Question 1

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for 60 percent of all purchases.

Accepted Answer

A) True 
 B)False

Question 2

The Bretton Woods exchange rate system was a

Accepted Answer

A) floating exchange rate system. 
B) managed float exchange rate system. 
C) fixed exchange rate system. 
D) flexible exchange rate system. 
E) a currency union system. 
A) floating exchange rate system. 
B) managed float exchange rate system. 
C) fixed exchange rate system. 
D) flexible exchange rate system. 
E) a currency union system.

Question 3

During what period of time did Canada 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 
E) from 1980 until 1993 
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 
E) from 1980 until 1993

Question 4

If two countries adhere to a gold standard, the exchange rate for their currencies is fixed.

Accepted Answer

A) True 
 B)False

Question 5

You are a Canadian citizen who works in Toronto and owns a winter home in Phoenix, Arizona.When you spend the winters in Phoenix, an increase in the value of the Canadian dollar relative to the U.S.dollar should

Accepted Answer

A) help you as each Canadian dollar of your salary is now worth more U.S.dollars. 
B) hurt you as each Canadian dollar of your salary is now worth less U.S.dollars. 
C) hurt you as it is now more expensive to live in Phoenix since the Canadian dollar appreciation. 
D) help you as it is now less expensive to live in Canada since the Canadian dollar appreciation. 
E) hurt you as each Canadian dollar of your salary is unchanged in value in U.S.dollars. 
A) help you as each Canadian dollar of your salary is now worth more U.S.dollars. 
B) hurt you as each Canadian dollar of your salary is now worth less U.S.dollars. 
C) hurt you as it is now more expensive to live in Phoenix since the Canadian dollar appreciation. 
D) help you as it is now less expensive to live in Canada since the Canadian dollar appreciation. 
E) hurt you as each Canadian dollar of your salary is unchanged in value in U.S.dollars.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which aspects of globalization help to increase growth in the world economy?

Accepted Answer

Economic growth relies on the channel th

Question 8

Members of the European Union decided to adopt a single currency by what year?

Accepted Answer

A) 2008 
B) 2005 
C) 1999 
D) 1992 
E) 1957 
A) 2008 
B) 2005 
C) 1999 
D) 1992 
E) 1957

Question 9

If the price of chicken wings in Notrealia was 12 francs per kilogram, but they cost 1 lira per kilogram in Madeupistan, the long run equilibrium exchange rate would be

Accepted Answer

A) 12 francs per lira. 
B)  0.83 francs per lira 
C) 11 francs per lira. 
D)  0.91 francs per lira 
E)  12 Francs per lira. 
A) 12 francs per lira. 
B)  0.83 francs per lira 
C) 11 francs per lira. 
D)  0.91 francs per lira 
E)  12 Francs per lira.

Question 10

The three most important international financial centres today are

Accepted Answer

A) New York, Los Angeles, and London. 
B) London, Tokyo, and Beijing. 
C) San Francisco, Paris, and Mexico City. 
D) Tokyo, London, and New York. 
E) New York, London, and Toronto. 
A) New York, Los Angeles, and London. 
B) London, Tokyo, and Beijing. 
C) San Francisco, Paris, and Mexico City. 
D) Tokyo, London, and New York. 
E) New York, London, and Toronto.

Question 11

Airbus is a passenger aircraft manufacturer based in Europe but, like the rest of the global aerospace industry, conducts its business in U.S.dollars.Suppose Airbus sells an aircraft to Air France, and Air France pays Airbus in U.S.dollars.If the value of the U.S.dollar falls relative to the euro, Airbus's profits in Europe will ________ because it will receive ________ when it converts the dollars it earns from the sale into euros.

Accepted Answer

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

Question 12

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 13

Between 1995 and 2013, foreign purchases of Canadian corporate stocks and bonds

Accepted Answer

A) grew. 
B) fell. 
C) grew at a faster pace than foreign investment in Canadian government bonds. 
D) grew at a faster pace than Canadian investment in foreign corporate bonds. 
E) grew and then fell. 
A) grew. 
B) fell. 
C) grew at a faster pace than foreign investment in Canadian government bonds. 
D) grew at a faster pace than Canadian investment in foreign corporate bonds. 
E) grew and then fell.

Question 14

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 Canada was $4.07.In Switzerland, the average price of a Big Mac was 6.50 Swiss francs.If the exchange rate between the Canadian dollar and the Swiss franc was 0.93 Swiss francs per Canadian dollar, how would purchasing power parity predict the exchange rate would change in the long run? Support your answer graphically.

Accepted Answer

The Canadian dollar in this example is "

Question 15

Figure 15.1   Alt text for Figure 15.1: In figure 15.1, a graph illustrates the quantity of euros traded against the exchange rate.
Long description for Figure 15.1: The x-axis is labelled, quantity of euros traded per day.The y-axis is labelled, exchange rate, Canadian dollar against euro, with values 1.00 and 1.05 marked.An upward sloping supply curve intersects the downward sloping demand curves D1 and D2.The intersection point of S and D1, A, corresponds to the point Canadian dollar 1.05 of the y-axis, and is displayed by a dotted line.The intersection point of S and D2, B, corresponds to the point 1.00 of the y-axis, also displayed by a dotted line.A down arrow is shown between the 2 dotted lines.A bold left arrow points from D1 to D2.Two dotted vertical lines from the intersection points also meet the x-axis.
-Refer to Figure 15.1.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) Canadian productivity rises relative to European productivity. 
B) Europeans decrease their preferences for Canadian goods relative to European goods. 
C) The European Union increases its quotas on French wine. 
D) an increase in the price level of Canadian goods relative to European goods 
E) the signing of a free trade agreement between the eurozone and Canada 
A) Canadian productivity rises relative to European productivity. 
B) Europeans decrease their preferences for Canadian goods relative to European goods. 
C) The European Union increases its quotas on French wine. 
D) an increase in the price level of Canadian goods relative to European goods 
E) the signing of a free trade agreement between the eurozone and Canada

Question 16

Which of the following is a reason Greece has had a slow recovery from the financial crisis of 2007-2009?

Accepted Answer

A) Currency union meant Greece was unable to exploit a falling exchange rate to boost exports. 
B) Austerity programs required Greece to maintain an artificially high exchange rate. 
C) Greece's recovery plan was based on poorly targeted increases in government spending. 
D) The expansionary fiscal policy of tax cuts was ineffective. 
E) Greece used contractionary fiscal policy to guarantee stable incomes for retired people. 
A) Currency union meant Greece was unable to exploit a falling exchange rate to boost exports. 
B) Austerity programs required Greece to maintain an artificially high exchange rate. 
C) Greece's recovery plan was based on poorly targeted increases in government spending. 
D) The expansionary fiscal policy of tax cuts was ineffective. 
E) Greece used contractionary fiscal policy to guarantee stable incomes for retired people.

Question 17

Selling a country's currency in anticipation of buying it back later at a lower price is known as

Accepted Answer

A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation. 
E) monetary stabilization. 
A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation. 
E) monetary stabilization.

Question 18

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

Question 19

Figure 15.5   Alt text for Figure 15.5: In figure 15.5, a graph illustrates the quantity of yuan traded against the exchange rate.
Long description for Figure 15.5: The x-axis is labelled, quantity of yuan traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the yuan.Supply curve S, is a straight line which slopes up from the bottom left corner to the top right corner.Demand curve D, is a straight line which slopes down from the top left corner to the bottom right corner.The curves intersect at point A, (600, 0.13).Point A, and unmarked points (800, 0.11), (500, $0.14), (700, $0.14), and (400, 0.11)are all connected to their corresponding values on the x and y-axes with dotted lines.
-Refer to Figure 15.5.The Chinese government pegs the yuan to the U.S.dollar, at one of the specified exchange rates on the graph, such that it undervalues its currency.Using the figure above, this would generate

Accepted Answer

A) a shortage of yuan equal to 400 million. 
B) a shortage of yuan equal to 200 million. 
C) a surplus of yuan equal to 200 million. 
D) a surplus of yuan equal to 400 million. 
E) a surplus of yuan equal to 300 million. 
A) a shortage of yuan equal to 400 million. 
B) a shortage of yuan equal to 200 million. 
C) a surplus of yuan equal to 200 million. 
D) a surplus of yuan equal to 400 million. 
E) a surplus of yuan equal to 300 million.

Question 20

If inflation in Russia is higher than it is in Canada

Accepted Answer

A) the purchasing power of the ruble in buying Russian goods will rise relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the ruble will rise in the long run. 
D) the real exchange rate will change but the nominal exchange rate will not. 
E) Both A and C are correct. 
A) the purchasing power of the ruble in buying Russian goods will rise relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the ruble will rise in the long run. 
D) the real exchange rate will change but the nominal exchange rate will not. 
E) Both A and C are correct.

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for 60 percent of all purchases.

The Bretton Woods exchange rate system was a

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

If two countries adhere to a gold standard, the exchange rate for their currencies is fixed.

You are a Canadian citizen who works in Toronto and owns a winter home in Phoenix, Arizona.When you spend the winters in Phoenix, an increase in the value of the Canadian dollar relative to the U.S.dollar should

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

Which aspects of globalization help to increase growth in the world economy?

Members of the European Union decided to adopt a single currency by what year?

If the price of chicken wings in Notrealia was 12 francs per kilogram, but they cost 1 lira per kilogram in Madeupistan, the long run equilibrium exchange rate would be

The three most important international financial centres today are

Between 1995 and 2013, foreign purchases of Canadian corporate stocks and bonds

Which of the following is a reason Greece has had a slow recovery from the financial crisis of 2007-2009?

Selling a country's currency in anticipation of buying it back later at a lower price is known as

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

If inflation in Russia is higher than it is in Canada

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

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 Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

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Exam 15: The International Financial System

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for 60 percent of all purchases.

The Bretton Woods exchange rate system was a

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

If two countries adhere to a gold standard, the exchange rate for their currencies is fixed.

You are a Canadian citizen who works in Toronto and owns a winter home in Phoenix, Arizona.When you spend the winters in Phoenix, an increase in the value of the Canadian dollar relative to the U.S.dollar should

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

Which aspects of globalization help to increase growth in the world economy?

Members of the European Union decided to adopt a single currency by what year?

If the price of chicken wings in Notrealia was 12 francs per kilogram, but they cost 1 lira per kilogram in Madeupistan, the long run equilibrium exchange rate would be

The three most important international financial centres today are

Between 1995 and 2013, foreign purchases of Canadian corporate stocks and bonds

Which of the following is a reason Greece has had a slow recovery from the financial crisis of 2007-2009?

Selling a country's currency in anticipation of buying it back later at a lower price is known as

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

If inflation in Russia is higher than it is in Canada

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

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 Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

Filters