Question 1

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

Accepted Answer

A)  the gold standard 
B)  a managed float exchange rate system 
C)  the Bretton Woods System 
D)  a fiat system 
A)  the gold standard 
B)  a managed float exchange rate system 
C)  the Bretton Woods System 
D)  a fiat system

Question 2

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

Accepted Answer

Under the gold standard,exchange rates w

Question 3

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

Accepted Answer

A)  foreign direct investment. 
B)  capital flight. 
C)  capital inflow. 
D)  stabilizing capitalization. 
A)  foreign direct investment. 
B)  capital flight. 
C)  capital inflow. 
D)  stabilizing capitalization.

Question 4

Why might a country raise interest rates in the face of an exchange rate crisis?

Accepted Answer

If the value of a country's currency is

Question 5

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 6

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,what is the dollar cost of a Big Mac in Brazil?

Accepted Answer

A)  $0.89 
B)  $2.25 
C)  $4.50 
D)  $8.00 
A)  $0.89 
B)  $2.25 
C)  $4.50 
D)  $8.00

Question 7

Figure 30-7
  
-Refer to Figure 30-7.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

Accepted Answer

A)  The Bank of England would have to buy 0.7 million pounds per day with dollars. 
B)  There is a shortage of pounds equal to 0.7 million. 
C)  The Bank of England would have to sell 0.7 million pounds per day in exchange for dollars. 
D)  The par exchange rate is below the equilibrium rate, causing a shortage of domestic currency. 
A)  The Bank of England would have to buy 0.7 million pounds per day with dollars. 
B)  There is a shortage of pounds equal to 0.7 million. 
C)  The Bank of England would have to sell 0.7 million pounds per day in exchange for dollars. 
D)  The par exchange rate is below the equilibrium rate, causing a shortage of domestic currency.

Question 8

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory.In July 2011,the Economist reported that the average price of a Big Mac in the United States was $4.07.In Mexico,the average price of a Big Mac at that time was 32 pesos.If the exchange rate between the dollar and the peso was 13.60 pesos per dollar,explain how it would be profitable to buy Big Macs in Mexico instead of in the United States.

Accepted Answer

If a Big Mac costs $4.07 in the United S

Question 9

The gold in Fort Knox backs all U.S.currency.

Accepted Answer

A) True 
 B)False

Question 10

Before 1980,U.S.investors rarely invested in foreign capital markets.

Accepted Answer

A) True 
 B)False

Question 11

During what period of time did the United States most consistently adhere to the gold standard?

Accepted Answer

A)  from the nineteenth century until the 1930s 
B)  from the eighteenth century until the nineteenth century 
C)  from 1914 until 1929 
D)  from 1944 until 1980 
A)  from the nineteenth century until the 1930s 
B)  from the eighteenth century until the nineteenth century 
C)  from 1914 until 1929 
D)  from 1944 until 1980

Question 12

A currency pegged at a value below the market equilibrium exchange rate is

Accepted Answer

A)  overvalued. 
B)  undervalued. 
C)  achieving purchasing power parity. 
D)  None of the above are correct. 
A)  overvalued. 
B)  undervalued. 
C)  achieving purchasing power parity. 
D)  None of the above are correct.

Question 13

The current exchange rate system has which of the following characteristics?

Accepted Answer

A)  The United States allows the dollar to float against other major currencies. 
B)  All developing countries allow their currencies to float against the dollar and other major currencies. 
C)  The countries of the European Union have adopted the gold standard. 
D)  Several developing countries in Asia have adopted the Bretton Woods system. 
E)  The current global foreign exchange system is a fixed system. 
A)  The United States allows the dollar to float against other major currencies. 
B)  All developing countries allow their currencies to float against the dollar and other major currencies. 
C)  The countries of the European Union have adopted the gold standard. 
D)  Several developing countries in Asia have adopted the Bretton Woods system. 
E)  The current global foreign exchange system is a fixed system.

Question 14

If interest rates in the United States rise,

Accepted Answer

A)  the value of the dollar will fall as foreign investors sell their U.S. investments. 
B)  the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments. 
C)  the value of the dollar will fall as foreign investors increase their holdings of U.S. investments. 
D)  the value of the dollar will rise as foreign investors sell their U.S. investments. 
A)  the value of the dollar will fall as foreign investors sell their U.S. investments. 
B)  the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments. 
C)  the value of the dollar will fall as foreign investors increase their holdings of U.S. investments. 
D)  the value of the dollar will rise as foreign investors sell their U.S. investments.

Question 15

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

Accepted Answer

A) True 
 B)False

Question 16

Figure 30-4
  
-Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

Accepted Answer

A)  there is a shortage of pounds equal to 600 million. 
B)  there is a surplus of pounds equal to 400 million. 
C)  there is a shortage of pounds equal to 400 million. 
D)  there is a surplus of pounds equal to 600 million. 
E)  there is a shortage of pounds equal to 200 million. 
A)  there is a shortage of pounds equal to 600 million. 
B)  there is a surplus of pounds equal to 400 million. 
C)  there is a shortage of pounds equal to 400 million. 
D)  there is a surplus of pounds equal to 600 million. 
E)  there is a shortage of pounds equal to 200 million.

Question 17

The exchange rate system agreed to in 1944 in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce is referred to as

Accepted Answer

A)  the gold standard. 
B)  the Bretton Woods System. 
C)  a floating currency standard. 
D)  a flexible exchange rate system. 
A)  the gold standard. 
B)  the Bretton Woods System. 
C)  a floating currency standard. 
D)  a flexible exchange rate system.

Question 18

A depreciation of a country's currency always lowers the domestic firm's profits.

Accepted Answer

A) True 
 B)False

Question 19

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Accepted Answer

A) True 
 B)False

Question 20

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Accepted Answer

A) True 
 B)False

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

Why might a country raise interest rates in the face of an exchange rate crisis?

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,what is the dollar cost of a Big Mac in Brazil?

Figure 30-7 -Refer to Figure 30-7.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

The gold in Fort Knox backs all U.S.currency.

Before 1980,U.S.investors rarely invested in foreign capital markets.

During what period of time did the United States most consistently adhere to the gold standard?

A currency pegged at a value below the market equilibrium exchange rate is

The current exchange rate system has which of the following characteristics?

If interest rates in the United States rise,

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

Figure 30-4 -Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

The exchange rate system agreed to in 1944 in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce is referred to as

A depreciation of a country's currency always lowers the domestic firm's profits.

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

Exam 19: The International Financial System

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

Why might a country raise interest rates in the face of an exchange rate crisis?

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,what is the dollar cost of a Big Mac in Brazil?

Figure 30-7 -Refer to Figure 30-7.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

The gold in Fort Knox backs all U.S.currency.

Before 1980,U.S.investors rarely invested in foreign capital markets.

During what period of time did the United States most consistently adhere to the gold standard?

A currency pegged at a value below the market equilibrium exchange rate is

The current exchange rate system has which of the following characteristics?

If interest rates in the United States rise,

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

Figure 30-4 -Refer to Figure 30-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

The exchange rate system agreed to in 1944 in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce is referred to as

A depreciation of a country's currency always lowers the domestic firm's profits.

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .