Question 1

Fixed exchange rates are determined by the:

Accepted Answer

A) policies of the domestic government. 
B) forces of demand and supply in the developed countries. 
C) forces of demand and supply in the foreign exchange market. 
D) forces of demand and supply in the domestic money market. 
A) policies of the domestic government. 
B) forces of demand and supply in the developed countries. 
C) forces of demand and supply in the foreign exchange market. 
D) forces of demand and supply in the domestic money market.

Question 2

Suppose a U.S. dollar initially trades for €1.20. After a few months, the U.S. dollar trades for €1.40. This means:

Accepted Answer

A) the dollar has depreciated. 
B) the dollar has appreciated. 
C) it now costs more U.S. dollars to buy euro-denominated goods. 
D) one can expect to see less euro goods bought by U.S. citizens. 
A) the dollar has depreciated. 
B) the dollar has appreciated. 
C) it now costs more U.S. dollars to buy euro-denominated goods. 
D) one can expect to see less euro goods bought by U.S. citizens.

Question 3

A decrease in capital flows into a country, holding everything else constant, will:

Accepted Answer

A) increase its current account. 
B) be recorded as an increase in its balance of financial account. 
C) decrease the balance of payments on the current account. 
D) make the balance of payments negative. 
A) increase its current account. 
B) be recorded as an increase in its balance of financial account. 
C) decrease the balance of payments on the current account. 
D) make the balance of payments negative.

Question 4

After a devaluation, all other things equal, a country's balance of payments on the current account will likely:

Accepted Answer

A) increase. 
B) decrease. 
C) remain the same. 
D) fluctuate randomly. 
A) increase. 
B) decrease. 
C) remain the same. 
D) fluctuate randomly.

Question 5

The difference between GDP and GNP is that:

Accepted Answer

A) GNP includes international factor income. 
B) GDP includes international factor income. 
C) GNP includes the money supply. 
D) GDP includes the money supply. 
A) GNP includes international factor income. 
B) GDP includes international factor income. 
C) GNP includes the money supply. 
D) GDP includes the money supply.

Question 6

The benefits of floating exchange rates served as one of the motivations for the international system of floating rates established after World War II.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the value of a floating currency is called an appreciation.

Accepted Answer

A) True 
 B)False

Question 8

If the U.S. is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

Accepted Answer

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

Question 9

The Chinese yuan is on a fixed rate. If the government of China uses monetary policy to change the exchange rate of the yuan from $0.16 to $0.10, the Chinese yuan has appreciated.

Accepted Answer

A) True 
 B)False

Question 10

A revaluation can help reduce an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 11

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the U.S. adopts a fixed exchange rate regime, and the target rate is €1.50 per dollar. If the current rate is €1.25 per dollar, what can the U.S. do to reach the target rate?

Accepted Answer

If the current exchange rate is €1.25 pe

Question 13

The exchange rate ensures that the balance of payments really does balance.

Accepted Answer

A) True 
 B)False

Question 14

If a government fixes the exchange rate below the market equilibrium rate, there will be a surplus of its currency.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a country has floated its currency and the central bank sets an expansionary monetary policy. Which of the following is LIKELY to occur?

Accepted Answer

A) Interest rates will fall and capital will flow in. 
B) Interest rates will rise and capital will flow out. 
C) Interest rates will fall and capital will flow out. 
D) Its exchange rate will appreciate. 
A) Interest rates will fall and capital will flow in. 
B) Interest rates will rise and capital will flow out. 
C) Interest rates will fall and capital will flow out. 
D) Its exchange rate will appreciate.

Question 16

Foreign exchange controls may distort incentives for international trade.

Accepted Answer

A) True 
 B)False

Question 17

A devaluation can help reduce shortages of domestic currency.

Accepted Answer

A) True 
 B)False

Question 18

A fixed exchange rate:
I. leaves monetary policy available for domestic stabilization.
II. reduces the uncertainty of international trade.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) neither I nor II 
A) I only 
B) II only 
C) I and II 
D) neither I nor II

Question 19

After a devaluation, all other things equal, probably exports will increase and imports will decrease.

Accepted Answer

A) True 
 B)False

Question 20

In terms of foreign currency, a revaluation makes:

Accepted Answer

A) domestic goods cheaper relative to foreign goods. 
B) both domestic and foreign goods less expensive. 
C) both domestic and foreign goods more expensive. 
D) domestic goods more expensive relative to foreign goods. 
A) domestic goods cheaper relative to foreign goods. 
B) both domestic and foreign goods less expensive. 
C) both domestic and foreign goods more expensive. 
D) domestic goods more expensive relative to foreign goods.

Fixed exchange rates are determined by the:

Suppose a U.S. dollar initially trades for €1.20. After a few months, the U.S. dollar trades for €1.40. This means:

A decrease in capital flows into a country, holding everything else constant, will:

After a devaluation, all other things equal, a country's balance of payments on the current account will likely:

The difference between GDP and GNP is that:

The benefits of floating exchange rates served as one of the motivations for the international system of floating rates established after World War II.

An increase in the value of a floating currency is called an appreciation.

If the U.S. is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.

The Chinese yuan is on a fixed rate. If the government of China uses monetary policy to change the exchange rate of the yuan from $0.16 to $0.10, the Chinese yuan has appreciated.

A revaluation can help reduce an inflationary gap.

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

Suppose that the U.S. adopts a fixed exchange rate regime, and the target rate is €1.50 per dollar. If the current rate is €1.25 per dollar, what can the U.S. do to reach the target rate?

The exchange rate ensures that the balance of payments really does balance.

If a government fixes the exchange rate below the market equilibrium rate, there will be a surplus of its currency.

Suppose a country has floated its currency and the central bank sets an expansionary monetary policy. Which of the following is LIKELY to occur?

Foreign exchange controls may distort incentives for international trade.

A devaluation can help reduce shortages of domestic currency.

A fixed exchange rate: I. leaves monetary policy available for domestic stabilization. II. reduces the uncertainty of international trade.

After a devaluation, all other things equal, probably exports will increase and imports will decrease.

In terms of foreign currency, a revaluation makes:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 19: Open-Economy Macroeconomics

Fixed exchange rates are determined by the:

Suppose a U.S. dollar initially trades for €1.20. After a few months, the U.S. dollar trades for €1.40. This means:

A decrease in capital flows into a country, holding everything else constant, will:

After a devaluation, all other things equal, a country's balance of payments on the current account will likely:

The difference between GDP and GNP is that:

The benefits of floating exchange rates served as one of the motivations for the international system of floating rates established after World War II.

An increase in the value of a floating currency is called an appreciation.

If the U.S. is in a recessionary gap, the appropriate policy is to _____ the money supply to _____ interest rates.

The Chinese yuan is on a fixed rate. If the government of China uses monetary policy to change the exchange rate of the yuan from $0.16 to $0.10, the Chinese yuan has appreciated.

A revaluation can help reduce an inflationary gap.

If the exchange rate for the U.S. dollar changes from $1.25 per euro to $1.50 per euro, then the dollar depreciates.

Suppose that the U.S. adopts a fixed exchange rate regime, and the target rate is €1.50 per dollar. If the current rate is €1.25 per dollar, what can the U.S. do to reach the target rate?

The exchange rate ensures that the balance of payments really does balance.

If a government fixes the exchange rate below the market equilibrium rate, there will be a surplus of its currency.

Suppose a country has floated its currency and the central bank sets an expansionary monetary policy. Which of the following is LIKELY to occur?

Foreign exchange controls may distort incentives for international trade.

A devaluation can help reduce shortages of domestic currency.

A fixed exchange rate: I. leaves monetary policy available for domestic stabilization. II. reduces the uncertainty of international trade.

After a devaluation, all other things equal, probably exports will increase and imports will decrease.

In terms of foreign currency, a revaluation makes:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

If the U.S. is in a recessionary gap, the appropriate policy is to _ the money supply to _ interest rates.