Question 1

The analysis of the effects of currency depreciation include all of the following except the:

Accepted Answer

A)  Absorption approach 
B)  Elasticity approach 
C)  Fiscal approach 
D)  Monetary approach 
A)  Absorption approach 
B)  Elasticity approach 
C)  Fiscal approach 
D)  Monetary approach

Question 2

Figure 14.1 US market for Imported Toyotas  
-In Figure 14.1,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC0 to MC1 leads to

Accepted Answer

A)  a complete pass-through ot the depreciation of the dollar 
B)  a complete pass-through of the appreciation of the dollar 
C)  a partial pass-through of the depreciation of the dollar 
D)  a partial pass-through of the appreciation of the dollar 
A)  a complete pass-through ot the depreciation of the dollar 
B)  a complete pass-through of the appreciation of the dollar 
C)  a partial pass-through of the depreciation of the dollar 
D)  a partial pass-through of the appreciation of the dollar

Question 3

Figure 14.2 The US Market for Imported Toyotas  
-In Figure 14.2,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC2 represents

Accepted Answer

A)  an appreciation of the dollar relative to the yen 
B)  a depreciation of the yen relative to the dollar 
C)  a depreciation of the dollar relative to the yen 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen 
A)  an appreciation of the dollar relative to the yen 
B)  a depreciation of the yen relative to the dollar 
C)  a depreciation of the dollar relative to the yen 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen

Question 4

According to the Marshall-Lerner condition,currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals:

Accepted Answer

A)  0.5 
B)  1.0 
C)  1.5 
D)  2.0 
A)  0.5 
B)  1.0 
C)  1.5 
D)  2.0

Question 5

Given favorable elasticity conditions,an appreciation of the yen results in

Accepted Answer

A)  A smaller Japanese trade deficit 
B)  A larger Japanese trade surplus 
C)  Decreased prices for imported products for Japan 
D)  Increased prices for imported products for Japan 
A)  A smaller Japanese trade deficit 
B)  A larger Japanese trade surplus 
C)  Decreased prices for imported products for Japan 
D)  Increased prices for imported products for Japan

Question 6

The extent to which changing currency values result in changing prices of imports and exports is known as the J-curve effect.

Accepted Answer

A) True 
 B)False

Question 7

Table 14.1.Hypothetical Costs of Producing an Automobile for Toyota Inc.of Japan
  
-Refer to Table 14.1.Assume that Toyota Inc.imports steel from U.S.suppliers,whose costs are denominated in dollars,while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the dollar-equivalent cost of a Toyota automobile equals:

Accepted Answer

A)  $24,000 
B)  $30,000 
C)  $36,000 
D)  $42,000 
A)  $24,000 
B)  $30,000 
C)  $36,000 
D)  $42,000

Question 8

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil:

Accepted Answer

A)  Domestic prices rise--purchasing power of money falls--consumption falls 
B)  Domestic prices rise--purchasing power of money rises--consumption rises 
C)  Domestic prices fall--purchasing power of money rises--consumption falls 
D)  Domestic prices fall--purchasing power of money rises--consumption rises 
A)  Domestic prices rise--purchasing power of money falls--consumption falls 
B)  Domestic prices rise--purchasing power of money rises--consumption rises 
C)  Domestic prices fall--purchasing power of money rises--consumption falls 
D)  Domestic prices fall--purchasing power of money rises--consumption rises

Question 9

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the:

Accepted Answer

A)  Recognition lag 
B)  Decision lag 
C)  Replacement lag 
D)  Production lag 
A)  Recognition lag 
B)  Decision lag 
C)  Replacement lag 
D)  Production lag

Question 10

The shorter the currency pass-through period,the ____ required for currency depreciation to have the intended effect on the trade balance.

Accepted Answer

A)  Shorter the time period 
B)  Longer the time period 
C)  Larger the spending cut 
D)  Smaller the spending cut 
A)  Shorter the time period 
B)  Longer the time period 
C)  Larger the spending cut 
D)  Smaller the spending cut

Question 11

Partial currency pass-through implies that if the dollar's exchange value appreciates by 10 percent,imports would become,say,6 percent more expensive to Americans while U.S.exports would become,say,8 percent cheaper to foreigners.

Accepted Answer

A) True 
 B)False

Question 12

The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.

Accepted Answer

A) True 
 B)False

Question 13

According to the J-curve effect,when the exchange value of a country's currency appreciates,the country's trade balance:

Accepted Answer

A)  First moves toward deficit,then later toward surplus 
B)  First moves toward surplus,then later toward deficit 
C)  Moves into deficit and stays there 
D)  Moves into surplus and stays there 
A)  First moves toward deficit,then later toward surplus 
B)  First moves toward surplus,then later toward deficit 
C)  Moves into deficit and stays there 
D)  Moves into surplus and stays there

Question 14

According to the Marshall-Lerner condition,currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

Accepted Answer

A) True 
 B)False

Question 15

Because of the J-curve effect and partial currency pass-through,a depreciation of the domestic currency tends to increase the size of a:

Accepted Answer

A)  Trade surplus in the short run 
B)  Trade surplus in the long run 
C)  Trade deficit in the short run 
D)  Trade deficit in the long run 
A)  Trade surplus in the short run 
B)  Trade surplus in the long run 
C)  Trade deficit in the short run 
D)  Trade deficit in the long run

Question 16

The effect of currency depreciation on the purchasing power of money balances and the resulting impact on domestic expenditures is emphasized by the:

Accepted Answer

A)  Absorption approach 
B)  Monetary approach 
C)  Fiscal approach 
D)  Elasticity approach 
A)  Absorption approach 
B)  Monetary approach 
C)  Fiscal approach 
D)  Elasticity approach

Question 17

According to the J-curve effect,currency appreciation:

Accepted Answer

A)  Decreases a trade surplus 
B)  Increases a trade surplus 
C)  Decreases a trade surplus before increasing a trade surplus 
D)  Increases a trade surplus before decreasing a trade surplus 
A)  Decreases a trade surplus 
B)  Increases a trade surplus 
C)  Decreases a trade surplus before increasing a trade surplus 
D)  Increases a trade surplus before decreasing a trade surplus

Question 18

Suppose the U.S.price elasticity of demand for imports equals 1.2 and the foreign elasticity of demand for U.S.exports equals 1.5.According to the Marshall-Lerner condition,an appreciation of the dollar's exchange value would worsen the U.S.balance of trade.

Accepted Answer

A) True 
 B)False

Question 19

Figure 14.2 The US Market for Imported Toyotas  
-In Figure 14.2,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC0 to MC2 leads to

Accepted Answer

A)  a complete pass-through ot the depreciation of the dollar 
B)  a complete pass-through of the appreciation of the dollar 
C)  a partial pass-through of the depreciation of the dollar 
D)  a partial pass-through of the appreciation of the dollar 
A)  a complete pass-through ot the depreciation of the dollar 
B)  a complete pass-through of the appreciation of the dollar 
C)  a partial pass-through of the depreciation of the dollar 
D)  a partial pass-through of the appreciation of the dollar

Question 20

The absorption approach to currency depreciation focuses on the

Accepted Answer

A)  Purchasing power of money 
B)  Relative price effects 
C)  Income effects 
D)  Price elasticity of demand 
A)  Purchasing power of money 
B)  Relative price effects 
C)  Income effects 
D)  Price elasticity of demand

The analysis of the effects of currency depreciation include all of the following except the:

Figure 14.1 US market for Imported Toyotas -In Figure 14.1,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₁ leads to

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₂ represents

According to the Marshall-Lerner condition,currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals:

Given favorable elasticity conditions,an appreciation of the yen results in

The extent to which changing currency values result in changing prices of imports and exports is known as the J-curve effect.

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil:

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the:

The shorter the currency pass-through period,the ____ required for currency depreciation to have the intended effect on the trade balance.

Partial currency pass-through implies that if the dollar's exchange value appreciates by 10 percent,imports would become,say,6 percent more expensive to Americans while U.S.exports would become,say,8 percent cheaper to foreigners.

The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.

According to the J-curve effect,when the exchange value of a country's currency appreciates,the country's trade balance:

According to the Marshall-Lerner condition,currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

Because of the J-curve effect and partial currency pass-through,a depreciation of the domestic currency tends to increase the size of a:

The effect of currency depreciation on the purchasing power of money balances and the resulting impact on domestic expenditures is emphasized by the:

According to the J-curve effect,currency appreciation:

Suppose the U.S.price elasticity of demand for imports equals 1.2 and the foreign elasticity of demand for U.S.exports equals 1.5.According to the Marshall-Lerner condition,an appreciation of the dollar's exchange value would worsen the U.S.balance of trade.

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₂ leads to

The absorption approach to currency depreciation focuses on the

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

International Banking: Reserves, Debt, and Risk

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Exam 14: Exchange-Rate Adjustments and the Balance of Payments

The analysis of the effects of currency depreciation include all of the following except the:

Figure 14.1 US market for Imported Toyotas -In Figure 14.1,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC0 to MC1 leads to

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC2 represents

According to the Marshall-Lerner condition,currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals:

Given favorable elasticity conditions,an appreciation of the yen results in

The extent to which changing currency values result in changing prices of imports and exports is known as the J-curve effect.

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil:

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the:

The shorter the currency pass-through period,the ____ required for currency depreciation to have the intended effect on the trade balance.

Partial currency pass-through implies that if the dollar's exchange value appreciates by 10 percent,imports would become,say,6 percent more expensive to Americans while U.S.exports would become,say,8 percent cheaper to foreigners.

The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.

According to the J-curve effect,when the exchange value of a country's currency appreciates,the country's trade balance:

According to the Marshall-Lerner condition,currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

Because of the J-curve effect and partial currency pass-through,a depreciation of the domestic currency tends to increase the size of a:

The effect of currency depreciation on the purchasing power of money balances and the resulting impact on domestic expenditures is emphasized by the:

According to the J-curve effect,currency appreciation:

Suppose the U.S.price elasticity of demand for imports equals 1.2 and the foreign elasticity of demand for U.S.exports equals 1.5.According to the Marshall-Lerner condition,an appreciation of the dollar's exchange value would worsen the U.S.balance of trade.

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC0 to MC2 leads to

The absorption approach to currency depreciation focuses on the

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Systems and Currency Crises

Macroeconomic Policy in an Open Economy

International Banking: Reserves, Debt, and Risk

Filters

Figure 14.1 US market for Imported Toyotas -In Figure 14.1,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₁ leads to

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₂ represents

Figure 14.2 The US Market for Imported Toyotas -In Figure 14.2,D represents the US demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.Assume that Toyota behaves like a monopolist in the US market.A shift in the marginal cost curve from MC₀ to MC₂ leads to