Question 1

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

Accepted Answer

A)  the Fed must sell dollars. 
B)  the Fed must buy dollars. 
C)  the Fed can do nothing in the short run. 
D)  will try to print more dollars for foreign distribution. 
A)  the Fed must sell dollars. 
B)  the Fed must buy dollars. 
C)  the Fed can do nothing in the short run. 
D)  will try to print more dollars for foreign distribution.

Question 2

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, people expect that the dollar will be worth 1.20 euros in the next month. This belief

Accepted Answer

A)  increases the demand for dollars. 
B)  decreases the demand for dollars. 
C)  increases the demand for euros. 
D)  increases the value of exports to Europe. 
A)  increases the demand for dollars. 
B)  decreases the demand for dollars. 
C)  increases the demand for euros. 
D)  increases the value of exports to Europe.

Question 3

If the yen appreciates in value against the dollar, the dollar must have depreciated against the yen.

Accepted Answer

A) True 
 B)False

Question 4

The account that records changes in the U.S. government's holdings of foreign currency is the

Accepted Answer

A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account. 
A)  capital and financial account. 
B)  official settlements account. 
C)  current account. 
D)  U.S. official reserves account.

Question 5

When Safeway supermarkets in the United States buys strawberries from Mexico

Accepted Answer

A)  it uses dollars to pay Mexican farmers. 
B)  it uses pesos to pay Mexican farmers. 
C)  it may use any currency it chooses. 
D)  the transaction shows up in the U.S. capital account. 
A)  it uses dollars to pay Mexican farmers. 
B)  it uses pesos to pay Mexican farmers. 
C)  it may use any currency it chooses. 
D)  the transaction shows up in the U.S. capital account.

Question 6

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

Accepted Answer

A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct. 
A)  Purchasing power parity does not prevail with these prices. 
B)  The U.S. dollar would be expected to depreciate. 
C)  The Jamaican dollar would be expected to appreciate. 
D)  All of the above are correct.

Question 7

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars ________ and the market moves to point such as ________.

Accepted Answer

A)  decreases; A 
B)  decreases; E 
C)  increases; D 
D)  increases; C 
A)  decreases; A 
B)  decreases; E 
C)  increases; D 
D)  increases; C

Question 8

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

Accepted Answer

A)  sell dollars. 
B)  buy dollars. 
C)  violate interest rate parity. 
D)  violate purchasing power parity. 
A)  sell dollars. 
B)  buy dollars. 
C)  violate interest rate parity. 
D)  violate purchasing power parity.

Question 9

The United States is a creditor nation.

Accepted Answer

A) True 
 B)False

Question 10

If interest rates in Japan rise and those in the United States do not change, there is

Accepted Answer

A)  a decrease in the supply of dollars. 
B)  an increase in the supply of dollars. 
C)  a downward movement along the supply curve for dollars. 
D)  None of the above answers is correct. 
A)  a decrease in the supply of dollars. 
B)  an increase in the supply of dollars. 
C)  a downward movement along the supply curve for dollars. 
D)  None of the above answers is correct.

Question 11

An increase in the Japanese interest rate will ________ the supply of dollars and lead the dollar to ________.

Accepted Answer

A)  increase; appreciate 
B)  increase; depreciate 
C)  decrease; appreciate 
D)  decrease; depreciate 
A)  increase; appreciate 
B)  increase; depreciate 
C)  decrease; appreciate 
D)  decrease; depreciate

Question 12

-In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________.

Accepted Answer

A)  decreases; A 
B)  decreases; E 
C)  increases; D 
D)  increases; C 
A)  decreases; A 
B)  decreases; E 
C)  increases; D 
D)  increases; C

Question 13

The term "foreign currency" refers to foreign
I.coins
II.notes
III.bank deposits

Accepted Answer

A)  II only 
B)  II and III only 
C)  I and II only 
D)  I, II, and III 
A)  II only 
B)  II and III only 
C)  I and II only 
D)  I, II, and III

Question 14

The U.S. dollar will appreciate in value if

Accepted Answer

A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Americans choose to buy more foreign goods. 
A)  the demand curve for U.S. dollars shifts rightward. 
B)  the demand curve for U.S. dollars shifts leftward. 
C)  the supply curve of U.S. dollars shifts rightward. 
D)  Americans choose to buy more foreign goods.

Question 15

According to interest rate parity, if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent, the comparable interest rate in the United States will be

Accepted Answer

A)  4 percent. 
B)  3 percent. 
C)  2 percent. 
D)  1 percent. 
A)  4 percent. 
B)  3 percent. 
C)  2 percent. 
D)  1 percent.

Question 16

By fixing its exchange rate, China is most likely

Accepted Answer

A)  achieving a low inflation rate by anchoring to the U.S. inflation rate. 
B)  keeping its export prices low. 
C)  making it easier to compete in world markets. 
D)  Both B and C. 
A)  achieving a low inflation rate by anchoring to the U.S. inflation rate. 
B)  keeping its export prices low. 
C)  making it easier to compete in world markets. 
D)  Both B and C.

Question 17

If a country - during its entire history - has invested more in the rest of the world than the rest of the world has invested in it, the country is a

Accepted Answer

A)  net borrower. 
B)  debtor nation. 
C)  net lender. 
D)  creditor nation. 
A)  net borrower. 
B)  debtor nation. 
C)  net lender. 
D)  creditor nation.

Question 18

As the exchange rate ________, the quantity of dollars ________ in the foreign exchange market ________.

Accepted Answer

A)  rises; supplied; increases 
B)  falls; supplied; increases 
C)  rises; demanded; increases 
D)  falls; demanded; decreases 
A)  rises; supplied; increases 
B)  falls; supplied; increases 
C)  rises; demanded; increases 
D)  falls; demanded; decreases

Question 19

If net exports is 100 and the private sector balance is 150, then the government sector balance is

Accepted Answer

A)  -50. 
B)  50. 
C)  250. 
D)  0. 
A)  -50. 
B)  50. 
C)  250. 
D)  0.

Question 20

An increase in the value of a domestic currency in terms of other currencies is known as

Accepted Answer

A)  an appreciation. 
B)  a depreciation. 
C)  a flexible exchange rate. 
D)  a term not given in the above answers. 
A)  an appreciation. 
B)  a depreciation. 
C)  a flexible exchange rate. 
D)  a term not given in the above answers.

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, people expect that the dollar will be worth 1.20 euros in the next month. This belief

If the yen appreciates in value against the dollar, the dollar must have depreciated against the yen.

The account that records changes in the U.S. government's holdings of foreign currency is the

When Safeway supermarkets in the United States buys strawberries from Mexico

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars and the market moves to point such as .

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

The United States is a creditor nation.

If interest rates in Japan rise and those in the United States do not change, there is

An increase in the Japanese interest rate will the supply of dollars and lead the dollar to .

-In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change the supply of dollars and the market moves to a point such as .

The term "foreign currency" refers to foreign I.coins II.notes III.bank deposits

The U.S. dollar will appreciate in value if

According to interest rate parity, if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent, the comparable interest rate in the United States will be

By fixing its exchange rate, China is most likely

If a country - during its entire history - has invested more in the rest of the world than the rest of the world has invested in it, the country is a

As the exchange rate , the quantity of dollars in the foreign exchange market .

If net exports is 100 and the private sector balance is 150, then the government sector balance is

An increase in the value of a domestic currency in terms of other currencies is known as

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 9: The Exchange Rate and the Balance of Payments

If the Fed sets a target exchange rate that is higher than the current exchange rate, then

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, people expect that the dollar will be worth 1.20 euros in the next month. This belief

If the yen appreciates in value against the dollar, the dollar must have depreciated against the yen.

The account that records changes in the U.S. government's holdings of foreign currency is the

When Safeway supermarkets in the United States buys strawberries from Mexico

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars ________ and the market moves to point such as ________.

Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can

The United States is a creditor nation.

If interest rates in Japan rise and those in the United States do not change, there is

An increase in the Japanese interest rate will ________ the supply of dollars and lead the dollar to ________.

-In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________.

The term "foreign currency" refers to foreign I.coins II.notes III.bank deposits

The U.S. dollar will appreciate in value if

According to interest rate parity, if the interest rate is 1 percent in the European Union and the euro is expected to appreciate 3 percent, the comparable interest rate in the United States will be

By fixing its exchange rate, China is most likely

If a country - during its entire history - has invested more in the rest of the world than the rest of the world has invested in it, the country is a

As the exchange rate ________, the quantity of dollars ________ in the foreign exchange market ________.

If net exports is 100 and the private sector balance is 150, then the government sector balance is

An increase in the value of a domestic currency in terms of other currencies is known as

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-In the figure above, suppose the economy is initially at point B. If people come to believe that the exchange rate will fall in the future, the supply of dollars and the market moves to point such as .

An increase in the Japanese interest rate will the supply of dollars and lead the dollar to .

-In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change the supply of dollars and the market moves to a point such as .

As the exchange rate , the quantity of dollars in the foreign exchange market .