Question 1

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Accepted Answer

A) True 
 B)False

Question 2

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

Accepted Answer

A) True 
 B)False

Question 3

In order to support an undervalued euro,the European Central Bank must ________ dollars.Over time,this action will cause the rate of inflation in the EU to ________.

Accepted Answer

A) buy; decrease 
B) buy; increase 
C) sell; increase 
D) sell; decrease 
A) buy; decrease 
B) buy; increase 
C) sell; increase 
D) sell; decrease

Question 4

If speculators believe a currency is undervalued,their trades in international exchange markets will

Accepted Answer

A) increase the surplus of the currency at the existing fixed exchange rate. 
B) decrease the surplus of the currency at the existing fixed exchange rate. 
C) decrease the shortage of the currency at the existing fixed exchange rate. 
D) increase the shortage of the currency at the existing fixed exchange rate. 
A) increase the surplus of the currency at the existing fixed exchange rate. 
B) decrease the surplus of the currency at the existing fixed exchange rate. 
C) decrease the shortage of the currency at the existing fixed exchange rate. 
D) increase the shortage of the currency at the existing fixed exchange rate.

Question 5

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

Accepted Answer

A) unable to conduct monetary policy. 
B) unable to conduct fiscal policy. 
C) using currency which is backed by gold. 
D) using a floating currency. 
A) unable to conduct monetary policy. 
B) unable to conduct fiscal policy. 
C) using currency which is backed by gold. 
D) using a floating currency.

Question 6

Before 1980,U.S.investors rarely invested in foreign capital markets.

Accepted Answer

A) True 
 B)False

Question 7

Compared to a situation in which there is no change in the value of the dollar relative to the peso,in which of the following situations would you be worse off?

Accepted Answer

A) you borrow 10,000 pesos,you earn income in dollars,the dollar appreciates against the peso,you must pay back the loan in pesos 
B) you borrow $10,000,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in dollars 
C) you borrow $10,000,you earn income in pesos,the dollar appreciates against the peso,you must pay back the loan in dollars 
D) you borrow 10,000 pesos,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in pesos 
A) you borrow 10,000 pesos,you earn income in dollars,the dollar appreciates against the peso,you must pay back the loan in pesos 
B) you borrow $10,000,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in dollars 
C) you borrow $10,000,you earn income in pesos,the dollar appreciates against the peso,you must pay back the loan in dollars 
D) you borrow 10,000 pesos,you earn income in pesos,the dollar depreciates against the peso,you must pay back the loan in pesos

Question 8

The central bank of the European Union is called the

Accepted Answer

A) Bundesbank. 
B) Banco Europe. 
C) Federal Reserve. 
D) European Central Bank. 
A) Bundesbank. 
B) Banco Europe. 
C) Federal Reserve. 
D) European Central Bank.

Question 9

One reason purchasing power parity does not exactly hold is that many goods are not traded internationally.

Accepted Answer

A) True 
 B)False

Question 10

If the average productivity of American firms is rising more quickly than the average productivity of Indian firms,which of the following would you expect to see? (India's currency is the rupee.)

Accepted Answer

A) an increase in the value of the rupee relative to the dollar 
B) a decrease in the prices of Indian products 
C) a decrease in the quantity demanded of Indian products relative to American products 
D) an increase in the quantity demanded of Indian products relative to American products 
A) an increase in the value of the rupee relative to the dollar 
B) a decrease in the prices of Indian products 
C) a decrease in the quantity demanded of Indian products relative to American products 
D) an increase in the quantity demanded of Indian products relative to American products

Question 11

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

Accepted Answer

A) U.S.productivity rises relative to European productivity. 
B) Europeans decrease their preferences for U.S.goods relative to European goods. 
C) The European Union increases its quotas on U.S.-produced wine. 
D) an increase in the price level of U.S.goods relative to European goods 
A) U.S.productivity rises relative to European productivity. 
B) Europeans decrease their preferences for U.S.goods relative to European goods. 
C) The European Union increases its quotas on U.S.-produced wine. 
D) an increase in the price level of U.S.goods relative to European goods

Question 12

Which of the following would increase the value of the dollar in the long run?

Accepted Answer

A) an increase in inflation in the United States relative to other countries 
B) an increase in the demand for American goods relative to goods from other countries 
C) a decrease in U.S.tariffs on foreign goods 
D) an increase in the supply of dollars on the foreign exchange market 
A) an increase in inflation in the United States relative to other countries 
B) an increase in the demand for American goods relative to goods from other countries 
C) a decrease in U.S.tariffs on foreign goods 
D) an increase in the supply of dollars on the foreign exchange market

Question 13

If a country's currency ________ the dollar,its exchange rate is fixed.

Accepted Answer

A) is exchanged in currency markets for 
B) depreciates against 
C) is pegged to 
D) has a floating exchange rate value which is equal to 
A) is exchanged in currency markets for 
B) depreciates against 
C) is pegged to 
D) has a floating exchange rate value which is equal to

Question 14

By 2017,how many European countries were members of the European Union?

Accepted Answer

A) 12 
B) 17 
C) 28 
D) 57 
A) 12 
B) 17 
C) 28 
D) 57

Question 15

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

Accepted Answer

A) $1 = 2 pesos. 
B) $1 = 4 pesos. 
C) $1 = 1/2 peso. 
D) $1 = 1/4 peso. 
E) $0.50 = 1/2 peso. 
A) $1 = 2 pesos. 
B) $1 = 4 pesos. 
C) $1 = 1/2 peso. 
D) $1 = 1/4 peso. 
E) $0.50 = 1/2 peso.

Question 16

Figure 19-8  
-Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate

Accepted Answer

A) there is a shortage of euros equal to 500 million. 
B) there is a surplus of euros equal to 300 million. 
C) there is a shortage of euros equal to 200 million. 
D) there is a surplus of euros equal to 700 million. 
A) there is a shortage of euros equal to 500 million. 
B) there is a surplus of euros equal to 300 million. 
C) there is a shortage of euros equal to 200 million. 
D) there is a surplus of euros equal to 700 million.

Question 17

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In January 2017,The Economist reported that the average price of a Big Mac in the United States was $4.93.In Switzerland,the average price of a Big Mac at that time was 6.50 Swiss francs.If the exchange rate between the dollar and the Swiss franc was 0.93 Swiss francs per dollar,explain how it would be profitable to buy Big Macs in the United States instead of in Switzerland.

Accepted Answer

If a Big Mac costs 6.50 Swiss francs in

Question 18

The gold standard is an example of

Accepted Answer

A) a floating exchange rate system. 
B) a managed float exchange rate system. 
C) a fixed exchange rate system. 
D) a flexible exchange rate system. 
E) the Bretton Woods System. 
A) a floating exchange rate system. 
B) a managed float exchange rate system. 
C) a fixed exchange rate system. 
D) a flexible exchange rate system. 
E) the Bretton Woods System.

Question 19

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

Accepted Answer

A) by purchasing surplus domestic currency at the pegged rate 
B) by selling surplus domestic currency at the pegged rate 
C) by purchasing surplus domestic currency at the equilibrium exchange rate 
D) by increasing the pegged exchange rate 
A) by purchasing surplus domestic currency at the pegged rate 
B) by selling surplus domestic currency at the pegged rate 
C) by purchasing surplus domestic currency at the equilibrium exchange rate 
D) by increasing the pegged exchange rate

Question 20

By the end of 2017,________ members of the European Union were using the euro as their currency.

Accepted Answer

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

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

In order to support an undervalued euro,the European Central Bank must dollars.Over time,this action will cause the rate of inflation in the EU to .

If speculators believe a currency is undervalued,their trades in international exchange markets will

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

Before 1980,U.S.investors rarely invested in foreign capital markets.

Compared to a situation in which there is no change in the value of the dollar relative to the peso,in which of the following situations would you be worse off?

The central bank of the European Union is called the

One reason purchasing power parity does not exactly hold is that many goods are not traded internationally.

If the average productivity of American firms is rising more quickly than the average productivity of Indian firms,which of the following would you expect to see? (India's currency is the rupee.)

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

Which of the following would increase the value of the dollar in the long run?

If a country's currency ________ the dollar,its exchange rate is fixed.

By 2017,how many European countries were members of the European Union?

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

Figure 19-8 -Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate

The gold standard is an example of

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

By the end of 2017,________ members of the European Union were using the euro as their currency.

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

Both countries involved in a pegging of currency must agree to the terms of the pegging.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

In order to support an undervalued euro,the European Central Bank must ________ dollars.Over time,this action will cause the rate of inflation in the EU to ________.

If speculators believe a currency is undervalued,their trades in international exchange markets will

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

Before 1980,U.S.investors rarely invested in foreign capital markets.

Compared to a situation in which there is no change in the value of the dollar relative to the peso,in which of the following situations would you be worse off?

The central bank of the European Union is called the

One reason purchasing power parity does not exactly hold is that many goods are not traded internationally.

If the average productivity of American firms is rising more quickly than the average productivity of Indian firms,which of the following would you expect to see? (India's currency is the rupee.)

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

Which of the following would increase the value of the dollar in the long run?

If a country's currency ________ the dollar,its exchange rate is fixed.

By 2017,how many European countries were members of the European Union?

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

Figure 19-8 -Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate

The gold standard is an example of

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

By the end of 2017,________ members of the European Union were using the euro as their currency.

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

In order to support an undervalued euro,the European Central Bank must dollars.Over time,this action will cause the rate of inflation in the EU to .