each nation can vary its money supply in response to domestic economic conditions. 
B) no country will experience inflation. 
C) no country will have control over its monetary policy. 
D) no country will experience deflation. 
A) each nation can vary its money supply in response to domestic economic conditions. 
B) no country will experience inflation. 
C) no country will have control over its monetary policy. 
D) no country will experience deflation.

Question 20

Adhering to a strict fixed exchange rate system means that

Accepted Answer

A) no country will experience inflation or recession. 
B) each nation improves control over its money supply. 
C) each nation loses some control of its monetary policy and its domestic economy. 
D) each nation improves control over its fiscal policy and aggregate demand. 
A) no country will experience inflation or recession. 
B) each nation improves control over its money supply. 
C) each nation loses some control of its monetary policy and its domestic economy. 
D) each nation improves control over its fiscal policy and aggregate demand.

Exam 36: The International Monetary System: Order or Disorder

To try and stave off a devaluation of its fixed currency, Argentina was required to

One major reason why the purchasing power parity theory does not always predict exchange rates accurately is that the theory focuses on trade in

Under the gold standard,

The appropriate "medicine" for correcting payments imbalances under a fixed exchange rate system is

The currency value of Agraria is set by government decree.Which of the following happens when the government alters the exchange rate so that its currency can buy more units of foreign currency?

A balance of payments deficit is defined as the amount by which

On May 12, 2011, the U.S.dollar was worth 28 Russian rubles.How many U.S.dollars did it take to buy one Russian ruble?

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

The Bretton Woods agreements in 1944

How did the gold standard help countries rectify the balance of payment problem? What were the problems associated with the gold standard?

In the current international monetary system, what is the role for gold?

In the spring of 2002, Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S.dollar.Explain the origin of this crisis and the painful remedies that Argentina has had to endure.

Appreciation is the term used to describe

International trade under a floating exchange rate system

If a Mexican pension fund decides to purchase U.S.government bonds, what is the effect in the foreign exchange market?

The currency of the European Union, the euro, was established as part of the Bretton Woods agreements.

Exchange rates in what is termed the "medium run"

Adhering to a strict gold standard necessarily means that

Adhering to a strict fixed exchange rate system means that

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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