Question 1

Under the gold standard, the government must have enough gold to back up any

Accepted Answer

A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank. 
E) additional government spending. 
A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank. 
E) additional government spending.

Question 2

Destabilizing speculation refers to

Accepted Answer

A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity. 
E) any purchase of foreign currency assets by foreign investors. 
A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity. 
E) any purchase of foreign currency assets by foreign investors.

Question 3

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

Accepted Answer

A) True 
 B)False

Question 4

The three most important financial centres in the world today are New York, London, and Tokyo.

Accepted Answer

A) True 
 B)False

Question 5

What are capital controls? Why might a financial crisis lead to a reconsideration of using capital controls, and what problems might result from the reinstatement of capital controls?

Accepted Answer

Capital controls refer to limits on the

Question 6

Why did Canada abandon the gold standard in the 1930s?

Accepted Answer

A) The government wanted to rapidly expand the money supply in response to the Great Depression. 
B) The government wanted to move away from a floating exchange rate system to a fixed exchange rate system. 
C) The Treasury Department in the United States found it was cheaper to print paper money instead of gold coins. 
D) New sources of gold were discovered, so the price of gold plummeted, dramatically reducing the value of the dollar. 
E) Other countries stopped accepting Canadian money as payment for their goods and services. 
A) The government wanted to rapidly expand the money supply in response to the Great Depression. 
B) The government wanted to move away from a floating exchange rate system to a fixed exchange rate system. 
C) The Treasury Department in the United States found it was cheaper to print paper money instead of gold coins. 
D) New sources of gold were discovered, so the price of gold plummeted, dramatically reducing the value of the dollar. 
E) Other countries stopped accepting Canadian money as payment for their goods and services.

Question 7

You decide to work in Japan for the next 10 years, accumulate some savings, then move back to Canada and convert your savings from yen to dollars.At the time of your move, economists predict that consumers in Canada have reignited their love of Japanese products, especially hybrid cars, and expect that this strong preference for Japanese products will continue for the next decade.How should this influence your decision to work and save in Japan?

Accepted Answer

A) You should be discouraged as the growing Canadian preference for Japanese goods should increase the value of the yen to the dollar and decrease the value of your savings when converted to dollars. 
B) You should be discouraged as the growing Canadian preference for Japanese goods should decrease the value of the yen to the dollar and decrease the value of your savings when converted to dollars. 
C) You should be encouraged as the growing Canadian preference for Japanese goods should decrease the value of the yen to the dollar and raise the value of your savings when converted to dollars. 
D) You should be encouraged as the growing Canadian preference for Japanese goods should increase the value of the yen to the dollar and raise the value of your savings when converted to dollars. 
A) You should be discouraged as the growing Canadian preference for Japanese goods should increase the value of the yen to the dollar and decrease the value of your savings when converted to dollars. 
B) You should be discouraged as the growing Canadian preference for Japanese goods should decrease the value of the yen to the dollar and decrease the value of your savings when converted to dollars. 
C) You should be encouraged as the growing Canadian preference for Japanese goods should decrease the value of the yen to the dollar and raise the value of your savings when converted to dollars. 
D) You should be encouraged as the growing Canadian preference for Japanese goods should increase the value of the yen to the dollar and raise the value of your savings when converted to dollars.

Question 8

Although the pegged exchange rate between the yuan and the U.S.dollar has undervalued the yuan, China has been reluctant to abandon the peg for fear that abandoning the peg would

Accepted Answer

A) increase exports and increase the current account deficit. 
B) reduce capital inflows. 
C) reduce exports and reduce economic growth. 
D) increase Chinese holdings of dollars. 
E) reduce the number of US dollars available to Chinese savers. 
A) increase exports and increase the current account deficit. 
B) reduce capital inflows. 
C) reduce exports and reduce economic growth. 
D) increase Chinese holdings of dollars. 
E) reduce the number of US dollars available to Chinese savers.

Question 9

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate?

Accepted Answer

A) Pegging allows the country more flexibility in conducting monetary policy. 
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports. 
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency. 
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning. 
E) Pegging often grants a central bank additional credibility. 
A) Pegging allows the country more flexibility in conducting monetary policy. 
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports. 
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency. 
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning. 
E) Pegging often grants a central bank additional credibility.

Question 10

How will the exchange rate (foreign currency per dollar)respond to an increase in the relative rate of productivity growth in Canada in the long run?

Accepted Answer

A) Exchange rates will rise. 
B) Exchange rates will fall. 
C) Exchange rates will be unaffected by changes in the relative rate of productivity growth in Canada, both in the short run and in the long run. 
D) The exchange rate will be affected in the short run, but not in the long run. 
A) Exchange rates will rise. 
B) Exchange rates will fall. 
C) Exchange rates will be unaffected by changes in the relative rate of productivity growth in Canada, both in the short run and in the long run. 
D) The exchange rate will be affected in the short run, but not in the long run.

Question 11

Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered.If the economy is at full employment, what should this discovery do?

Accepted Answer

A) It should raise the money supply but have no impact on the price level. 
B) It should raise the money supply and cause inflation. 
C) It should raise the money supply and cause disinflation. 
D) It should lower the money supply and cause deflation. 
E) It should not change the money supply. 
A) It should raise the money supply but have no impact on the price level. 
B) It should raise the money supply and cause inflation. 
C) It should raise the money supply and cause disinflation. 
D) It should lower the money supply and cause deflation. 
E) It should not change the money supply.

Question 12

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

Accepted Answer

A) will decrease in value relative the Canadian dollar. 
B) will increase in value relative to the Canadian dollar. 
C) will first increase then decrease in value relative the Canadian dollar. 
D) will first decrease then increase in value relative to the Canadian dollar. 
E) will be unaffected by the change in productivity. 
A) will decrease in value relative the Canadian dollar. 
B) will increase in value relative to the Canadian dollar. 
C) will first increase then decrease in value relative the Canadian dollar. 
D) will first decrease then increase in value relative to the Canadian dollar. 
E) will be unaffected by the change in productivity.

Question 13

What is the connection between the gold held at the Canadian Mint in Ottawa and the Canadian money supply?

Accepted Answer

Although under the gold standard all Can

Question 14

Which of the following would decrease the value of the Canadian dollar in the long run?

Accepted Answer

A) a decrease in inflation in Canada relative to other countries 
B) a decrease in the demand for Canadian goods relative to goods from other countries 
C) an increase in U.S.tariffs on foreign goods 
D) a decrease in the supply of Canadian dollars on the foreign exchange market 
E) an increase in Canadian interest rates 
A) a decrease in inflation in Canada relative to other countries 
B) a decrease in the demand for Canadian goods relative to goods from other countries 
C) an increase in U.S.tariffs on foreign goods 
D) a decrease in the supply of Canadian dollars on the foreign exchange market 
E) an increase in Canadian interest rates

Question 15

Which of the following statements about capital markets is true?

Accepted Answer

A) The U.S.capital market is currently larger than all other capital markets combined. 
B) At one time, the U.S.capital market was larger than all other capital markets combined, but that is no longer the case. 
C) There are currently large capital markets in Europe, but none in Asia. 
D) The largest capital markets in the world today are in East Asia and Latin America. 
E) The Chinese capital market is became the largest in the world in 2015. 
A) The U.S.capital market is currently larger than all other capital markets combined. 
B) At one time, the U.S.capital market was larger than all other capital markets combined, but that is no longer the case. 
C) There are currently large capital markets in Europe, but none in Asia. 
D) The largest capital markets in the world today are in East Asia and Latin America. 
E) The Chinese capital market is became the largest in the world in 2015.

Question 16

Shares of stock and long-term debt, including corporate and government bonds and bank loans, are bought and sold on

Accepted Answer

A) the stock market. 
B) capital markets. 
C) foreign exchange markets. 
D) commodity markets. 
E) the market for loanable funds. 
A) the stock market. 
B) capital markets. 
C) foreign exchange markets. 
D) commodity markets. 
E) the market for loanable funds.

Question 17

Although the pegged exchange rate between the yuan and the U.S.dollar has ________ the yuan, China has been reluctant to abandon the peg for fear that doing so would ________.

Accepted Answer

A) undervalued; reduce exports 
B) undervalued; reduce imports 
C) overvalued; increase imports 
D) overvalued; reduce exports 
E) depreciated; reduce exports 
A) undervalued; reduce exports 
B) undervalued; reduce imports 
C) overvalued; increase imports 
D) overvalued; reduce exports 
E) depreciated; reduce exports

Question 18

Pegging a country's exchange rate to the dollar can be advantageous if

Accepted Answer

A) the country does not trade much with Canada. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy. 
E) demand for the goods being exported are not sensitive to changes in price. 
A) the country does not trade much with Canada. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy. 
E) demand for the goods being exported are not sensitive to changes in price.

Question 19

Foreign purchases of Canadian securities rose dramatically in 2011, which was caused by a flight to safety, as Canadian securities were viewed as more stable, leading those who feared European governments defaulting to sell those securities to purchase Canadian ones.

Accepted Answer

A) True 
 B)False

Question 20

Why might a developing country choose to peg the value of its currency to the U.S.dollar?

Accepted Answer

The U.S.dollar is a relatively stable cu

Under the gold standard, the government must have enough gold to back up any

Destabilizing speculation refers to

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

The three most important financial centres in the world today are New York, London, and Tokyo.

What are capital controls? Why might a financial crisis lead to a reconsideration of using capital controls, and what problems might result from the reinstatement of capital controls?

Why did Canada abandon the gold standard in the 1930s?

Although the pegged exchange rate between the yuan and the U.S.dollar has undervalued the yuan, China has been reluctant to abandon the peg for fear that abandoning the peg would

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate?

How will the exchange rate (foreign currency per dollar)respond to an increase in the relative rate of productivity growth in Canada in the long run?

Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered.If the economy is at full employment, what should this discovery do?

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

What is the connection between the gold held at the Canadian Mint in Ottawa and the Canadian money supply?

Which of the following would decrease the value of the Canadian dollar in the long run?

Which of the following statements about capital markets is true?

Shares of stock and long-term debt, including corporate and government bonds and bank loans, are bought and sold on

Although the pegged exchange rate between the yuan and the U.S.dollar has the yuan, China has been reluctant to abandon the peg for fear that doing so would .

Pegging a country's exchange rate to the dollar can be advantageous if

Foreign purchases of Canadian securities rose dramatically in 2011, which was caused by a flight to safety, as Canadian securities were viewed as more stable, leading those who feared European governments defaulting to sell those securities to purchase Canadian ones.

Why might a developing country choose to peg the value of its currency to the U.S.dollar?

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

Exam 15: The International Financial System

Under the gold standard, the government must have enough gold to back up any

Destabilizing speculation refers to

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

The three most important financial centres in the world today are New York, London, and Tokyo.

What are capital controls? Why might a financial crisis lead to a reconsideration of using capital controls, and what problems might result from the reinstatement of capital controls?

Why did Canada abandon the gold standard in the 1930s?

Although the pegged exchange rate between the yuan and the U.S.dollar has undervalued the yuan, China has been reluctant to abandon the peg for fear that abandoning the peg would

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency, rather than choosing a floating exchange rate?

How will the exchange rate (foreign currency per dollar)respond to an increase in the relative rate of productivity growth in Canada in the long run?

Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered.If the economy is at full employment, what should this discovery do?

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

What is the connection between the gold held at the Canadian Mint in Ottawa and the Canadian money supply?

Which of the following would decrease the value of the Canadian dollar in the long run?

Which of the following statements about capital markets is true?

Shares of stock and long-term debt, including corporate and government bonds and bank loans, are bought and sold on

Although the pegged exchange rate between the yuan and the U.S.dollar has ________ the yuan, China has been reluctant to abandon the peg for fear that doing so would ________.

Pegging a country's exchange rate to the dollar can be advantageous if

Foreign purchases of Canadian securities rose dramatically in 2011, which was caused by a flight to safety, as Canadian securities were viewed as more stable, leading those who feared European governments defaulting to sell those securities to purchase Canadian ones.

Why might a developing country choose to peg the value of its currency to the U.S.dollar?

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

Although the pegged exchange rate between the yuan and the U.S.dollar has the yuan, China has been reluctant to abandon the peg for fear that doing so would .