Question 1

Figure 19-6  
-Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) An increase in investment in infrastructure causes U.S.productivity to rise relative to Mexican productivity. 
B) A growing preference for Margaritas causes U.S.consumers to increase their preferences for Mexican tequila relative to American-produced alcohol. 
C) Dumping accusations result in the United States placing tariffs on produce imported from Mexico. 
D) A contractionary monetary policy causes a decrease in the price level of U.S.goods relative to Mexican goods. 
A) An increase in investment in infrastructure causes U.S.productivity to rise relative to Mexican productivity. 
B) A growing preference for Margaritas causes U.S.consumers to increase their preferences for Mexican tequila relative to American-produced alcohol. 
C) Dumping accusations result in the United States placing tariffs on produce imported from Mexico. 
D) A contractionary monetary policy causes a decrease in the price level of U.S.goods relative to Mexican goods.

Question 2

Figure 19-3  
-Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

Accepted Answer

A) greater than $.03/baht 
B) less than $.03/baht 
C) equal to $.03/baht 
D) $1/baht 
A) greater than $.03/baht 
B) less than $.03/baht 
C) equal to $.03/baht 
D) $1/baht

Question 3

Figure 19-4  
-Refer to Figure 19-4.The equilibrium exchange rate is originally at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.If the government abandons the peg,the equilibrium exchange rate would be

Accepted Answer

A) $4/pound. 
B) $3/pound. 
C) $2/pound. 
D) less than $2/pound. 
A) $4/pound. 
B) $3/pound. 
C) $2/pound. 
D) less than $2/pound.

Question 4

By 2013,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 5

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 6

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 7

If currencies around the world are based on the gold standard,and Japan raises the amount of gold for which the yen will trade,then holding all else constant,

Accepted Answer

A) the yen will depreciate against the dollar. 
B) the yen will appreciate against the dollar. 
C) the value of the yen relative to the dollar will stay constant. 
D) the value of U.S.exports to Japan in terms of the yen will increase. 
A) the yen will depreciate against the dollar. 
B) the yen will appreciate against the dollar. 
C) the value of the yen relative to the dollar will stay constant. 
D) the value of U.S.exports to Japan in terms of the yen will increase.

Question 8

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 9

Which aspects of globalization help to increase growth in the world economy?

Accepted Answer

Economic growth relies on the channel th

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

International flows of capital increase both efficiency and growth in countries around the world.

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that

Accepted Answer

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

Question 16

Figure 19-5  
-Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Accepted Answer

A) increase the surplus of Chinese yuan. 
B) decrease the surplus of Chinese yuan. 
C) decrease the shortage of Chinese yuan. 
D) increase the shortage of Chinese yuan. 
A) increase the surplus of Chinese yuan. 
B) decrease the surplus of Chinese yuan. 
C) decrease the shortage of Chinese yuan. 
D) increase the shortage of Chinese yuan.

Question 17

If purchasing power parity tells us that if the exchange rate is a pound for a dollar,then price of a haircut in London should cost the same as a haircut in New York.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Accepted Answer

A) borrowing dollars from the International Monetary Fund in exchange for baht 
B) buying baht on the foreign exchange market to support higher demand for the baht 
C) increasing domestic interest rates to attract more foreign investors 
D) foreigners selling off new investments in Thailand 
A) borrowing dollars from the International Monetary Fund in exchange for baht 
B) buying baht on the foreign exchange market to support higher demand for the baht 
C) increasing domestic interest rates to attract more foreign investors 
D) foreigners selling off new investments in Thailand

Question 19

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Accepted Answer

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

Question 20

U.S.currency continues to be backed by the gold standard to this day.

Accepted Answer

A) True 
 B)False

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

Figure 19-3 -Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

By 2013,how many European countries were members of the European Union?

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

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

If currencies around the world are based on the gold standard,and Japan raises the amount of gold for which the yen will trade,then holding all else constant,

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

Which aspects of globalization help to increase growth in the world economy?

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

The gold standard is an example of

International flows of capital increase both efficiency and growth in countries around the world.

The central bank of the European Union is called the

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.

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

If purchasing power parity tells us that if the exchange rate is a pound for a dollar,then price of a haircut in London should cost the same as a haircut in New York.

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

U.S.currency continues to be backed by the gold standard to this day.

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

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

Figure 19-3 -Refer to Figure 19-3.At what level should the Thai government peg its currency to the dollar to make Thai exports cheaper to the United States?

By 2013,how many European countries were members of the European Union?

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

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

If currencies around the world are based on the gold standard,and Japan raises the amount of gold for which the yen will trade,then holding all else constant,

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

Which aspects of globalization help to increase growth in the world economy?

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

The gold standard is an example of

International flows of capital increase both efficiency and growth in countries around the world.

The central bank of the European Union is called the

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.

A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,purchasing power parity predicts that

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

If purchasing power parity tells us that if the exchange rate is a pound for a dollar,then price of a haircut in London should cost the same as a haircut in New York.

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

U.S.currency continues to be backed by the gold standard to this day.

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

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.