Question 1

If exports from the United States decrease because of a recession in Japan, all other things equal, the dollar will appreciate.

Accepted Answer

A) True 
 B)False

Question 2

A reduction in the interest rate has _____ impact on aggregate demand with _____ exchange rates than with _____ exchange rates.

Accepted Answer

A) a smaller; floating; fixed 
B) a larger; floating; fixed 
C) the same; fixed; floating 
D) the same; floating; fixed 
A) a smaller; floating; fixed 
B) a larger; floating; fixed 
C) the same; fixed; floating 
D) the same; floating; fixed

Question 3

When a country's currency undergoes a real appreciation:

Accepted Answer

A) exports fall and imports rise. 
B) exports rise and imports fall. 
C) the merchandise trade balance becomes positive. 
D) exports and imports do not change. 
A) exports fall and imports rise. 
B) exports rise and imports fall. 
C) the merchandise trade balance becomes positive. 
D) exports and imports do not change.

Question 4

A reduction in the value of a floating currency is called a devaluation.

Accepted Answer

A) True 
 B)False

Question 5

Capital tends to move from:

Accepted Answer

A) less developed to more developed countries. 
B) poorer countries to wealthier countries. 
C) slow-growing countries to fast-growing countries. 
D) fast-growing countries to slow-growing countries. 
A) less developed to more developed countries. 
B) poorer countries to wealthier countries. 
C) slow-growing countries to fast-growing countries. 
D) fast-growing countries to slow-growing countries.

Question 6

Countries that follow floating exchange rate regimes:

Accepted Answer

A) tend to insulate themselves from economic fluctuations in other countries. 
B) give up the ability to use monetary policy as a stabilization tool. 
C) find that they are susceptible to economic fluctuations in other countries. 
D) give up the ability to use fiscal policy as a stabilization tool. 
A) tend to insulate themselves from economic fluctuations in other countries. 
B) give up the ability to use monetary policy as a stabilization tool. 
C) find that they are susceptible to economic fluctuations in other countries. 
D) give up the ability to use fiscal policy as a stabilization tool.

Question 7

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

Accepted Answer

A) True 
 B)False

Question 8

A reduction in the value of a currency that is determined under a floating exchange rate regime is a(n):

Accepted Answer

A) depreciation. 
B) devaluation. 
C) appreciation. 
D) revaluation. 
A) depreciation. 
B) devaluation. 
C) appreciation. 
D) revaluation.

Question 9

Use the following to answer questions :
Scenario: Purchasing Power Parity
A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain.
-(Scenario: Purchasing Power Parity) Look at the scenario Purchasing Power Parity. What is the purchasing power parity of the pound?

Accepted Answer

A) $5 
B) $2.50 
C) $1.25 
D) $0.80 
A) $5 
B) $2.50 
C) $1.25 
D) $0.80

Question 10

Use the following to answer questions :
Figure: Exchange Market Intervention  
-(Figure: Exchange Market Intervention) Look at panel (a) in the figure Exchange Market Intervention. Which of the following approaches could the Genovian government use to raise the value of the geno above its present equilibrium exchange rate and into the target range?

Accepted Answer

A) use its own currency to buy U.S. dollars 
B) shift the demand for genos to the right by raising interest rates in Genovia 
C) eliminate the exchange controls that limit the right of Genovian citizens to buy U.S. dollars 
D) tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens 
A) use its own currency to buy U.S. dollars 
B) shift the demand for genos to the right by raising interest rates in Genovia 
C) eliminate the exchange controls that limit the right of Genovian citizens to buy U.S. dollars 
D) tighten the exchange controls that limit purchases of U.S. dollars by Genovian citizens

Question 11

If the supply of U.S. dollars in Britain increases, then all of the following occurs EXCEPT that:

Accepted Answer

A) the dollar depreciates against the pound. 
B) the pound sterling appreciates against the dollar. 
C) the dollar price of the pound increases. 
D) the dollar appreciates. 
A) the dollar depreciates against the pound. 
B) the pound sterling appreciates against the dollar. 
C) the dollar price of the pound increases. 
D) the dollar appreciates.

Question 12

The Bretton Woods agreement was abandoned in the early 1990s.

Accepted Answer

A) True 
 B)False

Question 13

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, all of the following will be true EXCEPT that:

Accepted Answer

A) the demand curve for dollars will shift to the left. 
B) the Japanese will buy more U.S. goods. 
C) Americans will buy more Japanese goods. 
D) the exchange rate of yen per U.S. dollar will fall. 
A) the demand curve for dollars will shift to the left. 
B) the Japanese will buy more U.S. goods. 
C) Americans will buy more Japanese goods. 
D) the exchange rate of yen per U.S. dollar will fall.

Question 14

The purchasing power parity between two currencies is the exchange rate at which a given basket of goods and services would cost the same amount in each country.

Accepted Answer

A) True 
 B)False

Question 15

An increase in U.S. interest rates causes a decrease in aggregate demand by _____ investment spending, _____ the dollar, and _____.

Accepted Answer

A) increasing; appreciating; increasing imports 
B) decreasing; appreciating; increasing imports 
C) increasing; depreciating; increasing exports 
D) decreasing; depreciating; decreasing exports 
A) increasing; appreciating; increasing imports 
B) decreasing; appreciating; increasing imports 
C) increasing; depreciating; increasing exports 
D) decreasing; depreciating; decreasing exports

Question 16

Use the following to answer questions :
Scenario: Exchange Rates
The value of a euro goes from US$1.25 to US$1.50.
-(Scenario: Exchange Rates) Look at the scenario Exchange Rates. The euro has:

Accepted Answer

A) depreciated. 
B) appreciated. 
C) been devalued. 
D) not been affected for use in international trade. 
A) depreciated. 
B) appreciated. 
C) been devalued. 
D) not been affected for use in international trade.

Question 17

A floating 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 18

When a currency becomes more valuable in terms of other currencies, it depreciates.

Accepted Answer

A) True 
 B)False

Question 19

A floating rate system eliminates uncertainty about the future value of a currency.

Accepted Answer

A) True 
 B)False

Question 20

A country with a fixed exchange rate regime:

Accepted Answer

A) tends to increase uncertainty regarding the value of its currency. 
B) allows countries to use both fiscal and monetary policies to stabilize their economy. 
C) reduces a country's bias toward inflationary policies. 
D) reduces the amount of foreign currency a country must hold. 
A) tends to increase uncertainty regarding the value of its currency. 
B) allows countries to use both fiscal and monetary policies to stabilize their economy. 
C) reduces a country's bias toward inflationary policies. 
D) reduces the amount of foreign currency a country must hold.

If exports from the United States decrease because of a recession in Japan, all other things equal, the dollar will appreciate.

A reduction in the interest rate has ___ impact on aggregate demand with _ exchange rates than with ___ exchange rates.

When a country's currency undergoes a real appreciation:

A reduction in the value of a floating currency is called a devaluation.

Capital tends to move from:

Countries that follow floating exchange rate regimes:

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

A reduction in the value of a currency that is determined under a floating exchange rate regime is a(n):

If the supply of U.S. dollars in Britain increases, then all of the following occurs EXCEPT that:

The Bretton Woods agreement was abandoned in the early 1990s.

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, all of the following will be true EXCEPT that:

The purchasing power parity between two currencies is the exchange rate at which a given basket of goods and services would cost the same amount in each country.

An increase in U.S. interest rates causes a decrease in aggregate demand by ___ investment spending, _ the dollar, and ___.

Use the following to answer questions : Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. -(Scenario: Exchange Rates) Look at the scenario Exchange Rates. The euro has:

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

When a currency becomes more valuable in terms of other currencies, it depreciates.

A floating rate system eliminates uncertainty about the future value of a currency.

A country with a fixed exchange rate regime:

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

If exports from the United States decrease because of a recession in Japan, all other things equal, the dollar will appreciate.

A reduction in the interest rate has _____ impact on aggregate demand with _____ exchange rates than with _____ exchange rates.

When a country's currency undergoes a real appreciation:

A reduction in the value of a floating currency is called a devaluation.

Capital tends to move from:

Countries that follow floating exchange rate regimes:

Other things equal, a recession in Mexico would cause U.S. exports to Mexico to increase and U.S. aggregate demand to increase.

A reduction in the value of a currency that is determined under a floating exchange rate regime is a(n):

If the supply of U.S. dollars in Britain increases, then all of the following occurs EXCEPT that:

The Bretton Woods agreement was abandoned in the early 1990s.

Consider the demand for and the supply of the U.S. dollar. The exchange rate is measured in terms of yen per dollar. If the demand for the U.S. dollar decreases, all of the following will be true EXCEPT that:

The purchasing power parity between two currencies is the exchange rate at which a given basket of goods and services would cost the same amount in each country.

An increase in U.S. interest rates causes a decrease in aggregate demand by _____ investment spending, _____ the dollar, and _____.

Use the following to answer questions : Scenario: Exchange Rates The value of a euro goes from US$1.25 to US$1.50. -(Scenario: Exchange Rates) Look at the scenario Exchange Rates. The euro has:

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

When a currency becomes more valuable in terms of other currencies, it depreciates.

A floating rate system eliminates uncertainty about the future value of a currency.

A country with a fixed exchange rate regime:

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

A reduction in the interest rate has ___ impact on aggregate demand with _ exchange rates than with ___ exchange rates.

An increase in U.S. interest rates causes a decrease in aggregate demand by ___ investment spending, _ the dollar, and ___.