Question 1

Foreign currency prices of the U.S.dollar are currently determined by a managed float exchange rate system.

Accepted Answer

A) True 
 B)False

Question 2

If relative purchasing power between the United States and Argentina is 3.22 pesos per dollar,under which circumstances would we say that the dollar is "overvalued"?

Accepted Answer

A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos per dollar 
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos per dollar 
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos per dollar 
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos per dollar 
A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos per dollar 
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos per dollar 
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos per dollar 
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos per dollar

Question 3

By 2015,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 4

Under the Bretton Woods exchange rate system,________ could sell their dollars to the American government in exchange for gold.

Accepted Answer

A) foreign central banks 
B) American citizens 
C) foreign citizens 
D) all of the above 
A) foreign central banks 
B) American citizens 
C) foreign citizens 
D) all of the above

Question 5

Figure 30-3  
-Refer to Figure 30-3.Which of the following is not true?

Accepted Answer

A) Thai imports from the United States are cheaper at exchange rates greater than $.03/baht than at the equilibrium exchange rate. 
B) The baht is overvalued at exchange rates greater than $.03/baht. 
C) To achieve an exchange rate greater than $.03/baht,the Bank of Thailand must buy surplus dollars with bahts. 
D) Thai exports to the United States are more expensive at exchange rates greater than $.03/baht than at the equilibrium exchange rate. 
A) Thai imports from the United States are cheaper at exchange rates greater than $.03/baht than at the equilibrium exchange rate. 
B) The baht is overvalued at exchange rates greater than $.03/baht. 
C) To achieve an exchange rate greater than $.03/baht,the Bank of Thailand must buy surplus dollars with bahts. 
D) Thai exports to the United States are more expensive at exchange rates greater than $.03/baht than at the equilibrium exchange rate.

Question 6

Destabilizing speculation refers to

Accepted Answer

A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity. 
A) actions taken by the International Monetary Fund that increase lending to countries who have pegged their currencies against the dollar. 
B) actions taken by currency traders to sell a currency that is undervalued. 
C) actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price. 
D) any depreciation of a country's currency as a result of long-run adjustments to purchasing power parity.

Question 7

Figure 30-10  
-Refer to Figure 30-10.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

If one U.S.dollar could be exchanged for one Australian dollar in 1970,and one U.S.dollar can now be exchanged for 0.98 Australian dollars,which of the following is true?

Accepted Answer

A) The U.S.dollar gained value against the Australian dollar. 
B) The Australian dollar lost value against the U.S.dollar. 
C) The Australian dollar gained value against the U.S.dollar. 
D) Both A and C are true. 
A) The U.S.dollar gained value against the Australian dollar. 
B) The Australian dollar lost value against the U.S.dollar. 
C) The Australian dollar gained value against the U.S.dollar. 
D) Both A and C are true.

Question 9

The three most important financial centers in the world today are New York,London,and Tokyo.

Accepted Answer

A) True 
 B)False

Question 10

An increase in the value of the U.S.dollar relative to the Japanese yen would be ________ for Japanese owners of U.S.houses who wish to sell those houses,and ________ for Japanese manufacturers operating factories in the United States that export their products back to Japan.

Accepted Answer

A) good news;good news 
B) good news;bad news 
C) bad news;good news 
D) bad news;bad news 
A) good news;good news 
B) good news;bad news 
C) bad news;good news 
D) bad news;bad news

Question 11

If the implied exchange rate between Big Mac prices in the United States and the Philippines is 68 pesos per dollar,but the actual exchange rate between the United States and the Philippines is 43 pesos per dollar,which of the following would you expect to see?

Accepted Answer

A) a depreciation of the dollar 
B) an increase in the demand for dollars. 
C) a decrease in the demand for dollars 
D) an appreciation of the Philippine pesos 
A) a depreciation of the dollar 
B) an increase in the demand for dollars. 
C) a decrease in the demand for dollars 
D) an appreciation of the Philippine pesos

Question 12

Among countries that purchased U.S.stocks and bonds in 2015,China was the biggest customer,accounting for over 50 percent of all purchases.

Accepted Answer

A) True 
 B)False

Question 13

If a country's currency is "pegged" to the dollar,its exchange rate is

Accepted Answer

A) floating. 
B) flexible. 
C) fixed. 
D) undervalued. 
A) floating. 
B) flexible. 
C) fixed. 
D) undervalued.

Question 14

If the exchange rate between the U.S.dollar and the Mexican peso (pesos per dollar)is less than the relative purchasing power between the two countries,which of the following would be true?

Accepted Answer

A) There are opportunities for profit by purchasing goods in the United States and then selling them in Mexico. 
B) Purchasing power parity predicts that the value of the dollar will fall as traders take advantage of arbitrage opportunities. 
C) Purchasing power parity predicts that the dollar is overvalued as traders take advantage of arbitrage opportunities. 
D) There are no arbitrage opportunities for which traders can take advantage. 
A) There are opportunities for profit by purchasing goods in the United States and then selling them in Mexico. 
B) Purchasing power parity predicts that the value of the dollar will fall as traders take advantage of arbitrage opportunities. 
C) Purchasing power parity predicts that the dollar is overvalued as traders take advantage of arbitrage opportunities. 
D) There are no arbitrage opportunities for which traders can take advantage.

Question 15

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 16

The Bretton Woods system confronted severe problems in the 1960s,problems which included

Accepted Answer

A) some countries with overvalued currencies refused to devalue their currencies. 
B) dollars held by foreign central banks exceeded gold reserves held by the United States. 
C) the increased demand for gold brought about by lifting the prohibition against U.S.citizens owning gold. 
D) all of the above 
A) some countries with overvalued currencies refused to devalue their currencies. 
B) dollars held by foreign central banks exceeded gold reserves held by the United States. 
C) the increased demand for gold brought about by lifting the prohibition against U.S.citizens owning gold. 
D) all of the above

Question 17

What is destabilizing speculation? What role did it play in the collapse of the Bretton Woods system?

Accepted Answer

Destabilizing speculation refers to acti

Question 18

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?

Accepted Answer

A) Some goods and services produced in any country are not traded internationally. 
B) Consumer preferences for goods and services across countries are very similar. 
C) Most countries do not impose barriers to trade. 
D) Most countries have free markets with little,if any,government regulation. 
A) Some goods and services produced in any country are not traded internationally. 
B) Consumer preferences for goods and services across countries are very similar. 
C) Most countries do not impose barriers to trade. 
D) Most countries have free markets with little,if any,government regulation.

Question 19

Why did the United States abandon the gold standard in the 1930s?

Accepted Answer

A) The government wanted to rapidly expand the money supply in response to the Great Depression. 
B) The government wanted to move away from a floating exchange rate system to a fixed exchange rate system. 
C) The Treasury Department in the United States found it was cheaper to print paper money instead of gold coins. 
D) New sources of gold were discovered,so the price of gold plummeted,dramatically reducing the value of the dollar. 
A) The government wanted to rapidly expand the money supply in response to the Great Depression. 
B) The government wanted to move away from a floating exchange rate system to a fixed exchange rate system. 
C) The Treasury Department in the United States found it was cheaper to print paper money instead of gold coins. 
D) New sources of gold were discovered,so the price of gold plummeted,dramatically reducing the value of the dollar.

Question 20

Pegging a country's exchange rate to the dollar can be advantageous in all of the following situations except

Accepted Answer

A) if the country has extensive trade with the United States. 
B) if investors believe the dollar to be more stable than the domestic country's currency. 
C) if a country wishes to conduct independent monetary policy. 
D) if imports are a significant fraction of the goods the country's consumers buy. 
A) if the country has extensive trade with the United States. 
B) if investors believe the dollar to be more stable than the domestic country's currency. 
C) if a country wishes to conduct independent monetary policy. 
D) if imports are a significant fraction of the goods the country's consumers buy.

Exam 30: The International Financial System

Foreign currency prices of the U.S.dollar are currently determined by a managed float exchange rate system.

If relative purchasing power between the United States and Argentina is 3.22 pesos per dollar,under which circumstances would we say that the dollar is "overvalued"?

By 2015,how many European countries were members of the European Union?

Under the Bretton Woods exchange rate system,________ could sell their dollars to the American government in exchange for gold.

Figure 30-3 -Refer to Figure 30-3.Which of the following is not true?

Destabilizing speculation refers to

Figure 30-10 -Refer to Figure 30-10.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?

If one U.S.dollar could be exchanged for one Australian dollar in 1970,and one U.S.dollar can now be exchanged for 0.98 Australian dollars,which of the following is true?

The three most important financial centers in the world today are New York,London,and Tokyo.

An increase in the value of the U.S.dollar relative to the Japanese yen would be ________ for Japanese owners of U.S.houses who wish to sell those houses,and ________ for Japanese manufacturers operating factories in the United States that export their products back to Japan.

If the implied exchange rate between Big Mac prices in the United States and the Philippines is 68 pesos per dollar,but the actual exchange rate between the United States and the Philippines is 43 pesos per dollar,which of the following would you expect to see?

Among countries that purchased U.S.stocks and bonds in 2015,China was the biggest customer,accounting for over 50 percent of all purchases.

If a country's currency is "pegged" to the dollar,its exchange rate is

If the exchange rate between the U.S.dollar and the Mexican peso (pesos per dollar)is less than the relative purchasing power between the two countries,which of the following would be true?

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.

The Bretton Woods system confronted severe problems in the 1960s,problems which included

What is destabilizing speculation? What role did it play in the collapse of the Bretton Woods system?

Which of the following explains why purchasing power parity does not completely explain long-run fluctuations in exchange rates?

Why did the United States abandon the gold standard in the 1930s?

Pegging a country's exchange rate to the dollar can be advantageous in all of the following situations except

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

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

An increase in the value of the U.S.dollar relative to the Japanese yen would be for Japanese owners of U.S.houses who wish to sell those houses,and for Japanese manufacturers operating factories in the United States that export their products back to Japan.