Question 1

By 2015, how many European countries were members of the European Union?

Accepted Answer

A) 12 
B) 15 
C) 19 
D) 28 
E) 57 
A) 12 
B) 15 
C) 19 
D) 28 
E) 57

Question 2

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

Accepted Answer

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

Question 3

If relative purchasing power between Canada and Argentina is 3.22 pesos per dollar, under which circumstances would we say that the dollar is "overvalued"?

Accepted Answer

A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos per dollar 
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos per dollar 
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos per dollar 
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos per dollar 
E) if the actual exchange rate between the dollar and the Argentinean peso is 2.5 pesos per dollar 
A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos per dollar 
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos per dollar 
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos per dollar 
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos per dollar 
E) if the actual exchange rate between the dollar and the Argentinean peso is 2.5 pesos per dollar

Question 4

Before 1980, Canadian investors rarely invested in foreign capital markets.

Accepted Answer

A) True 
 B)False

Question 5

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

Accepted Answer

In a fixed exchange rate system, the val

Question 6

China began pegging its currency, the yuan, to the U.S.dollar in 1994.Because the yuan was ________ at the pegged exchange rate, the Chinese government increased its reserves of ________ as the government purchased more ________ to maintain the pegged exchange rate.

Accepted Answer

A) undervalued; U.S.dollars; U.S.dollars 
B) undervalued; yuan; yuan 
C) overvalued; yuan; yuan 
D) overvalued; U.S.dollars; U.S.dollars 
E) undervalued; yuan; U.S.dollars 
A) undervalued; U.S.dollars; U.S.dollars 
B) undervalued; yuan; yuan 
C) overvalued; yuan; yuan 
D) overvalued; U.S.dollars; U.S.dollars 
E) undervalued; yuan; U.S.dollars

Question 7

Investors in which country accounted for more than half of all foreign purchases of Canadian stocks and bonds in 2015?

Accepted Answer

A) the United States 
B) the United Kingdom 
C) China 
D) Mexico 
E) Germany 
A) the United States 
B) the United Kingdom 
C) China 
D) Mexico 
E) Germany

Question 8

A Big Mac costs $4.07 in Canada and 8.63 zlotys in Poland.If the exchange rate is 3 zlotys per Canadian dollar, purchasing power parity predicts that

Accepted Answer

A) the Canadian dollar will appreciate as the demand for Canadian dollars rises in the long run. 
B) the Canadian dollar will appreciate as the supply of Canadian dollars falls in the long run. 
C) the Canadian dollar will depreciate as the demand for Canadian dollars falls in the long run. 
D) the Canadian dollar will depreciate as the supply of Canadian dollars rises in the long run. 
E) the Canadian dollar's value will not change as it has achieved it's long run equilibrium value. 
A) the Canadian dollar will appreciate as the demand for Canadian dollars rises in the long run. 
B) the Canadian dollar will appreciate as the supply of Canadian dollars falls in the long run. 
C) the Canadian dollar will depreciate as the demand for Canadian dollars falls in the long run. 
D) the Canadian dollar will depreciate as the supply of Canadian dollars rises in the long run. 
E) the Canadian dollar's value will not change as it has achieved it's long run equilibrium value.

Question 9

If, at the current exchange rate between the Canadian dollar and the South African rand of 6.92 rand per Canadian dollar, the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

Accepted Answer

A) The demand for the Canadian dollar will fall, while the supply of the rand will rise. 
B) The demand for the Canadian dollar will rise, while the supply of the rand will fall. 
C) The supply of the Canadian dollar will rise, while the demand for the rand will rise. 
D) The supply of the Canadian dollar will rise, while the demand for the rand will fall. 
E) The supply of both the Canadian dollar and the rand will rise. 
A) The demand for the Canadian dollar will fall, while the supply of the rand will rise. 
B) The demand for the Canadian dollar will rise, while the supply of the rand will fall. 
C) The supply of the Canadian dollar will rise, while the demand for the rand will rise. 
D) The supply of the Canadian dollar will rise, while the demand for the rand will fall. 
E) The supply of both the Canadian dollar and the rand will rise.

Question 10

In Thailand, in the late 1990s, there was pressure for the value of the baht to decline as foreign investors began to

Accepted Answer

A) sell off investments they had made in Thailand and traded in their baht for U.S.dollars. 
B) sell off investments they had made in Thailand and traded in their U.S.dollars for baht. 
C) increase their investments in Thailand and exchanged their baht for U.S.dollars. 
D) increase their investments in Thailand and exchanged their U.S.dollars for baht. 
E) sell off investments they had made outside Thailand and purchase additional baht with the proceeds. 
A) sell off investments they had made in Thailand and traded in their baht for U.S.dollars. 
B) sell off investments they had made in Thailand and traded in their U.S.dollars for baht. 
C) increase their investments in Thailand and exchanged their baht for U.S.dollars. 
D) increase their investments in Thailand and exchanged their U.S.dollars for baht. 
E) sell off investments they had made outside Thailand and purchase additional baht with the proceeds.

Question 11

Figure 15.10   Alt text for Figure 15.10: In figure 15.10, a graph illustrates the quantity of yuan traded against the exchange rate.
Long description for Figure 15.10: 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 15.10.The Chinese government pegs the yuan to the Canadian dollar, at one of the specified exchange rates on the graph, such that it overvalues its currency.Using the figure above, this would generate

Accepted Answer

A) a shortage of yuan equal to 500 million. 
B) a shortage of yuan equal to 100 million. 
C) a surplus of yuan equal to 200 million. 
D) a surplus of yuan equal to 700 million. 
E) a shortage of yuan equal to 600 million. 
A) a shortage of yuan equal to 500 million. 
B) a shortage of yuan equal to 100 million. 
C) a surplus of yuan equal to 200 million. 
D) a surplus of yuan equal to 700 million. 
E) a shortage of yuan equal to 600 million.

Question 12

The current exchange rate system has which of the following characteristics?

Accepted Answer

A) Canada allows the dollar to float against other major currencies. 
B) All developing countries allow their currencies to float against the dollar and other major currencies. 
C) The countries of the European Union have adopted the gold standard. 
D) Several developing countries in Asia have adopted the Bretton Woods system. 
E) The current global foreign exchange system is a fixed system. 
A) Canada allows the dollar to float against other major currencies. 
B) All developing countries allow their currencies to float against the dollar and other major currencies. 
C) The countries of the European Union have adopted the gold standard. 
D) Several developing countries in Asia have adopted the Bretton Woods system. 
E) The current global foreign exchange system is a fixed system.

Question 13

During 2015, investors in ________ accounted for more than half of all foreign purchases of Canadian bonds and money market instruments.

Accepted Answer

A) China 
B) Japan 
C) the United States 
D) the United Kingdom 
E) Germany 
A) China 
B) Japan 
C) the United States 
D) the United Kingdom 
E) Germany

Question 14

With a common currency such as the euro,

Accepted Answer

A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same, regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies. 
E) individual countries using the currency are no longer able to run independent immigration policies. 
A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same, regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies. 
E) individual countries using the currency are no longer able to run independent immigration policies.

Question 15

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for over 50 percent of all purchases.

Accepted Answer

A) True 
 B)False

Question 16

During what period of time was the gold standard used?

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 1970 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 1970 until 1993

Question 17

During the Chinese experience with pegging the yuan to the U.S.dollar, the yuan was ________.As a result, there was a ________ of U.S.dollars on the market, and the Chinese government had to purchase U.S.dollars to maintain the peg.

Accepted Answer

A) overvalued; shortage 
B) undervalued; surplus 
C) overvalued; surplus 
D) undervalued; shortage 
E) appreciating; surplus 
A) overvalued; shortage 
B) undervalued; surplus 
C) overvalued; surplus 
D) undervalued; shortage 
E) appreciating; surplus

Question 18

Suppose the GDP deflator in Canada is 125 and the GDP deflator in Japan is 100.Also assume Canada has trade barriers on Japanese goods in the form of quotas.What does this imply about the exchange rate of yen per dollar under the theory of purchasing power parity in the long run?

Accepted Answer

A) The exchange rate of yen per dollar will be greater than 1.25. 
B) The exchange rate of yen per dollar will be equal to 1.25. 
C) The exchange rate of yen per dollar will be greater than 0.8 but less than 1.25. 
D) The exchange rate of yen per dollar will be equal to 0.8. 
E) The exchange rate of yen per dollar will be less than 0.8. 
A) The exchange rate of yen per dollar will be greater than 1.25. 
B) The exchange rate of yen per dollar will be equal to 1.25. 
C) The exchange rate of yen per dollar will be greater than 0.8 but less than 1.25. 
D) The exchange rate of yen per dollar will be equal to 0.8. 
E) The exchange rate of yen per dollar will be less than 0.8.

Question 19

Figure 15.10   Alt text for Figure 15.10: In figure 15.10, a graph illustrates the quantity of yuan traded against the exchange rate.
Long description for Figure 15.10: 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 15.10.Suppose the Chinese government decides to abandon pegging the yuan to the Canadian dollar at a rate that overvalues the yuan.Using the figure above, the equilibrium exchange rate would be ________, and Chinese exports to Canada would ________ in price.

Accepted Answer

A) $0.11/yuan; decrease 
B) $0.14/yuan; increase 
C) $0.13/yuan; increase 
D) $0.13/yuan; decrease 
E) 600 million yuan; increase 
A) $0.11/yuan; decrease 
B) $0.14/yuan; increase 
C) $0.13/yuan; increase 
D) $0.13/yuan; decrease 
E) 600 million yuan; increase

Question 20

Why are foreign investors more likely to invest in Canadian government bonds than in Canadian corporate bonds?

Accepted Answer

Foreign investors are more likely to buy

By 2015, how many European countries were members of the European Union?

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

If relative purchasing power between Canada and Argentina is 3.22 pesos per dollar, under which circumstances would we say that the dollar is "overvalued"?

Before 1980, Canadian investors rarely invested in foreign capital markets.

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

China began pegging its currency, the yuan, to the U.S.dollar in 1994.Because the yuan was at the pegged exchange rate, the Chinese government increased its reserves of as the government purchased more to maintain the pegged exchange rate.

Investors in which country accounted for more than half of all foreign purchases of Canadian stocks and bonds in 2015?

A Big Mac costs $4.07 in Canada and 8.63 zlotys in Poland.If the exchange rate is 3 zlotys per Canadian dollar, purchasing power parity predicts that

If, at the current exchange rate between the Canadian dollar and the South African rand of 6.92 rand per Canadian dollar, the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

In Thailand, in the late 1990s, there was pressure for the value of the baht to decline as foreign investors began to

The current exchange rate system has which of the following characteristics?

During 2015, investors in ________ accounted for more than half of all foreign purchases of Canadian bonds and money market instruments.

With a common currency such as the euro,

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for over 50 percent of all purchases.

During what period of time was the gold standard used?

During the Chinese experience with pegging the yuan to the U.S.dollar, the yuan was .As a result, there was a of U.S.dollars on the market, and the Chinese government had to purchase U.S.dollars to maintain the peg.

Suppose the GDP deflator in Canada is 125 and the GDP deflator in Japan is 100.Also assume Canada has trade barriers on Japanese goods in the form of quotas.What does this imply about the exchange rate of yen per dollar under the theory of purchasing power parity in the long run?

Why are foreign investors more likely to invest in Canadian government bonds than in Canadian corporate bonds?

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

By 2015, how many European countries were members of the European Union?

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

If relative purchasing power between Canada and Argentina is 3.22 pesos per dollar, under which circumstances would we say that the dollar is "overvalued"?

Before 1980, Canadian investors rarely invested in foreign capital markets.

What is the difference between a fixed exchange rate system and a managed float exchange rate system?

China began pegging its currency, the yuan, to the U.S.dollar in 1994.Because the yuan was ________ at the pegged exchange rate, the Chinese government increased its reserves of ________ as the government purchased more ________ to maintain the pegged exchange rate.

Investors in which country accounted for more than half of all foreign purchases of Canadian stocks and bonds in 2015?

A Big Mac costs $4.07 in Canada and 8.63 zlotys in Poland.If the exchange rate is 3 zlotys per Canadian dollar, purchasing power parity predicts that

If, at the current exchange rate between the Canadian dollar and the South African rand of 6.92 rand per Canadian dollar, the rand is "undervalued," how do you expect demand and supply in the foreign exchange markets to respond?

In Thailand, in the late 1990s, there was pressure for the value of the baht to decline as foreign investors began to

The current exchange rate system has which of the following characteristics?

During 2015, investors in ________ accounted for more than half of all foreign purchases of Canadian bonds and money market instruments.

With a common currency such as the euro,

Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for over 50 percent of all purchases.

During what period of time was the gold standard used?

During the Chinese experience with pegging the yuan to the U.S.dollar, the yuan was ________.As a result, there was a ________ of U.S.dollars on the market, and the Chinese government had to purchase U.S.dollars to maintain the peg.

Suppose the GDP deflator in Canada is 125 and the GDP deflator in Japan is 100.Also assume Canada has trade barriers on Japanese goods in the form of quotas.What does this imply about the exchange rate of yen per dollar under the theory of purchasing power parity in the long run?

Why are foreign investors more likely to invest in Canadian government bonds than in Canadian corporate bonds?

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

China began pegging its currency, the yuan, to the U.S.dollar in 1994.Because the yuan was at the pegged exchange rate, the Chinese government increased its reserves of as the government purchased more to maintain the pegged exchange rate.

During the Chinese experience with pegging the yuan to the U.S.dollar, the yuan was .As a result, there was a of U.S.dollars on the market, and the Chinese government had to purchase U.S.dollars to maintain the peg.