Question 1

Under a system of flexible exchange rates,what will correct a deficit in a country's balance of payments?

Accepted Answer

A) depreciation in the nation's currency 
B) an increase in the nation's inflation rate 
C) a decline in the nation's domestic price level 
D) appreciation in the nation's currency 
A) depreciation in the nation's currency 
B) an increase in the nation's inflation rate 
C) a decline in the nation's domestic price level 
D) appreciation in the nation's currency

Question 2

Which of the following would supply Canadian dollars to the foreign exchange market?

Accepted Answer

A) the spending of British tourists in Canada 
B) the purchase of Florida oranges by a Canadian consumer 
C) the sale of a Canadian corporation to a Saudi Arabian investor 
D) the sale of a Canadian automobile to a Mexican consumer 
A) the spending of British tourists in Canada 
B) the purchase of Florida oranges by a Canadian consumer 
C) the sale of a Canadian corporation to a Saudi Arabian investor 
D) the sale of a Canadian automobile to a Mexican consumer

Question 3

Can the Canadian dollar and the U.K.pound both appreciate relative to each other?

Accepted Answer

A) Yes, provided the central banks agree to permit it. 
B) No, the citizens of the countries would not agree to it. 
C) No, if one currency appreciates relative to another, the other depreciates. 
D) Yes, both countries can gain in this manner. 
A) Yes, provided the central banks agree to permit it. 
B) No, the citizens of the countries would not agree to it. 
C) No, if one currency appreciates relative to another, the other depreciates. 
D) Yes, both countries can gain in this manner.

Question 4

The exchange rate is the price of one currency in terms of a second currency.

Accepted Answer

A) True 
 B)False

Question 5

Other things being constant,which of the following will most likely cause the dollar to appreciate on the exchange rate market?

Accepted Answer

A) expansionary domestic monetary policy 
B) reduced inflation abroad 
C) higher interest rates abroad 
D) higher domestic interest rates 
A) expansionary domestic monetary policy 
B) reduced inflation abroad 
C) higher interest rates abroad 
D) higher domestic interest rates

Question 6

Under a fixed exchange rate system,when the currency is pegged below the equilibrium value,what is a country likely to face?

Accepted Answer

A) an increase in real GDP 
B) a reduction in international reserves 
C) a falling interest rate 
D) a reduction in its inflation rate 
A) an increase in real GDP 
B) a reduction in international reserves 
C) a falling interest rate 
D) a reduction in its inflation rate

Question 7

Suppose Canada imposed a high tariff on a major imported item.What effect would this have?

Accepted Answer

A) It would tend to cause the dollar to appreciate in value. 
B) It would tend to decrease the Canadian merchandise trade surplus. 
C) It would tend to increase Canadian exports of goods. 
D) It would tend to cause the dollar to depreciate in value. 
A) It would tend to cause the dollar to appreciate in value. 
B) It would tend to decrease the Canadian merchandise trade surplus. 
C) It would tend to increase Canadian exports of goods. 
D) It would tend to cause the dollar to depreciate in value.

Question 8

If a nation wants to maintain a constant exchange rate at a time when supply and demand are causing the exchange rate of its currency to appreciate,what action might the nation take?

Accepted Answer

A) reduce taxes and run a budget deficit to push domestic interest rates up 
B) decrease its tariffs and/or eliminate restrictive quotas 
C) shift to a more contractionary monetary policy 
D) restrict the export of oil and other natural resources 
A) reduce taxes and run a budget deficit to push domestic interest rates up 
B) decrease its tariffs and/or eliminate restrictive quotas 
C) shift to a more contractionary monetary policy 
D) restrict the export of oil and other natural resources

Question 9

What is the economic effect of a student group from your university touring the United Kingdom?

Accepted Answer

A) It causes the English pound to depreciate. 
B) It creates a demand for English pounds and a supply of dollars in the foreign currency market. 
C) It causes the Canadian dollar to appreciate. 
D) It creates a demand for dollars and a supply of English pounds in the foreign currency market. 
A) It causes the English pound to depreciate. 
B) It creates a demand for English pounds and a supply of dollars in the foreign currency market. 
C) It causes the Canadian dollar to appreciate. 
D) It creates a demand for dollars and a supply of English pounds in the foreign currency market.

Question 10

On March 16ᵗʰ,2012,the Canadian dollar was worth 0.6386 U.K.pounds.How many Canadian dollars did it take to buy one U.K.pound?

Accepted Answer

A) 0.2614 
B) 0.63866 
C) 1.5659 
D) 1.6386 
A) 0.2614 
B) 0.63866 
C) 1.5659 
D) 1.6386

Question 11

Which of the following would be recorded as a credit in the Canadian balance of payments accounts?

Accepted Answer

A) the purchase of a Government of Canada bond by a French investment company 
B) the import of Honda trucks by a Canadian automobile dealer 
C) European travel expenditures of a Canadian college student 
D) the purchase of a German business by a Canadian investor 
A) the purchase of a Government of Canada bond by a French investment company 
B) the import of Honda trucks by a Canadian automobile dealer 
C) European travel expenditures of a Canadian college student 
D) the purchase of a German business by a Canadian investor

Question 12

Under a flexible exchange rate system,what will a contractionary monetary policy lead to?

Accepted Answer

A) an appreciation of the domestic currency 
B) a decrease in foreign reserves 
C) an increase in foreign reserves 
D) a depreciation of the domestic currency 
A) an appreciation of the domestic currency 
B) a decrease in foreign reserves 
C) an increase in foreign reserves 
D) a depreciation of the domestic currency

Question 13

Suppose the exchange rate between Japanese yen and Canadian dollars is originally 130 yen to the dollar.If it then changes to 150 yen to the dollar,what will happen to the imports of Japanese goods into Canada?

Accepted Answer

A) They will change in an indeterminate direction. 
B) They will fall. 
C) They will rise. 
D) They will stay the same. 
A) They will change in an indeterminate direction. 
B) They will fall. 
C) They will rise. 
D) They will stay the same.

Question 14

Whenever there is a surplus in the current account,what will the capital account be?

Accepted Answer

A) It will be the same amount as the surplus. 
B) It will be negative. 
C) It will be positive. 
D) It will be zero. 
A) It will be the same amount as the surplus. 
B) It will be negative. 
C) It will be positive. 
D) It will be zero.

Under a system of flexible exchange rates,what will correct a deficit in a country's balance of payments?

Which of the following would supply Canadian dollars to the foreign exchange market?

Can the Canadian dollar and the U.K.pound both appreciate relative to each other?

The exchange rate is the price of one currency in terms of a second currency.

Other things being constant,which of the following will most likely cause the dollar to appreciate on the exchange rate market?

Under a fixed exchange rate system,when the currency is pegged below the equilibrium value,what is a country likely to face?

Suppose Canada imposed a high tariff on a major imported item.What effect would this have?

If a nation wants to maintain a constant exchange rate at a time when supply and demand are causing the exchange rate of its currency to appreciate,what action might the nation take?

What is the economic effect of a student group from your university touring the United Kingdom?

On March 16ᵗʰ,2012,the Canadian dollar was worth 0.6386 U.K.pounds.How many Canadian dollars did it take to buy one U.K.pound?

Which of the following would be recorded as a credit in the Canadian balance of payments accounts?

Under a flexible exchange rate system,what will a contractionary monetary policy lead to?

Suppose the exchange rate between Japanese yen and Canadian dollars is originally 130 yen to the dollar.If it then changes to 150 yen to the dollar,what will happen to the imports of Japanese goods into Canada?

Whenever there is a surplus in the current account,what will the capital account be?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

Filters

Exam 15: International Finance

Under a system of flexible exchange rates,what will correct a deficit in a country's balance of payments?

Which of the following would supply Canadian dollars to the foreign exchange market?

Can the Canadian dollar and the U.K.pound both appreciate relative to each other?

The exchange rate is the price of one currency in terms of a second currency.

Other things being constant,which of the following will most likely cause the dollar to appreciate on the exchange rate market?

Under a fixed exchange rate system,when the currency is pegged below the equilibrium value,what is a country likely to face?

Suppose Canada imposed a high tariff on a major imported item.What effect would this have?

If a nation wants to maintain a constant exchange rate at a time when supply and demand are causing the exchange rate of its currency to appreciate,what action might the nation take?

What is the economic effect of a student group from your university touring the United Kingdom?

On March 16ᵗʰ,2012,the Canadian dollar was worth 0.6386 U.K.pounds.How many Canadian dollars did it take to buy one U.K.pound?

Which of the following would be recorded as a credit in the Canadian balance of payments accounts?

Under a flexible exchange rate system,what will a contractionary monetary policy lead to?

Suppose the exchange rate between Japanese yen and Canadian dollars is originally 130 yen to the dollar.If it then changes to 150 yen to the dollar,what will happen to the imports of Japanese goods into Canada?

Whenever there is a surplus in the current account,what will the capital account be?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

Filters