Question 1

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Accepted Answer

Under the gold standard,the exchange rat

Question 2

Briefly describe how the Bretton Woods system operated.

Accepted Answer

Under the Bretton Woods System of fixed

Question 3

Table 30-1
   
Source: "The Big Mac Index," Economist, July 28, 2011.
-According to the theory of purchasing power parity,if the inflation rate in the United States is greater than the inflation rate in Canada,explain what should happen to the exchange rate between the U.S.dollar and the Canadian dollar?

Accepted Answer

The value of the U.S.dollar sh

Question 4

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 5

If,at the current exchange rate between the dollar and the South African rand of 6.92 rand per dollar,the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

Accepted Answer

A)  The demand for the dollar will fall, while the supply of the rand will rise. 
B)  The demand for the dollar will rise, while the supply of the rand will fall. 
C)  The supply of the dollar will rise, while the demand for the rand will rise. 
D)  The supply of the dollar will rise, while the demand for the rand will fall. 
A)  The demand for the dollar will fall, while the supply of the rand will rise. 
B)  The demand for the dollar will rise, while the supply of the rand will fall. 
C)  The supply of the dollar will rise, while the demand for the rand will rise. 
D)  The supply of the dollar will rise, while the demand for the rand will fall.

Question 6

Figure 30-7
  
-If speculators believe a currency is undervalued,their trades in international exchange markets will

Accepted Answer

A)  increase the surplus of the currency at the existing fixed exchange rate. 
B)  decrease the surplus of the currency at the existing fixed exchange rate. 
C)  decrease the shortage of the currency at the existing fixed exchange rate. 
D)  increase the shortage of the currency at the existing fixed exchange rate. 
A)  increase the surplus of the currency at the existing fixed exchange rate. 
B)  decrease the surplus of the currency at the existing fixed exchange rate. 
C)  decrease the shortage of the currency at the existing fixed exchange rate. 
D)  increase the shortage of the currency at the existing fixed exchange rate.

Question 7

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes is more difficult to maintain the existing exchange rate.

Accepted Answer

A) True 
 B)False

Question 8

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to ________ in Thailand and exchange ________ .This change in investment by foreigners is termed capital flight.

Accepted Answer

A)  purchase more investments; dollars for baht to purchase these investments 
B)  sell off their investments; the baht they received for dollars 
C)  sell off their investments; the dollars they received for baht 
D)  purchase more investments; baht for dollars to purchase these investments 
A)  purchase more investments; dollars for baht to purchase these investments 
B)  sell off their investments; the baht they received for dollars 
C)  sell off their investments; the dollars they received for baht 
D)  purchase more investments; baht for dollars to purchase these investments

Question 9

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

Accepted Answer

A) True 
 B)False

Question 10

What does it mean when one currency is "pegged" against another currency?

Accepted Answer

One currency is pegged against

Question 11

Figure 30-5
  
-Refer to Figure 30-5. Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which overvalues the yuan.Using the figure above,the equilibrium exchange rate would be ________ and Chinese exports to the United States would ________ in price.

Accepted Answer

A)  $0.11/yuan; decrease 
B)  $0.14/yuan; increase 
C)  $0.13/yuan; increase 
D)  $0.13/yuan; decrease 
A)  $0.11/yuan; decrease 
B)  $0.14/yuan; increase 
C)  $0.13/yuan; increase 
D)  $0.13/yuan; decrease

Question 12

In the 1960s,the deutsche mark was overvalued,creating a chronic surplus of deutsche marks in world currency markets.

Accepted Answer

A) True 
 B)False

Question 13

Under a floating exchange rate,the exchange rate

Accepted Answer

A)  will change whenever the price of gold changes. 
B)  is controlled by central bank intervention. 
C)  is determined by the interaction of supply of the currency and demand for the currency. 
D)  is pegged against the euro. 
A)  will change whenever the price of gold changes. 
B)  is controlled by central bank intervention. 
C)  is determined by the interaction of supply of the currency and demand for the currency. 
D)  is pegged against the euro.

Question 14

By 2011,________ members of the European Union were using the euro as their currency.

Accepted Answer

A)  12 
B)  17 
C)  27 
D)  57 
A)  12 
B)  17 
C)  27 
D)  57

Question 15

Figure 30-7
  
-Refer to Figure 30-7.The graph above,depicts supply and demand for U.S.dollars during a trading day. At a fixed exchange rate of 0.30 pounds per dollar,the dollar is ________ versus the pound. A ________ of the dollar would correct the fundamental disequilibrium that exists in this market.

Accepted Answer

A)  undervalued; devaluation 
B)  undervalued; revaluation 
C)  overvalued; revaluation 
D)  overvalued; devaluation 
A)  undervalued; devaluation 
B)  undervalued; revaluation 
C)  overvalued; revaluation 
D)  overvalued; devaluation

Question 16

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

Accepted Answer

In a fixed exchange rate system,the valu

Question 17

The United States abandoned the ________ because the government wanted to rapidly expand the money supply in response to the Great Depression.

Accepted Answer

A)  gold standard 
B)  Bretton Woods system 
C)  managed float 
D)  floating exchange rate system 
A)  gold standard 
B)  Bretton Woods system 
C)  managed float 
D)  floating exchange rate system

Question 18

If a country sets a pegged exchange rate that is below the equilibrium exchange rate,how can the country maintain the peg?

Accepted Answer

A)  by purchasing surplus domestic currency at the pegged rate 
B)  by selling surplus domestic currency at the pegged rate 
C)  by purchasing surplus domestic currency at the equilibrium exchange rate 
D)  by decreasing the pegged exchange rate 
A)  by purchasing surplus domestic currency at the pegged rate 
B)  by selling surplus domestic currency at the pegged rate 
C)  by purchasing surplus domestic currency at the equilibrium exchange rate 
D)  by decreasing the pegged exchange rate

Question 19

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

Accepted Answer

A)  only by supply and demand 
B)  by its issuing government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by its issuing government, with occasional readjustments in value 
A)  only by supply and demand 
B)  by its issuing government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by its issuing government, with occasional readjustments in value

Question 20

The Bretton Woods system of fixed exchange rates was set up in

Accepted Answer

A)  the 1890s. 
B)  the 1920s. 
C)  the 1940s. 
D)  the 1970s. 
A)  the 1890s. 
B)  the 1920s. 
C)  the 1940s. 
D)  the 1970s.

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Briefly describe how the Bretton Woods system operated.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

If,at the current exchange rate between the dollar and the South African rand of 6.92 rand per dollar,the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

Figure 30-7 -If speculators believe a currency is undervalued,their trades in international exchange markets will

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes is more difficult to maintain the existing exchange rate.

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to in Thailand and exchange .This change in investment by foreigners is termed capital flight.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

What does it mean when one currency is "pegged" against another currency?

Figure 30-5 -Refer to Figure 30-5. Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which overvalues the yuan.Using the figure above,the equilibrium exchange rate would be and Chinese exports to the United States would in price.

In the 1960s,the deutsche mark was overvalued,creating a chronic surplus of deutsche marks in world currency markets.

Under a floating exchange rate,the exchange rate

By 2011,________ members of the European Union were using the euro as their currency.

Figure 30-7 -Refer to Figure 30-7.The graph above,depicts supply and demand for U.S.dollars during a trading day. At a fixed exchange rate of 0.30 pounds per dollar,the dollar is versus the pound. A of the dollar would correct the fundamental disequilibrium that exists in this market.

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

The United States abandoned the ________ because the government wanted to rapidly expand the money supply in response to the Great Depression.

If a country sets a pegged exchange rate that is below the equilibrium exchange rate,how can the country maintain the peg?

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

The Bretton Woods system of fixed exchange rates was set up in

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

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Briefly describe how the Bretton Woods system operated.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

If,at the current exchange rate between the dollar and the South African rand of 6.92 rand per dollar,the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

Figure 30-7 -If speculators believe a currency is undervalued,their trades in international exchange markets will

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes is more difficult to maintain the existing exchange rate.

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to ________ in Thailand and exchange ________ .This change in investment by foreigners is termed capital flight.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

What does it mean when one currency is "pegged" against another currency?

Figure 30-5 -Refer to Figure 30-5. Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which overvalues the yuan.Using the figure above,the equilibrium exchange rate would be ________ and Chinese exports to the United States would ________ in price.

In the 1960s,the deutsche mark was overvalued,creating a chronic surplus of deutsche marks in world currency markets.

Under a floating exchange rate,the exchange rate

By 2011,________ members of the European Union were using the euro as their currency.

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

The United States abandoned the ________ because the government wanted to rapidly expand the money supply in response to the Great Depression.

If a country sets a pegged exchange rate that is below the equilibrium exchange rate,how can the country maintain the peg?

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

The Bretton Woods system of fixed exchange rates was set up in

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

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to in Thailand and exchange .This change in investment by foreigners is termed capital flight.

Figure 30-5 -Refer to Figure 30-5. Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which overvalues the yuan.Using the figure above,the equilibrium exchange rate would be and Chinese exports to the United States would in price.