Question 1

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

Accepted Answer

A) True 
 B)False

Question 2

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar.This shortage can be reduced or eliminated through a ________ of the yen.

Accepted Answer

A) undervalued; devaluation 
B) undervalued; revaluation 
C) overvalued; revaluation 
D) overvalued; devaluation 
A) undervalued; devaluation 
B) undervalued; revaluation 
C) overvalued; revaluation 
D) overvalued; devaluation

Question 3

Figure 19-7  
-Refer to Figure 19-7.Which of the following is true?

Accepted Answer

A) U.S.imports are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
B) The rupee is overvalued at exchange rates less than $.02/rupee. 
C) To achieve an exchange rate greater than $.02/rupee,the Reserve Bank of India must buy surplus dollars with rupees. 
D) Indian exports to the United States are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
A) U.S.imports are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
B) The rupee is overvalued at exchange rates less than $.02/rupee. 
C) To achieve an exchange rate greater than $.02/rupee,the Reserve Bank of India must buy surplus dollars with rupees. 
D) Indian exports to the United States are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate.

Question 4

Figure 19-9  
-Refer to Figure 19-9.According to the graph,is there a surplus or shortage of Saudi Arabian riyal in exchange for U.S.dollars? To maintain the pegged exchange rate,will the Saudi central bank need to buy riyal in exchange for dollars or sell riyal in exchange for dollars? How many riyal will the Saudi central bank need to buy or sell?

Accepted Answer

There is a surplus of riyal in exchange

Question 5

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Accepted Answer

A) True 
 B)False

Question 6

During what period of time did the United States 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 
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

Question 7

If the purchasing power of the dollar is less than the purchasing power of the British pound,purchasing power parity predicts that the exchange rate will

Accepted Answer

A) increase if the exchange rate is greater than 1 pound per dollar. 
B) decrease if the exchange rate is less than 1 pound per dollar. 
C) be equal to the relative purchasing power across the currencies in the long run. 
D) All of the above are correct. 
A) increase if the exchange rate is greater than 1 pound per dollar. 
B) decrease if the exchange rate is less than 1 pound per dollar. 
C) be equal to the relative purchasing power across the currencies in the long run. 
D) All of the above are correct.

Question 8

You decide to work in Japan for the next 10 years,accumulate some savings,then move back to the United States and convert your savings from yen to dollars.At the time of your move,economists predict that consumers in the United States 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 U.S.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 U.S.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 U.S.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 U.S.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 U.S.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 U.S.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 U.S.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 U.S.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 9

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Accepted Answer

A) True 
 B)False

Question 10

Compared to 2007,foreign investment in ________ were lower in 2016.

Accepted Answer

A) both government and corporate bonds 
B) corporate bonds and corporate stocks 
C) government bonds and corporate stocks 
D) government bonds,corporate bonds,and corporate stocks 
A) both government and corporate bonds 
B) corporate bonds and corporate stocks 
C) government bonds and corporate stocks 
D) government bonds,corporate bonds,and corporate stocks

Question 11

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Accepted Answer

A) Because the yuan was undervalued at the pegged exchange rate,the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely. 
B) Because the yuan was overvalued at the pegged exchange rate,competing firms from other countries feared that abandoning the peg would lead to an increase in Chinese exports. 
C) Competitors feared that the declining value of the dollar would continue to make Chinese goods more expensive. 
D) Because China's population is so large relative to other countries,the pegged exchange rate made the goods of foreign competing firms much less expensive than domestic Chinese goods. 
A) Because the yuan was undervalued at the pegged exchange rate,the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely. 
B) Because the yuan was overvalued at the pegged exchange rate,competing firms from other countries feared that abandoning the peg would lead to an increase in Chinese exports. 
C) Competitors feared that the declining value of the dollar would continue to make Chinese goods more expensive. 
D) Because China's population is so large relative to other countries,the pegged exchange rate made the goods of foreign competing firms much less expensive than domestic Chinese goods.

Question 12

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,purchasing power parity predicts that

Accepted Answer

A) the dollar is undervalued. 
B) the dollar is overvalued. 
C) the real is undervalued. 
D) both B and C are correct. 
A) the dollar is undervalued. 
B) the dollar is overvalued. 
C) the real is undervalued. 
D) both B and C are correct.

Question 13

According to the theory of purchasing power parity,if the inflation rate in the United States is greater than the inflation rate in Canada,explain what should happen to the exchange rate between the U.S.dollar and the Canadian dollar.

Accepted Answer

The value of the U.S.dollar sh

Question 14

Because the value of the euro is determined by factors that affect the entire euro zone,during the recession of 2007-2009,individual countries using the euro

Accepted Answer

A) were unable to have their exchange rates depreciate. 
B) were more insulated from unemployment increases than most countries. 
C) experienced a greater increase in exports than did most countries. 
D) were able to use expansionary monetary policy to lessen the impact of the recession. 
A) were unable to have their exchange rates depreciate. 
B) were more insulated from unemployment increases than most countries. 
C) experienced a greater increase in exports than did most countries. 
D) were able to use expansionary monetary policy to lessen the impact of the recession.

Question 15

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

Accepted Answer

A) only by supply and demand 
B) by its issuing government 
C) mostly by supply and demand,but with occasional government intervention 
D) by its issuing government,with occasional readjustments in value 
A) only by supply and demand 
B) by its issuing government 
C) mostly by supply and demand,but with occasional government intervention 
D) by its issuing government,with occasional readjustments in value

Question 16

An increase in the value of the U.S.dollar relative to the Japanese yen would be ________ for Japanese owners of U.S.houses who wish to sell those houses,and ________ for Japanese manufacturers operating factories in the United States that export their products back to Japan.

Accepted Answer

A) good news; good news 
B) good news; bad news 
C) bad news; good news 
D) bad news; bad news 
A) good news; good news 
B) good news; bad news 
C) bad news; good news 
D) bad news; bad news

Question 17

Figure 19-5  
-Refer to Figure 19-5.The Chinese government pegs the yuan to the 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 18

The current exchange rate system in the United States is best described as a

Accepted Answer

A) silver standard. 
B) managed float exchange rate system. 
C) fixed exchange rate system. 
D) gold standard. 
A) silver standard. 
B) managed float exchange rate system. 
C) fixed exchange rate system. 
D) gold standard.

Question 19

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

Accepted Answer

Although under the gold standard all U.S

Question 20

In 1931,the first major country to abandon the gold standard-in order to increase its policy options in face of the Great Depression-was

Accepted Answer

A) Great Britain. 
B) the United States. 
C) Germany. 
D) France. 
A) Great Britain. 
B) the United States. 
C) Germany. 
D) France.

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is versus the dollar.This shortage can be reduced or eliminated through a of the yen.

Figure 19-7 -Refer to Figure 19-7.Which of the following is true?

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

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

If the purchasing power of the dollar is less than the purchasing power of the British pound,purchasing power parity predicts that the exchange rate will

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Compared to 2007,foreign investment in ________ were lower in 2016.

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,purchasing power parity predicts that

According to the theory of purchasing power parity,if the inflation rate in the United States is greater than the inflation rate in Canada,explain what should happen to the exchange rate between the U.S.dollar and the Canadian dollar.

Because the value of the euro is determined by factors that affect the entire euro zone,during the recession of 2007-2009,individual countries using the euro

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

An increase in the value of the U.S.dollar relative to the Japanese yen would be for Japanese owners of U.S.houses who wish to sell those houses,and for Japanese manufacturers operating factories in the United States that export their products back to Japan.

Figure 19-5 -Refer to Figure 19-5.The Chinese government pegs the yuan to the dollar,at one of the specified exchange rates on the graph,such that it undervalues its currency.Using the figure above,this would generate

The current exchange rate system in the United States is best described as a

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

In 1931,the first major country to abandon the gold standard-in order to increase its policy options in face of the Great Depression-was

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

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Exam 19: The International Financial System

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar.This shortage can be reduced or eliminated through a ________ of the yen.

Figure 19-7 -Refer to Figure 19-7.Which of the following is true?

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

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

If the purchasing power of the dollar is less than the purchasing power of the British pound,purchasing power parity predicts that the exchange rate will

The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.

Compared to 2007,foreign investment in ________ were lower in 2016.

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,purchasing power parity predicts that

According to the theory of purchasing power parity,if the inflation rate in the United States is greater than the inflation rate in Canada,explain what should happen to the exchange rate between the U.S.dollar and the Canadian dollar.

Because the value of the euro is determined by factors that affect the entire euro zone,during the recession of 2007-2009,individual countries using the euro

When the value of a currency is determined ________,the exchange rate system is defined as managed float.

An increase in the value of the U.S.dollar relative to the Japanese yen would be ________ for Japanese owners of U.S.houses who wish to sell those houses,and ________ for Japanese manufacturers operating factories in the United States that export their products back to Japan.

Figure 19-5 -Refer to Figure 19-5.The Chinese government pegs the yuan to the dollar,at one of the specified exchange rates on the graph,such that it undervalues its currency.Using the figure above,this would generate

The current exchange rate system in the United States is best described as a

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

In 1931,the first major country to abandon the gold standard-in order to increase its policy options in face of the Great Depression-was

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

A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is versus the dollar.This shortage can be reduced or eliminated through a of the yen.

An increase in the value of the U.S.dollar relative to the Japanese yen would be for Japanese owners of U.S.houses who wish to sell those houses,and for Japanese manufacturers operating factories in the United States that export their products back to Japan.