Question 1

Figure 19-1
  
-Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

Accepted Answer

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

Question 2

If U.S.securities pay 6 percent interest, and if Great Britain's securities pay 8 percent interest, then

Accepted Answer

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

Question 3

When a country decreases the official value of its currency, for example, Russia changes the value of the ruble from $.16 to $.04, it is said to have ____ its currency.

Accepted Answer

A) floated 
B) revalued 
C) devalued 
D) depreciated 
A) floated 
B) revalued 
C) devalued 
D) depreciated

Question 4

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

Accepted Answer

A) True 
 B)False

Question 5

There are at least three exchange rates between every pair of national currencies.

Accepted Answer

A) True 
 B)False

Question 6

On May 12, 2011, it cost U.S.$1.64 to buy one British pound.How many British pounds would U.S.$1 buy?

Accepted Answer

A) 0.56 
B) 0.61 
C) 1.64 
D) 2.64 
A) 0.56 
B) 0.61 
C) 1.64 
D) 2.64

Question 7

When one currency appreciates, another currency must depreciate.

Accepted Answer

A) True 
 B)False

Question 8

The demand for euros would come from

Accepted Answer

A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct. 
A) American exports to Europe. 
B) European demand for U.S.government bonds. 
C) American demand for European real estate. 
D) All of the above are correct.

Question 9

The principal goal of the Treaty of Maastricht was the creation of a

Accepted Answer

A) fixed exchange rate system. 
B) floating exchange rate system. 
C) gold-exchange system. 
D) monetary union. 
A) fixed exchange rate system. 
B) floating exchange rate system. 
C) gold-exchange system. 
D) monetary union.

Question 10

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

Accepted Answer

A) balance of payments deficit. 
B) balance of payments surplus. 
C) increase in the rate of inflation. 
D) increase in the unemployment rate. 
A) balance of payments deficit. 
B) balance of payments surplus. 
C) increase in the rate of inflation. 
D) increase in the unemployment rate.

Question 11

If a currency increases in value as a result of government decree rather than market forces, the 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

In 2001, the Argentine peso was overvalued relative to the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 13

If the dollar depreciates relative to other currencies, which of the following is true?

Accepted Answer

A) It takes more foreign currency to buy a dollar. 
B) It takes more dollars to buy a foreign currency. 
C) U.S.exports will decrease. 
D) Foreign purchases of U.S.goods will decrease. 
A) It takes more foreign currency to buy a dollar. 
B) It takes more dollars to buy a foreign currency. 
C) U.S.exports will decrease. 
D) Foreign purchases of U.S.goods will decrease.

Question 14

Figure 19-2
  
-Of the graphs in Figure 19-2, which one shows the effect of an increase in interest rates in Japan?

Accepted Answer

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

Question 15

If Japanese tourists visit Yellowstone Park, what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen. 
A) It will increase demand for Japanese yen. 
B) It will decrease demand for Japanese yen. 
C) It will increase supply of Japanese yen. 
D) It will decrease supply of Japanese yen.

Question 16

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico, what is the exchange rate between the dollar and the peso (assuming PPP holds)?

Accepted Answer

A) $1 = 2.79 pesos 
B) $1 = 7.90 pesos 
C) $1 = 9.30 pesos 
D) $1 = 27.90 pesos 
A) $1 = 2.79 pesos 
B) $1 = 7.90 pesos 
C) $1 = 9.30 pesos 
D) $1 = 27.90 pesos

Question 17

The purchasing power parity theory of exchange rate determination maintains that

Accepted Answer

A) the exchange rate between two nations' currencies is determined by the percent of gold that backs each nation's currency. 
B) the exchange rate between two nations' currencies adjusts to reflect differences in the price levels in the two nations. 
C) in the short run, exchange rates are determined by central bank intervention in the currency markets. 
D) the exchange rate between two currencies is determined by the debt that each nation owes to the World Bank. 
A) the exchange rate between two nations' currencies is determined by the percent of gold that backs each nation's currency. 
B) the exchange rate between two nations' currencies adjusts to reflect differences in the price levels in the two nations. 
C) in the short run, exchange rates are determined by central bank intervention in the currency markets. 
D) the exchange rate between two currencies is determined by the debt that each nation owes to the World Bank.

Question 18

Fixed exchange rates are fixed by

Accepted Answer

A) international speculators who manipulate the world's currencies. 
B) international demand and supply. 
C) national governments. 
D) All of the above are correct. 
A) international speculators who manipulate the world's currencies. 
B) international demand and supply. 
C) national governments. 
D) All of the above are correct.

Question 19

In the long run, the chief determinant of exchange rate changes is a change in

Accepted Answer

A) interest rates. 
B) real GDP. 
C) the price of gold. 
D) price levels. 
A) interest rates. 
B) real GDP. 
C) the price of gold. 
D) price levels.

Question 20

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit.What is most likely to happen?

Accepted Answer

A) a gradual increase in the value of its currency 
B) a gradual decrease in the value of its currency 
C) a "run" on its currency and a sudden appreciation 
D) a "run" on its currency and a sudden devaluation 
A) a gradual increase in the value of its currency 
B) a gradual decrease in the value of its currency 
C) a "run" on its currency and a sudden appreciation 
D) a "run" on its currency and a sudden devaluation

Exam 36: The International Monetary System: Order or Disorder

Figure 19-1 -Of the graphs in Figure 19-1, which one shows that an expansion of the Japanese economy leads to a depreciation of the yen?

If U.S.securities pay 6 percent interest, and if Great Britain's securities pay 8 percent interest, then

When a country decreases the official value of its currency, for example, Russia changes the value of the ruble from $.16 to $.04, it is said to have ____ its currency.

The Big Mac index uses prices of a common item to predict long-run changes in exchange rates.

There are at least three exchange rates between every pair of national currencies.

On May 12, 2011, it cost U.S.$1.64 to buy one British pound.How many British pounds would U.S.$1 buy?

When one currency appreciates, another currency must depreciate.

The demand for euros would come from

The principal goal of the Treaty of Maastricht was the creation of a

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

If a currency increases in value as a result of government decree rather than market forces, the process is known as

In 2001, the Argentine peso was overvalued relative to the U.S.dollar.

If the dollar depreciates relative to other currencies, which of the following is true?

Figure 19-2 -Of the graphs in Figure 19-2, which one shows the effect of an increase in interest rates in Japan?

If Japanese tourists visit Yellowstone Park, what is the effect in the foreign exchange market?

If Wisconsin cheddar cheese sells for $3.00 per pound in the United States and for 27.90 pesos in Mexico, what is the exchange rate between the dollar and the peso (assuming PPP holds)?

The purchasing power parity theory of exchange rate determination maintains that

Fixed exchange rates are fixed by

In the long run, the chief determinant of exchange rate changes is a change in

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit.What is most likely to happen?

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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