Question 1

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Accepted Answer

A) Panama 
B) Ecuador 
C) Zimbabwe 
D) all of the above 
A) Panama 
B) Ecuador 
C) Zimbabwe 
D) all of the above

Question 2

When a government influences the exchange rate of its currency, it is said to be practicing "dirty floating."

Accepted Answer

A) True 
 B)False

Question 3

The gold standard prevented a nation from controlling its domestic economy through monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

Figure 19-3
  
-Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Accepted Answer

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

Question 5

Which of the following statements is correct?

Accepted Answer

A) In the short run, interest rate differentials have the greatest impact on exchange rates. 
B) In the medium run, differences in growth rates of aggregate demand have the greatest impact on exchange rates. 
C) In the long run, price and inflation differentials have the greatest impact on exchange rates. 
D) All of the above are correct. 
A) In the short run, interest rate differentials have the greatest impact on exchange rates. 
B) In the medium run, differences in growth rates of aggregate demand have the greatest impact on exchange rates. 
C) In the long run, price and inflation differentials have the greatest impact on exchange rates. 
D) All of the above are correct.

Question 6

The dollar appreciates against the euro when U.S.demand for European goods increases.

Accepted Answer

A) True 
 B)False

Question 7

If Japanese tourists visit Yellowstone Park, 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 8

The exchange rate

Accepted Answer

A) is the ratio of two countries' GDPs. 
B) is the rate at which one country's money is flowing into another country. 
C) states the price of one currency in terms of another currency. 
D) is closely related to the concept of absolute advantage. 
A) is the ratio of two countries' GDPs. 
B) is the rate at which one country's money is flowing into another country. 
C) states the price of one currency in terms of another currency. 
D) is closely related to the concept of absolute advantage.

Question 9

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

Accepted Answer

A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19 
A) 1.19 
B) 1.61 
C) 1.64 
D) 2.19

Question 10

-Assume that the information in Table 19-1 applies to the cost per ton of coal in 1998.Assume that also over a 10-year period prices rise 100 percent in Great Britain and 200 percent in the United States.According to the purchasing power parity theory, the exchange rate between the dollar and the pound in the year 2008 will be

Accepted Answer

A) one dollar = two pounds. 
B) one pound = two dollars. 
C) one pound = three dollars. 
D) one dollar = three pounds. 
A) one dollar = two pounds. 
B) one pound = two dollars. 
C) one pound = three dollars. 
D) one dollar = three pounds.

Question 11

The current exchange rate system for most currencies is described most accurately as one of

Accepted Answer

A) fixed exchange rates. 
B) freely flexible exchange rates. 
C) gold standard rates. 
D) dirty or managed floating. 
A) fixed exchange rates. 
B) freely flexible exchange rates. 
C) gold standard rates. 
D) dirty or managed floating.

Question 12

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

Accepted Answer

A) goods 
B) energy 
C) assets 
D) automobiles 
A) goods 
B) energy 
C) assets 
D) automobiles

Question 13

A deficit country, like Argentina in 2001, must follow restrictive monetary and fiscal policy in order to maintain a fixed exchange rate.

Accepted Answer

A) True 
 B)False

Question 14

The rate at which one currency is traded for another is called a(n)

Accepted Answer

A) prime rate. 
B) trade rate. 
C) exchange rate. 
D) money rate. 
A) prime rate. 
B) trade rate. 
C) exchange rate. 
D) money rate.

Question 15

One method for a deficit country to correct the situation under a fixed exchange rate system is to

Accepted Answer

A) increase aggregate demand with stimulative monetary policy. 
B) increase aggregate supply with tax cuts. 
C) decrease aggregate demand with restrictive fiscal and monetary policy. 
D) decrease aggregate supply with restrictive fiscal policy. 
A) increase aggregate demand with stimulative monetary policy. 
B) increase aggregate supply with tax cuts. 
C) decrease aggregate demand with restrictive fiscal and monetary policy. 
D) decrease aggregate supply with restrictive fiscal policy.

Question 16

The International Monetary Fund was established to manage the Bretton Woods System.

Accepted Answer

A) True 
 B)False

Question 17

An economic boom in America should increase the

Accepted Answer

A) demand for U.S.dollars. 
B) demand for U.S.goods and services. 
C) demand for foreign currencies. 
D) supply of foreign currencies. 
A) demand for U.S.dollars. 
B) demand for U.S.goods and services. 
C) demand for foreign currencies. 
D) supply of foreign currencies.

Question 18

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

Accepted Answer

A) devaluation. 
B) depreciation. 
C) deflation. 
D) degeneration. 
A) devaluation. 
B) depreciation. 
C) deflation. 
D) degeneration.

Question 19

A fixed exchange rate can be maintained by a government as long as it has sufficient

Accepted Answer

A) supplies of its own currency. 
B) foreign reserves. 
C) gold and other precious metals. 
D) tax revenues. 
A) supplies of its own currency. 
B) foreign reserves. 
C) gold and other precious metals. 
D) tax revenues.

Question 20

Figure 19-2
  
-Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Accepted Answer

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

Exam 36: The International Monetary System: Order or Disorder

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

When a government influences the exchange rate of its currency, it is said to be practicing "dirty floating."

The gold standard prevented a nation from controlling its domestic economy through monetary policy.

Figure 19-3 -Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?

Which of the following statements is correct?

The dollar appreciates against the euro when U.S.demand for European goods increases.

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

The exchange rate

On May 12, 2011, the U.S.dollar was worth 0.61 British pounds.How many dollars did it take to buy one British pound?

The current exchange rate system for most currencies is described most accurately as one of

An area in which the United States has had a sizable surplus in its balance of payments is sales of ____ to foreigners.

A deficit country, like Argentina in 2001, must follow restrictive monetary and fiscal policy in order to maintain a fixed exchange rate.

The rate at which one currency is traded for another is called a(n)

One method for a deficit country to correct the situation under a fixed exchange rate system is to

The International Monetary Fund was established to manage the Bretton Woods System.

An economic boom in America should increase the

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

A fixed exchange rate can be maintained by a government as long as it has sufficient

Figure 19-2 -Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

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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