Question 1

The three most important international financial centers today are

Accepted Answer

A) New York,Los Angeles,and London. 
B) London,Tokyo,and Beijing. 
C) San Francisco,Paris,and Mexico City. 
D) Tokyo,London,and New York. 
A) New York,Los Angeles,and London. 
B) London,Tokyo,and Beijing. 
C) San Francisco,Paris,and Mexico City. 
D) Tokyo,London,and New York.

Question 2

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

Accepted Answer

A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s. 
A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s.

Question 3

What explains the appreciation of the Japanese yen relative to the U.S.dollar from 1970 to the early 1990s?

Accepted Answer

A) Japanese productivity rose faster than U.S.productivity. 
B) Japanese inflation rose faster than U.S.inflation. 
C) U.S.consumers reduced their preferences for Japanese goods. 
D) High tariffs and restrictive quotas in the United States caused the value of the dollar to decline. 
A) Japanese productivity rose faster than U.S.productivity. 
B) Japanese inflation rose faster than U.S.inflation. 
C) U.S.consumers reduced their preferences for Japanese goods. 
D) High tariffs and restrictive quotas in the United States caused the value of the dollar to decline.

Question 4

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

Accepted Answer

A) The value of the Canadian dollar relative to the U.S.dollar increased during this time. 
B) The U.S.dollar depreciated during this time. 
C) The Canadian dollar appreciated during this time. 
D) The U.S.dollar appreciated relative to the Canadian dollar during this time. 
A) The value of the Canadian dollar relative to the U.S.dollar increased during this time. 
B) The U.S.dollar depreciated during this time. 
C) The Canadian dollar appreciated during this time. 
D) The U.S.dollar appreciated relative to the Canadian dollar during this time.

Question 5

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

Accepted Answer

A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) depreciating in value relative to its pegged currency. 
A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) depreciating in value relative to its pegged currency.

Question 6

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

Accepted Answer

A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation. 
A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation.

Question 7

Figure 19-10  
-Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

Accepted Answer

A) The Bank of England would have to buy 0.7 million pounds per day with dollars. 
B) There is a shortage of pounds equal to 0.7 million. 
C) The Bank of England would have to sell 0.7 million pounds per day in exchange for dollars. 
D) The par exchange rate is below the equilibrium rate,causing a shortage of domestic currency. 
A) The Bank of England would have to buy 0.7 million pounds per day with dollars. 
B) There is a shortage of pounds equal to 0.7 million. 
C) The Bank of England would have to sell 0.7 million pounds per day in exchange for dollars. 
D) The par exchange rate is below the equilibrium rate,causing a shortage of domestic currency.

Question 8

Figure 19-10  
-Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of ________ and the IMF would allow a ________ in the exchange rate.

Accepted Answer

A) fundamental disequilibrium; revaluation 
B) fundamental disequilibrium; devaluation 
C) fundamental overvaluation; devaluation 
D) fundamental overvaluation; revaluation 
A) fundamental disequilibrium; revaluation 
B) fundamental disequilibrium; devaluation 
C) fundamental overvaluation; devaluation 
D) fundamental overvaluation; revaluation

Question 9

Pegging a country's exchange rate to the dollar can be advantageous if

Accepted Answer

A) the country does not trade much with the United States. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy. 
A) the country does not trade much with the United States. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy.

Question 10

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Accepted Answer

Under the gold standard,the exchange rat

Question 11

Figure 19-4  
-Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

Accepted Answer

A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million. 
A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million.

Question 12

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 French 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 French wine. 
D) an increase in the price level of U.S.goods relative to European goods

Question 13

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 14

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In July 2013,the Economist reported that the average price of a Big Mac in the United States was $4.56.In Mexico,the average price of a Big Mac at that time was 37 pesos.If the exchange rate between the dollar and the peso was 13.60 pesos per dollar,how would purchasing power parity predict the exchange rate will change in the long run? Support your answer graphically.

Accepted Answer

The dollar in this example is "overvalue

Question 15

Figure 19-11  
-Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is ________ versus the dollar.A ________ of the pound would correct the fundamental disequilibrium that exists in this market.

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 16

Managed float exchange systems were abandoned with the implementation of the gold standard.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which of the following is most important in explaining exchange rate fluctuations in the short run?

Accepted Answer

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

Question 19

With a common currency such as the euro,

Accepted Answer

A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same,regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies. 
A) trade barriers between countries using the currency are increased. 
B) individual countries using the currency are no longer able to run independent monetary policies. 
C) the prices of goods across countries using the currency must always be the same,regardless of consumer preferences for goods across countries. 
D) individual countries using the currency are no longer able to run independent fiscal policies.

Question 20

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

Accepted Answer

Foreign investors are more likely to buy

The three most important international financial centers today are

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

What explains the appreciation of the Japanese yen relative to the U.S.dollar from 1970 to the early 1990s?

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

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

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of and the IMF would allow a in the exchange rate.

Pegging a country's exchange rate to the dollar can be advantageous if

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

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

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

Figure 19-11 -Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is versus the dollar.A of the pound would correct the fundamental disequilibrium that exists in this market.

Managed float exchange systems were abandoned with the implementation of the gold standard.

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.)

Which of the following is most important in explaining exchange rate fluctuations in the short run?

With a common currency such as the euro,

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

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

The three most important international financial centers today are

Americans,other than jewelers or rare coin collectors,were not allowed to own gold from the early 1930s until the

What explains the appreciation of the Japanese yen relative to the U.S.dollar from 1970 to the early 1990s?

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

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

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $4 per pound in the figure above,then which of the following is true?

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of ________ and the IMF would allow a ________ in the exchange rate.

Pegging a country's exchange rate to the dollar can be advantageous if

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.At the pegged exchange rate,

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

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

Figure 19-11 -Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is ________ versus the dollar.A ________ of the pound would correct the fundamental disequilibrium that exists in this market.

Managed float exchange systems were abandoned with the implementation of the gold standard.

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.)

Which of the following is most important in explaining exchange rate fluctuations in the short run?

With a common currency such as the euro,

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

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

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of and the IMF would allow a in the exchange rate.

Figure 19-11 -Refer to Figure 19-11.The graph above depicts supply and demand for British pounds during a trading day.At a fixed exchange rate of $2.00 per pound,the pound is versus the dollar.A of the pound would correct the fundamental disequilibrium that exists in this market.