Question 1

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 2

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

Accepted Answer

A)  A positive entry on the trade account. 
B)  Capital inflow into Australia's financial account. 
C)  A negative entry on the financial account. 
D)  An increase in foreign direct investment into Australia. 
A)  A positive entry on the trade account. 
B)  Capital inflow into Australia's financial account. 
C)  A negative entry on the financial account. 
D)  An increase in foreign direct investment into Australia.

Question 3

When the value of a currency is determined ________,the exchange rate system is defined as a managed float.

Accepted Answer

A)  only by supply and demand 
B)  by the country's government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by the country's government, with occasional readjustments in value 
A)  only by supply and demand 
B)  by the country's government 
C)  mostly by supply and demand, but with occasional government intervention 
D)  by the country's government, with occasional readjustments in value

Question 4

A federal budget deficit may ________ exchange rates (foreign currency per domestic currency),and ________ the balance of trade for goods and services.

Accepted Answer

A)  raise; reduce 
B)  raise; raise 
C)  reduce; reduce 
D)  reduce; raise 
A)  raise; reduce 
B)  raise; raise 
C)  reduce; reduce 
D)  reduce; raise

Question 5

The nominal exchange rate is the

Accepted Answer

A)  value of one country's currency over time. 
B)  average value of one country's currency over one quarter. 
C)  value of one country's currency in terms of another country's currency. 
D)  value of one country's currency in terms of another country's currency adjusted for the price level. 
A)  value of one country's currency over time. 
B)  average value of one country's currency over one quarter. 
C)  value of one country's currency in terms of another country's currency. 
D)  value of one country's currency in terms of another country's currency adjusted for the price level.

Question 6

An economy that does not have interactions in trade or finance with other economies is referred to as

Accepted Answer

A)  an open economy. 
B)  a closed economy. 
C)  a trade-balanced economy. 
D)  a zero foreign investment economy. 
A)  an open economy. 
B)  a closed economy. 
C)  a trade-balanced economy. 
D)  a zero foreign investment economy.

Question 7

Under the gold standard,the government must have enough gold to back up any

Accepted Answer

A)  increase in money demand. 
B)  increase in the money supply. 
C)  change in its currency's exchange rate. 
D)  foreign currency deposits in its central bank. 
A)  increase in money demand. 
B)  increase in the money supply. 
C)  change in its currency's exchange rate. 
D)  foreign currency deposits in its central bank.

Question 8

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Accepted Answer

A) True 
 B)False

Question 9

Suppose an iPod costs $200 in Australia and 25 000 yen in Japan.Suppose the exchange rate is $1 = 100 yen.According to purchasing power parity,what should happen to the exchange rate in the long run? What will be the new exchange rate?

Accepted Answer

If purchasing power parity holds then,in

Question 10

What is a gold standard? What kind of exchange rate system is it? What problem does it present during a depression?

Accepted Answer

A gold standard is a monetary system whe

Question 11

Under the gold standard,a chance discovery of gold such as a gold rush would

Accepted Answer

A)  decrease the general price level. 
B)  increase the general price level. 
C)  increase the rate of unemployment. 
D)  decrease the rate of economic growth. 
A)  decrease the general price level. 
B)  increase the general price level. 
C)  increase the rate of unemployment. 
D)  decrease the rate of economic growth.

Question 12

Suppose the price of a digital camera in Australia is $200 and 22 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Accepted Answer

A)  the yen will appreciate relative to the dollar. 
B)  the yen will depreciate relative to the dollar. 
C)  the value of the yen relative to the dollar will not change. 
D)  both the yen and the dollar will appreciate. 
A)  the yen will appreciate relative to the dollar. 
B)  the yen will depreciate relative to the dollar. 
C)  the value of the yen relative to the dollar will not change. 
D)  both the yen and the dollar will appreciate.

Question 13

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade

Accepted Answer

A)  10 yen for $0.60. 
B)  10 yen for $6.00. 
C)  10 yen for $0.17. 
D)  10 yen for $0.01. 
A)  10 yen for $0.60. 
B)  10 yen for $6.00. 
C)  10 yen for $0.17. 
D)  10 yen for $0.01.

Question 14

Explain what the financial account measures.

Accepted Answer

The financial account records purchases

Question 15

A managed float exchange rate system is one in which

Accepted Answer

A)  trading firms establish the exchange rates for individual transactions in the foreign exchange market. 
B)  the central bank intervenes in the currency exchange market to influence, but not fix, the exchange rate. 
C)  the central bank allows private banks to manage their exchange rates. 
D)  the central bank intervenes in the currency exchange market to fix the exchange rate. 
A)  trading firms establish the exchange rates for individual transactions in the foreign exchange market. 
B)  the central bank intervenes in the currency exchange market to influence, but not fix, the exchange rate. 
C)  the central bank allows private banks to manage their exchange rates. 
D)  the central bank intervenes in the currency exchange market to fix the exchange rate.

Question 16

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

Accepted Answer

A) True 
 B)False

Question 17

If the current account is in surplus and the capital account is zero,then the

Accepted Answer

A)  financial account must be in deficit. 
B)  balance of trade must be in deficit. 
C)  balance of payments must be in surplus. 
D)  balance of services must be in deficit. 
A)  financial account must be in deficit. 
B)  balance of trade must be in deficit. 
C)  balance of payments must be in surplus. 
D)  balance of services must be in deficit.

Question 18

A country that imports a significant proportion of its consumer goods can avoid inflation by adopting a fixed exchange rate because it can avoid the price increases of ________ that occur when the value of the domestic currency ________.

Accepted Answer

A)  imports; rises 
B)  imports; falls 
C)  exports; rises 
D)  exports; falls 
A)  imports; rises 
B)  imports; falls 
C)  exports; rises 
D)  exports; falls

Question 19

Which of the following is not a feature of the current exchange rate system?

Accepted Answer

A)  Some developing countries attempt to keep their currencies' exchange rates fixed against the US dollar or other major currencies. 
B)  Developed countries rely on the gold standard to fix their currencies' exchange rates. 
C)  Most Western European countries have adopted a single currency, the euro. 
D)  Australia allows the dollar to float against other major currencies, only intervening occasionally. 
A)  Some developing countries attempt to keep their currencies' exchange rates fixed against the US dollar or other major currencies. 
B)  Developed countries rely on the gold standard to fix their currencies' exchange rates. 
C)  Most Western European countries have adopted a single currency, the euro. 
D)  Australia allows the dollar to float against other major currencies, only intervening occasionally.

Question 20

The United States of America implements a quota on imported cotton.This will ________ the supply of United States dollars relative to the currencies of foreign cotton producers and lead to a(n)________ of United States dollars relative to these foreign currencies.

Accepted Answer

A)  increase; appreciation 
B)  increase; depreciation 
C)  decrease; appreciation 
D)  decrease; depreciation 
A)  increase; appreciation 
B)  increase; depreciation 
C)  decrease; appreciation 
D)  decrease; depreciation

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

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

When the value of a currency is determined ________,the exchange rate system is defined as a managed float.

A federal budget deficit may exchange rates (foreign currency per domestic currency),and the balance of trade for goods and services.

The nominal exchange rate is the

An economy that does not have interactions in trade or finance with other economies is referred to as

Under the gold standard,the government must have enough gold to back up any

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Suppose an iPod costs $200 in Australia and 25 000 yen in Japan.Suppose the exchange rate is $1 = 100 yen.According to purchasing power parity,what should happen to the exchange rate in the long run? What will be the new exchange rate?

What is a gold standard? What kind of exchange rate system is it? What problem does it present during a depression?

Under the gold standard,a chance discovery of gold such as a gold rush would

Suppose the price of a digital camera in Australia is $200 and 22 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade

Explain what the financial account measures.

A managed float exchange rate system is one in which

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

If the current account is in surplus and the capital account is zero,then the

A country that imports a significant proportion of its consumer goods can avoid inflation by adopting a fixed exchange rate because it can avoid the price increases of that occur when the value of the domestic currency .

Which of the following is not a feature of the current exchange rate system?

The United States of America implements a quota on imported cotton.This will the supply of United States dollars relative to the currencies of foreign cotton producers and lead to a(n) of United States dollars relative to these foreign currencies.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters

Exam 19: Comparative Advantage, international Trade, and Exchange Rates

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

If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

When the value of a currency is determined ________,the exchange rate system is defined as a managed float.

A federal budget deficit may ________ exchange rates (foreign currency per domestic currency),and ________ the balance of trade for goods and services.

The nominal exchange rate is the

An economy that does not have interactions in trade or finance with other economies is referred to as

Under the gold standard,the government must have enough gold to back up any

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Suppose an iPod costs $200 in Australia and 25 000 yen in Japan.Suppose the exchange rate is $1 = 100 yen.According to purchasing power parity,what should happen to the exchange rate in the long run? What will be the new exchange rate?

What is a gold standard? What kind of exchange rate system is it? What problem does it present during a depression?

Under the gold standard,a chance discovery of gold such as a gold rush would

Suppose the price of a digital camera in Australia is $200 and 22 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade

Explain what the financial account measures.

A managed float exchange rate system is one in which

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

If the current account is in surplus and the capital account is zero,then the

A country that imports a significant proportion of its consumer goods can avoid inflation by adopting a fixed exchange rate because it can avoid the price increases of ________ that occur when the value of the domestic currency ________.

Which of the following is not a feature of the current exchange rate system?

The United States of America implements a quota on imported cotton.This will ________ the supply of United States dollars relative to the currencies of foreign cotton producers and lead to a(n)________ of United States dollars relative to these foreign currencies.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Filters

A federal budget deficit may exchange rates (foreign currency per domestic currency),and the balance of trade for goods and services.

A country that imports a significant proportion of its consumer goods can avoid inflation by adopting a fixed exchange rate because it can avoid the price increases of that occur when the value of the domestic currency .

The United States of America implements a quota on imported cotton.This will the supply of United States dollars relative to the currencies of foreign cotton producers and lead to a(n) of United States dollars relative to these foreign currencies.