Question 1

Which of the following is not a true statement about the Bretton Woods system?

Accepted Answer

A) The value of the dollar was fixed in terms of gold. 
B) Other currencies fixed values in terms of the dollar. 
C) The U.S. was able to increase its money supply easily. 
D) Trade deficits were eliminated. 
A) The value of the dollar was fixed in terms of gold. 
B) Other currencies fixed values in terms of the dollar. 
C) The U.S. was able to increase its money supply easily. 
D) Trade deficits were eliminated. D

Question 2

If nominal exchange rates do not change,an increase in the U.S.price level relative to the foreign price level represents a real appreciation of the dollar.However,if nominal exchange rates can change,is an increase in U.S.inflation relative to foreign inflation likely to cause appreciation of the dollar in the short run?

Accepted Answer

No.An increase in U.S.inflation relative to foreign inflation is likely to reduce the demand for dollars relative to other currencies.This will cause the nominal exchange rate to increase,a depreciation of the dollar relative to other currencies,and thus the effect on the real exchange rate is unclear.

Question 3

Which currency is most commonly traded?

Accepted Answer

The U.S.dollar

Question 4

How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?

Accepted Answer

Currency t

Question 5

Soft pegs that are periodically adjusted are called

Accepted Answer

A) crawling pegs. 
B) hard pegs. 
C) snakes. 
D) managed floats. 
A) crawling pegs. 
B) hard pegs. 
C) snakes. 
D) managed floats.

Question 6

The nominal interest rate in the U.S.is 5% and the nominal interest rate in Canada is 3%.The spot value of the U.S.dollar is 1 ($/Canadian dollar)and the forward rate is 1.2 ($/Canadian dollar).Which of the following is NOT true?

Accepted Answer

A) The dollar is likely to appreciate in spot markets. 
B) The interest parity condition does not hold. 
C) The dollar is trading at a forward discount. 
D) Money will flow into the Canada. 
A) The dollar is likely to appreciate in spot markets. 
B) The interest parity condition does not hold. 
C) The dollar is trading at a forward discount. 
D) Money will flow into the Canada.

Question 7

The spot rate is the rate at which foreign currencies will be exchanged a specified number of days in the future.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following institutions is the most important participant in foreign currency markets?

Accepted Answer

A) A retail customer 
B) A commercial bank 
C) A foreign exchange broker 
D) A central bank 
A) A retail customer 
B) A commercial bank 
C) A foreign exchange broker 
D) A central bank

Question 9

Suppose that the nominal exchange rate between the U.S.dollar and the Canadian dollar is 0.75 U.S.dollars per Canadian dollar.If Canada's rate of inflation is 0 percent and the U.S.rate is 10 percent,then the real exchange rate for the U.S.dollar will

Accepted Answer

A) appreciate by about 9 percent. 
B) appreciate by 10 percent. 
C) depreciate by about 9 percent. 
D) depreciate by 10 percent. 
A) appreciate by about 9 percent. 
B) appreciate by 10 percent. 
C) depreciate by about 9 percent. 
D) depreciate by 10 percent.

Question 10

Draw the demand for and supply of the U.S.dollar in each of the following cases.Diagram and explain in words the effect of each of the following events in the short run.Make sure to properly label the axes.In each case,assume the two countries under consideration are important trading partners.
(a) There is an increase in the real interest rates in the United States relative to Japan.
(b) Investment returns in the United States decrease relative to expected returns in Japan.
(c) Inflation in Japan fell relative to the inflation rate in the United States.
(d) The Japanese expect the value of the U.S.dollar to decline.
(e) The Federal Reserve raised interest rates fearing the inflationary pressures of a booming U.S.economy.

Accepted Answer

(a) Both holders of yen and holders of U

Question 11

What are the differences and similarities between a depreciation and devaluation of a currency?

Accepted Answer

A depreciation of a currency takes place

Question 12

The most important participants in foreign exchange markets are ________.

Accepted Answer

The answer of The most important participants in foreign exchange...

Question 13

Explain the three rules that countries must follow to maintain a gold standard.

Accepted Answer

First,they must fix the value of their c

Question 14

How does rapid economic growth at home affect foreign exchange markets?

Accepted Answer

It increases home country dema

Question 15

If a currency has a fixed exchange rate,it is not subject to the forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 16

What is the largest center for currency trading?

Accepted Answer

The answer of What is the largest center for currency...

Question 17

Economists usually favor a return to the gold standard.

Accepted Answer

A) True 
 B)False

Question 18

All else equal,if Canada raises its interest rates,

Accepted Answer

A) the dollar depreciates. 
B) the U.S. demand for Canadian dollars decreases. 
C) the Canadian supply of Canadian dollars increases. 
D) the Canadian dollar will depreciate. 
A) the dollar depreciates. 
B) the U.S. demand for Canadian dollars decreases. 
C) the Canadian supply of Canadian dollars increases. 
D) the Canadian dollar will depreciate.

Question 19

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Accepted Answer

A) speculating. 
B) demonstrating purchasing power parity. 
C) engaging in interest rate arbitrage. 
D) responding to fluctuations in the business cycle. 
A) speculating. 
B) demonstrating purchasing power parity. 
C) engaging in interest rate arbitrage. 
D) responding to fluctuations in the business cycle.

Question 20

Why might a group of countries wish to have a common currency? Explain four reasons.

Accepted Answer

First,a single currency eliminates the n

Which of the following is not a true statement about the Bretton Woods system?

Which currency is most commonly traded?

How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?

Soft pegs that are periodically adjusted are called

The nominal interest rate in the U.S.is 5% and the nominal interest rate in Canada is 3%.The spot value of the U.S.dollar is 1 ($/Canadian dollar)and the forward rate is 1.2 ($/Canadian dollar).Which of the following is NOT true?

The spot rate is the rate at which foreign currencies will be exchanged a specified number of days in the future.

Which of the following institutions is the most important participant in foreign currency markets?

Suppose that the nominal exchange rate between the U.S.dollar and the Canadian dollar is 0.75 U.S.dollars per Canadian dollar.If Canada's rate of inflation is 0 percent and the U.S.rate is 10 percent,then the real exchange rate for the U.S.dollar will

What are the differences and similarities between a depreciation and devaluation of a currency?

The most important participants in foreign exchange markets are ________.

Explain the three rules that countries must follow to maintain a gold standard.

How does rapid economic growth at home affect foreign exchange markets?

If a currency has a fixed exchange rate,it is not subject to the forces of supply and demand.

What is the largest center for currency trading?

Economists usually favor a return to the gold standard.

All else equal,if Canada raises its interest rates,

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Why might a group of countries wish to have a common currency? Explain four reasons.

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

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Exam 10: Exchange Rates and Exchange Rate Systems

Which of the following is not a true statement about the Bretton Woods system?

Which currency is most commonly traded?

How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?

Soft pegs that are periodically adjusted are called

The nominal interest rate in the U.S.is 5% and the nominal interest rate in Canada is 3%.The spot value of the U.S.dollar is 1 ($/Canadian dollar)and the forward rate is 1.2 ($/Canadian dollar).Which of the following is NOT true?

The spot rate is the rate at which foreign currencies will be exchanged a specified number of days in the future.

Which of the following institutions is the most important participant in foreign currency markets?

Suppose that the nominal exchange rate between the U.S.dollar and the Canadian dollar is 0.75 U.S.dollars per Canadian dollar.If Canada's rate of inflation is 0 percent and the U.S.rate is 10 percent,then the real exchange rate for the U.S.dollar will

What are the differences and similarities between a depreciation and devaluation of a currency?

The most important participants in foreign exchange markets are ________.

Explain the three rules that countries must follow to maintain a gold standard.

How does rapid economic growth at home affect foreign exchange markets?

If a currency has a fixed exchange rate,it is not subject to the forces of supply and demand.

What is the largest center for currency trading?

Economists usually favor a return to the gold standard.

All else equal,if Canada raises its interest rates,

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Why might a group of countries wish to have a common currency? Explain four reasons.

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

Filters