Question 1

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 2

What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.

Accepted Answer

If the dollar is "undervalued," that mea

Question 3

Which of the following would decrease the value of the dollar in the long run?

Accepted Answer

A) a decrease in inflation in the United States relative to other countries 
B) a decrease in the demand for American goods relative to goods from other countries 
C) an increase in U.S.tariffs on foreign goods 
D) a decrease in the supply of dollars on the foreign exchange market 
A) a decrease in inflation in the United States relative to other countries 
B) a decrease in the demand for American goods relative to goods from other countries 
C) an increase in U.S.tariffs on foreign goods 
D) a decrease in the supply of dollars on the foreign exchange market

Question 4

From the beginning of 1973 until August 2015,the value of the dollar has ________ relative to the Canadian dollar and ________ relative to the Japanese yen.

Accepted Answer

A) appreciated;appreciated 
B) appreciated;depreciated 
C) depreciated;appreciated 
D) depreciated;depreciated 
A) appreciated;appreciated 
B) appreciated;depreciated 
C) depreciated;appreciated 
D) depreciated;depreciated

Question 5

An easy way to determine if a currency is undervalued at a point in time is to use the model of purchasing power parity.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

Accepted Answer

A) nominal interest rates across countries. 
B) real GDP across countries. 
C) corporate profits across countries. 
D) the relative purchasing power of currencies across countries. 
A) nominal interest rates across countries. 
B) real GDP across countries. 
C) corporate profits across countries. 
D) the relative purchasing power of currencies across countries.

Question 8

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Accepted Answer

A) True 
 B)False

Question 9

Although the pegged exchange rate between the yuan and the dollar has ________ the yuan,China had been reluctant to abandon the peg for fear that abandoning the peg would ________.

Accepted Answer

A) undervalued;reduce exports 
B) undervalued;reduce imports 
C) overvalued;increase imports 
D) overvalued;reduce exports 
A) undervalued;reduce exports 
B) undervalued;reduce imports 
C) overvalued;increase imports 
D) overvalued;reduce exports

Question 10

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 11

In 1991,Argentina decided to peg its currency (the Argentinean peso)to the U.S.dollar.Most of Argentina's trading,however,was with Brazil and Europe,not the United States.What result would pegging the Argentinean peso to the U.S.dollar have on the cost of imports from and exports to Brazil and Europe?

Accepted Answer

If Argentina pegs its currency to the do

Question 12

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In July 2015,The Economist reported that the average price of a Big Mac in the United States was $4.79.In India,the average price of a Big Mac at that time was 116.25 rupees.What is the "implied exchange rate" between the yen and the dollar?

Accepted Answer

A) 0.04 rupees per dollar 
B) 24.27 rupees per dollar 
C) 60.47 rupees per dollar 
D) 556.84 rupees per dollar 
A) 0.04 rupees per dollar 
B) 24.27 rupees per dollar 
C) 60.47 rupees per dollar 
D) 556.84 rupees per dollar

Question 13

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 14

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 15

If the U.S.government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

Accepted Answer

A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall 
A) rise;rise 
B) rise;fall 
C) fall;rise 
D) fall;fall

Question 16

Suppose the United States decides to go back on the gold standard.This should

Accepted Answer

A) decrease the Federal Reserve's ability to pursue active monetary policy. 
B) increase the effectiveness of contractionary monetary policy. 
C) increase the effectiveness of expansionary monetary policy. 
D) improve the Federal Reserve's ability to target inflation. 
A) decrease the Federal Reserve's ability to pursue active monetary policy. 
B) increase the effectiveness of contractionary monetary policy. 
C) increase the effectiveness of expansionary monetary policy. 
D) improve the Federal Reserve's ability to target inflation.

Question 17

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

Accepted Answer

A) foreign direct investment. 
B) capital flight. 
C) capital inflow. 
D) stabilizing capitalization. 
A) foreign direct investment. 
B) capital flight. 
C) capital inflow. 
D) stabilizing capitalization.

Question 18

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

Accepted Answer

A) by purchasing surplus domestic currency at the pegged rate 
B) by selling surplus domestic currency at the pegged rate 
C) by purchasing surplus domestic currency at the equilibrium exchange rate 
D) by increasing the pegged exchange rate 
A) by purchasing surplus domestic currency at the pegged rate 
B) by selling surplus domestic currency at the pegged rate 
C) by purchasing surplus domestic currency at the equilibrium exchange rate 
D) by increasing the pegged exchange rate

Question 19

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 20

Managed float exchange systems were abandoned with the implementation of the gold standard.

Accepted Answer

A) True 
 B)False

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?

What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.

Which of the following would decrease the value of the dollar in the long run?

From the beginning of 1973 until August 2015,the value of the dollar has relative to the Canadian dollar and relative to the Japanese yen.

An easy way to determine if a currency is undervalued at a point in time is to use the model of purchasing power parity.

The gold standard is an example of

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Although the pegged exchange rate between the yuan and the dollar has the yuan,China had been reluctant to abandon the peg for fear that abandoning the peg would .

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

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?

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

If the U.S.government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .

Suppose the United States decides to go back on the gold standard.This should

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

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

Managed float exchange systems were abandoned with the implementation of the gold standard.

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 19-3 -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?

What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.

Which of the following would decrease the value of the dollar in the long run?

From the beginning of 1973 until August 2015,the value of the dollar has ________ relative to the Canadian dollar and ________ relative to the Japanese yen.

An easy way to determine if a currency is undervalued at a point in time is to use the model of purchasing power parity.

The gold standard is an example of

Purchasing power parity is the theory that,in the long run,exchange rates move to equalize

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Although the pegged exchange rate between the yuan and the dollar has ________ the yuan,China had been reluctant to abandon the peg for fear that abandoning the peg would ________.

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

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?

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

If the U.S.government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

Suppose the United States decides to go back on the gold standard.This should

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

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

Managed float exchange systems were abandoned with the implementation of the gold standard.

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

From the beginning of 1973 until August 2015,the value of the dollar has relative to the Canadian dollar and relative to the Japanese yen.

Although the pegged exchange rate between the yuan and the dollar has the yuan,China had been reluctant to abandon the peg for fear that abandoning the peg would .

If the U.S.government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will and the demand for the undervalued currency will .