Question 1

If interest rates in the United States fall

Accepted Answer

A) the value of the dollar will fall as foreign investors decrease their holdings of U.S.investments. 
B) the value of the dollar will rise as foreign investors increase their holdings of U.S.investments. 
C) the value of the dollar will fall as foreign investors increase their holdings of U.S.investments. 
D) the value of the dollar will rise as foreign investors decrease their holdings of U.S.investments. 
A) the value of the dollar will fall as foreign investors decrease their holdings of U.S.investments. 
B) the value of the dollar will rise as foreign investors increase their holdings of U.S.investments. 
C) the value of the dollar will fall as foreign investors increase their holdings of U.S.investments. 
D) the value of the dollar will rise as foreign investors decrease their holdings of U.S.investments.

Question 2

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

Accepted Answer

A) failure to support the existing fixed exchange rate by central banks. 
B) fundamental disequilibrium in the country's exchange rate. 
C) speculation against the currency by speculators in world exchange markets. 
D) all of the above 
A) failure to support the existing fixed exchange rate by central banks. 
B) fundamental disequilibrium in the country's exchange rate. 
C) speculation against the currency by speculators in world exchange markets. 
D) all of the above

Question 3

A currency pegged at a value below the market equilibrium exchange rate is

Accepted Answer

A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) None of the above are correct. 
A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) None of the above are correct.

Question 4

Why did the United States 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. 
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.

Question 5

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

Accepted Answer

A) U.S.Treasury Department. 
B) World Trade Organization. 
C) International Monetary Fund. 
D) Bank of England. 
A) U.S.Treasury Department. 
B) World Trade Organization. 
C) International Monetary Fund. 
D) Bank of England.

Question 6

Which of the following is a drawback to having a common currency across countries,as in the European Union?

Accepted Answer

A) A common currency increases barriers to trade across countries,reducing opportunities for economic growth. 
B) With a common currency,individual countries are no longer able to run independent monetary policies. 
C) Having a common currency implies that the prices of goods across countries must always be the same,regardless of consumer preferences for goods across countries. 
D) None of the above is a drawback to a common currency. 
A) A common currency increases barriers to trade across countries,reducing opportunities for economic growth. 
B) With a common currency,individual countries are no longer able to run independent monetary policies. 
C) Having a common currency implies that the prices of goods across countries must always be the same,regardless of consumer preferences for goods across countries. 
D) None of the above is a drawback to a common currency.

Question 7

Figure 19-1  
-Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) European productivity rises relative to American productivity. 
B) Americans increase their preferences for goods produced in the EU relative to American goods. 
C) The U.S.removes a quota on wristwatches from the European Union. 
D) The price level of goods produced in the EU increases relative to the price level of goods produced in the United States. 
A) European productivity rises relative to American productivity. 
B) Americans increase their preferences for goods produced in the EU relative to American goods. 
C) The U.S.removes a quota on wristwatches from the European Union. 
D) The price level of goods produced in the EU increases relative to the price level of goods produced in the United States.

Question 8

Figure 19-7  
-Refer to Figure 19-7.At what level should the Indian government peg its currency to the dollar to make U.S.imports cheaper in India?

Accepted Answer

A) greater than $.02/rupee 
B) less than $.02/rupee 
C) equal to $.02/rupee 
D) $1/rupee 
A) greater than $.02/rupee 
B) less than $.02/rupee 
C) equal to $.02/rupee 
D) $1/rupee

Question 9

If the rate of productivity growth in the United States exceeds the rate of productivity growth in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Accepted Answer

A) True 
 B)False

Question 10

Why might a country raise interest rates in the face of an exchange rate crisis?

Accepted Answer

If the value of a country's currency is

Question 11

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Accepted Answer

A) True 
 B)False

Question 12

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 13

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory.In January 2017,the Economist reported that the average price of a Big Mac in the U.S.was $4.93.In Sweden,the average price of a Big Mac at that time was 48 kronor.What is the "implied exchange rate" between Swedish kronor and U.S.dollars?

Accepted Answer

A) 0.10 kronor per dollar 
B) 2.37 kronor per dollar 
C) 9.74 kronor per dollar 
D) 52.93 kronor per dollar 
A) 0.10 kronor per dollar 
B) 2.37 kronor per dollar 
C) 9.74 kronor per dollar 
D) 52.93 kronor per dollar

Question 14

The ________ system of currency exchange rates was set up in 1944.

Accepted Answer

A) gold standard 
B) Bretton Woods 
C) managed float 
D) flexible 
A) gold standard 
B) Bretton Woods 
C) managed float 
D) flexible

Question 15

Which of the following is not one of the four main determinants of exchange rates in the long run?

Accepted Answer

A) relative price levels across countries 
B) relative rates of productivity growth across countries 
C) preferences for domestic and foreign goods across countries 
D) speculating in currency markets 
A) relative price levels across countries 
B) relative rates of productivity growth across countries 
C) preferences for domestic and foreign goods across countries 
D) speculating in currency markets

Question 16

If inflation in Russia is higher than it is in the United States

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) 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) Both A and C are correct.

Question 17

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

Accepted Answer

Under the gold standard,exchange rates w

Question 18

South Korea,Indonesia,Malaysia,and Thailand all pegged their currencies to the dollar at one point in time.Because some of these currencies were overvalued at the pegged rate,speculators anticipated these countries would abandon the peg and speculators began selling those currencies.Explain how this speculation would affect the ability of a country to maintain a pegged exchange rate.

Accepted Answer

As speculators began selling currencies

Question 19

Figure 19-3  
-Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

Accepted Answer

A) greater than $.03/baht 
B) less than $.03/baht 
C) equal to $.03/baht 
D) $1/baht 
A) greater than $.03/baht 
B) less than $.03/baht 
C) equal to $.03/baht 
D) $1/baht

Question 20

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

Accepted Answer

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

If interest rates in the United States fall

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

A currency pegged at a value below the market equilibrium exchange rate is

Why did the United States abandon the gold standard in the 1930s?

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

Which of the following is a drawback to having a common currency across countries,as in the European Union?

Figure 19-1 -Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

Figure 19-7 -Refer to Figure 19-7.At what level should the Indian government peg its currency to the dollar to make U.S.imports cheaper in India?

If the rate of productivity growth in the United States exceeds the rate of productivity growth in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Why might a country raise interest rates in the face of an exchange rate crisis?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

The ________ system of currency exchange rates was set up in 1944.

Which of the following is not one of the four main determinants of exchange rates in the long run?

If inflation in Russia is higher than it is in the United States

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

Figure 19-3 -Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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 Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

Exam 19: The International Financial System

If interest rates in the United States fall

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

A currency pegged at a value below the market equilibrium exchange rate is

Why did the United States abandon the gold standard in the 1930s?

Under the Bretton Woods system,central bankers could obtain foreign currency loans from the

Which of the following is a drawback to having a common currency across countries,as in the European Union?

Figure 19-1 -Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

Figure 19-7 -Refer to Figure 19-7.At what level should the Indian government peg its currency to the dollar to make U.S.imports cheaper in India?

If the rate of productivity growth in the United States exceeds the rate of productivity growth in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Why might a country raise interest rates in the face of an exchange rate crisis?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

The ________ system of currency exchange rates was set up in 1944.

Which of the following is not one of the four main determinants of exchange rates in the long run?

If inflation in Russia is higher than it is in the United States

How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?

Figure 19-3 -Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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 Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

If the U.S.government places tariffs on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .