Question 1

U.S.currency continues to be backed by the gold standard to this day.

Accepted Answer

A) True 
 B)False

Question 2

The Latvian currency,the lat,is pegged to the euro at a rate of 0.71 lats to the euro.At the pegged exchange rate,how many euros would be exchanged for one lat?

Accepted Answer

A)  0.29 
B)  0.71 
C)  1.41 
D)  1.71 
A)  0.29 
B)  0.71 
C)  1.41 
D)  1.71

Question 3

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

Accepted Answer

A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s. 
A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s.

Question 4

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

Accepted Answer

A)  nominal interest rates across countries. 
B)  real GDP across countries. 
C)  corporate profits across countries. 
D)  the relative purchasing power of currencies across countries. 
A)  nominal interest rates across countries. 
B)  real GDP across countries. 
C)  corporate profits across countries. 
D)  the relative purchasing power of currencies across countries.

Question 5

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

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 6

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

Accepted Answer

A)  will decrease in value relative the U.S. dollar. 
B)  will increase in value relative to the U.S. dollar. 
C)  will nominally appreciate against the dollar, but its real value relative to the dollar will remain unchanged. 
D)  will nominally depreciate against the dollar, but its real value relative to the dollar will remain unchanged. 
A)  will decrease in value relative the U.S. dollar. 
B)  will increase in value relative to the U.S. dollar. 
C)  will nominally appreciate against the dollar, but its real value relative to the dollar will remain unchanged. 
D)  will nominally depreciate against the dollar, but its real value relative to the dollar will remain unchanged.

Question 7

Under the Bretton Woods exchange rate system,________ could sell their dollars to the American government in exchange for gold.

Accepted Answer

A)  foreign central banks 
B)  American citizens 
C)  foreign citizens 
D)  all of the above 
A)  foreign central banks 
B)  American citizens 
C)  foreign citizens 
D)  all of the above

Question 8

Figure 30-6
  
-Refer to Figure 30-6.According to the graph,is there a surplus or shortage of Saudi Arabian riyal in exchange for U.S.dollars? To maintain the pegged exchange rate,will the Saudi central bank need to buy riyal in exchange for dollars or sell riyal in exchange for dollars? How many riyal will the Saudi central bank need to buy or sell?

Accepted Answer

There is a surplus of riyal in exchange

Question 9

Figure 30-4
  
-Refer to Figure 30-4. The equilibrium exchange rate is originally at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D₂.If the European Central Bank abandons the peg,the equilibrium exchange rate would be

Accepted Answer

A)  $1.00/euro. 
B)  $1.25/euro. 
C)  $1.50/euro. 
D)  $1.75/euro. 
A)  $1.00/euro. 
B)  $1.25/euro. 
C)  $1.50/euro. 
D)  $1.75/euro.

Question 10

The "Big Mac Theory of Exchange Rates" tests the accuracy of 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 Switzerland,the average price of a Big Mac at that time was 6.50 Swiss francs.If the exchange rate between the dollar and the Swiss franc was 0.93 Swiss francs per dollar,explain how it would be profitable to buy Big Macs in the United States instead of in Switzerland.

Accepted Answer

If a Big Mac costs 6.50 Swiss francs in

Question 11

South Korea suffered a destabilizing speculation in the late 1990s. This had the effect of decreasing the ________ the won. The South Korean government tried to counteract this by ________ interest rates which should have increased the ________ the won.

Accepted Answer

A)  demand for; raising; demand for 
B)  demand for; lowering; demand for 
C)  supply of; lowering; supply of 
D)  supply of; raising; supply of 
A)  demand for; raising; demand for 
B)  demand for; lowering; demand for 
C)  supply of; lowering; supply of 
D)  supply of; raising; supply of

Question 12

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Accepted Answer

A) True 
 B)False

U.S.currency continues to be backed by the gold standard to this day.

The Latvian currency,the lat,is pegged to the euro at a rate of 0.71 lats to the euro.At the pegged exchange rate,how many euros would be exchanged for one lat?

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

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

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

Under the Bretton Woods exchange rate system,________ could sell their dollars to the American government in exchange for gold.

South Korea suffered a destabilizing speculation in the late 1990s. This had the effect of decreasing the the won. The South Korean government tried to counteract this by interest rates which should have increased the the won.

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

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

U.S.currency continues to be backed by the gold standard to this day.

The Latvian currency,the lat,is pegged to the euro at a rate of 0.71 lats to the euro.At the pegged exchange rate,how many euros would be exchanged for one lat?

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

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

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

Under the Bretton Woods exchange rate system,________ could sell their dollars to the American government in exchange for gold.

South Korea suffered a destabilizing speculation in the late 1990s. This had the effect of decreasing the ________ the won. The South Korean government tried to counteract this by ________ interest rates which should have increased the ________ the won.

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

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

South Korea suffered a destabilizing speculation in the late 1990s. This had the effect of decreasing the the won. The South Korean government tried to counteract this by interest rates which should have increased the the won.