Question 1

What does it mean when the dollar appreciates? What does it mean when the dollar depreciates?

Accepted Answer

If the dollar appreciates with respect t

Question 2

If the dollar used to buy 100 yen and now buys 360 yen, there has been

Accepted Answer

A)  appreciation of the dollar. 
B)  depreciation of the dollar. 
C)  appreciation of the yen. 
D)  an increase in special drawing rights. 
A)  appreciation of the dollar. 
B)  depreciation of the dollar. 
C)  appreciation of the yen. 
D)  an increase in special drawing rights.

Question 3

Why does the supply curve of Japanese yen slope up?

Accepted Answer

Japanese residents supply yen when they

Question 4

Checking exchange rates, you find $1 equals 0.75 euros. Then the price of 1 euro is

Accepted Answer

A)  $0.25. 
B)  $0.75. 
C)  $1.33. 
D)  $4.30. 
A)  $0.25. 
B)  $0.75. 
C)  $1.33. 
D)  $4.30.

Question 5

An important problem with the gold standard was that

Accepted Answer

A)  it was too complicated and restricted business activity. 
B)  a country did not have control of its domestic monetary policy. 
C)  exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. 
D)  one country could easily manipulate the system to its advantage and the disadvantage of other countries. 
A)  it was too complicated and restricted business activity. 
B)  a country did not have control of its domestic monetary policy. 
C)  exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. 
D)  one country could easily manipulate the system to its advantage and the disadvantage of other countries.

Question 6

The United States dollar has NOT been officially convertible to gold by international traders since

Accepted Answer

A)  1930. 
B)  1944. 
C)  1971. 
D)  1995. 
A)  1930. 
B)  1944. 
C)  1971. 
D)  1995.

Question 7

The legally established value of a country's monetary unit in terms of another under the Bretton Woods system was called the

Accepted Answer

A)  exchange rate. 
B)  dirty float. 
C)  special draw. 
D)  par value. 
A)  exchange rate. 
B)  dirty float. 
C)  special draw. 
D)  par value.

Question 8

An example of a transaction that will be a surplus item on the U.S. balance of payments is

Accepted Answer

A)  the purchase of General Motors stock by a German resident. 
B)  the purchase of a Mercedes-Benz by an American. 
C)  a Nissan plant in Tennessee buying parts from the main plant in Japan. 
D)  a gift of wheat from the United States government to Egypt. 
A)  the purchase of General Motors stock by a German resident. 
B)  the purchase of a Mercedes-Benz by an American. 
C)  a Nissan plant in Tennessee buying parts from the main plant in Japan. 
D)  a gift of wheat from the United States government to Egypt.

Question 9

Demand for the Brazilian real is

Accepted Answer

A)  determined by how well the real maintains its value. 
B)  a function of the Brazilian banking system. 
C)  derived from the supply of U.S. dollars. 
D)  derived from the demand for Brazilian goods. 
A)  determined by how well the real maintains its value. 
B)  a function of the Brazilian banking system. 
C)  derived from the supply of U.S. dollars. 
D)  derived from the demand for Brazilian goods.

Question 10

Net unilateral transfers would appear in a nation's

Accepted Answer

A)  current account. 
B)  capital account. 
C)  official reserve transaction account. 
D)  financial account. 
A)  current account. 
B)  capital account. 
C)  official reserve transaction account. 
D)  financial account.

Question 11

If the United States exports $250 billion worth of goods and imports $420 billion worth of goods,

Accepted Answer

A)  the balance of payments will be -$170 billion. 
B)  the balance of trade will be -$170 billion. 
C)  the balance of trade will be $670 billion. 
D)  the official reserve transaction will be $170 billion. 
A)  the balance of payments will be -$170 billion. 
B)  the balance of trade will be -$170 billion. 
C)  the balance of trade will be $670 billion. 
D)  the official reserve transaction will be $170 billion.

Question 12

To prevent the dollar from depreciating, the U.S. central bank that tries to fix the currency value of the dollar can

Accepted Answer

A)  buy U.S. dollars in the foreign exchange market. 
B)  sell U.S. dollars in the foreign exchange market. 
C)  abandon the U.S. dollar and use another country's currency as its legal currency. 
D)  buy foreign currencies in the foreign exchange market. 
A)  buy U.S. dollars in the foreign exchange market. 
B)  sell U.S. dollars in the foreign exchange market. 
C)  abandon the U.S. dollar and use another country's currency as its legal currency. 
D)  buy foreign currencies in the foreign exchange market.

Question 13

In the market for euros, the supply of euros (€) is

Accepted Answer

A)  downward sloping, because lower dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
B)  downward sloping, because higher dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
C)  upward sloping, because higher dollar prices of euros means that U.S. goods are cheaper to Europeans. 
D)  upward sloping, because lower dollar prices of euros means that U.S. goods are cheaper to Europeans. 
A)  downward sloping, because lower dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
B)  downward sloping, because higher dollar prices of euros mean that U.S. goods are cheaper to Europeans. 
C)  upward sloping, because higher dollar prices of euros means that U.S. goods are cheaper to Europeans. 
D)  upward sloping, because lower dollar prices of euros means that U.S. goods are cheaper to Europeans.

Question 14

Today, the most common exchange rate arrangement in the world is

Accepted Answer

A)  the fixed exchange rate system. 
B)  the gold standard system. 
C)  the managed floating system. 
D)  the freely floating exchange rate system. 
A)  the fixed exchange rate system. 
B)  the gold standard system. 
C)  the managed floating system. 
D)  the freely floating exchange rate system.

Question 15

Suppose a currency's value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority, the currency has

Accepted Answer

A)  a fixed exchange rate. 
B)  a gold standard. 
C)  a price control in its exchange rate. 
D)  a floating exchange rate. 
A)  a fixed exchange rate. 
B)  a gold standard. 
C)  a price control in its exchange rate. 
D)  a floating exchange rate.

Question 16

If the foreign exchange rate is 70 cents for one Swiss franc, then

Accepted Answer

A)  a car that costs 40,000 francs will cost $7,143.00. 
B)  a wine that costs 200 francs will cost $14.00. 
C)  a clock that costs 500 francs will cost $350.00. 
D)  a house that costs 100,000 francs will cost $700,000.00. 
A)  a car that costs 40,000 francs will cost $7,143.00. 
B)  a wine that costs 200 francs will cost $14.00. 
C)  a clock that costs 500 francs will cost $350.00. 
D)  a house that costs 100,000 francs will cost $700,000.00.

Question 17

All of the following would be considered a current account transaction EXCEPT the

Accepted Answer

A)  importing of services. 
B)  exporting of goods. 
C)  importing of capital. 
D)  importing of goods. 
A)  importing of services. 
B)  exporting of goods. 
C)  importing of capital. 
D)  importing of goods.

Question 18

Under the Bretton Woods system, a country could alter its exchange rate

Accepted Answer

A)  by changing its value relative to gold. 
B)  whenever it determined that there was a fundamental disequilibrium. 
C)  only when the IMF permitted due to a fundamental disequilibrium. 
D)  under no circumstances. 
A)  by changing its value relative to gold. 
B)  whenever it determined that there was a fundamental disequilibrium. 
C)  only when the IMF permitted due to a fundamental disequilibrium. 
D)  under no circumstances.

Question 19

The United States was taken off the gold standard by

Accepted Answer

A)  President Lyndon Johnson. 
B)  President Richard Nixon. 
C)  the Federal Reserve Chairman. 
D)  President Jimmy Carter. 
A)  President Lyndon Johnson. 
B)  President Richard Nixon. 
C)  the Federal Reserve Chairman. 
D)  President Jimmy Carter.

Question 20

One problem associated with the gold standard was that

Accepted Answer

A)  nations gave up control of their money supply. 
B)  there was an incentive for individuals to hold gold at all interest rates. 
C)  there was no fluctuation in exchange rates. 
D)  nations could not determine their current account balances. 
A)  nations gave up control of their money supply. 
B)  there was an incentive for individuals to hold gold at all interest rates. 
C)  there was no fluctuation in exchange rates. 
D)  nations could not determine their current account balances.

Exam 33: Exchange Rates and the Balance of Payments

What does it mean when the dollar appreciates? What does it mean when the dollar depreciates?

If the dollar used to buy 100 yen and now buys 360 yen, there has been

Why does the supply curve of Japanese yen slope up?

Checking exchange rates, you find $1 equals 0.75 euros. Then the price of 1 euro is

An important problem with the gold standard was that

The United States dollar has NOT been officially convertible to gold by international traders since

The legally established value of a country's monetary unit in terms of another under the Bretton Woods system was called the

An example of a transaction that will be a surplus item on the U.S. balance of payments is

Demand for the Brazilian real is

Net unilateral transfers would appear in a nation's

If the United States exports $250 billion worth of goods and imports $420 billion worth of goods,

To prevent the dollar from depreciating, the U.S. central bank that tries to fix the currency value of the dollar can

In the market for euros, the supply of euros (€) is

Today, the most common exchange rate arrangement in the world is

Suppose a currency's value in the foreign exchange market is determined solely by market supply and demand without any intervention by the government authority, the currency has

If the foreign exchange rate is 70 cents for one Swiss franc, then

All of the following would be considered a current account transaction EXCEPT the

Under the Bretton Woods system, a country could alter its exchange rate

The United States was taken off the gold standard by

One problem associated with the gold standard was that

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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