Question 1

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

Accepted Answer

A) True 
 B)False

Question 2

If the rate of inflation in the United States exceeds the rate of inflation in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Accepted Answer

A) True 
 B)False

Question 3

Firms in Thailand that had ________ while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Accepted Answer

A) borrowed dollars;above 
B) borrowed baht;above 
C) borrowed dollars;below 
D) borrowed baht;below 
A) borrowed dollars;above 
B) borrowed baht;above 
C) borrowed dollars;below 
D) borrowed baht;below

Question 4

Figure 19-3  
-Refer to Figure 19-3.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 5

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee. )

Accepted Answer

A) a decrease in the value of the rupee relative to the dollar 
B) an increase in the prices of Indian products 
C) an increase in the quantity demanded of Indian products relative to American products 
D) All of the above are correct. 
A) a decrease in the value of the rupee relative to the dollar 
B) an increase in the prices of Indian products 
C) an increase in the quantity demanded of Indian products relative to American products 
D) All of the above are correct.

Question 6

When the value of a currency is determined mostly by demand and supply,but with occasional government intervention,the exchange rate system is defined as

Accepted Answer

A) fixed. 
B) floating. 
C) managed float. 
D) Bretton Woods. 
A) fixed. 
B) floating. 
C) managed float. 
D) Bretton Woods.

Question 7

Figure 19-7  
-Refer to Figure 19-7.Which of the following is true?

Accepted Answer

A) U.S.imports are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
B) The rupee is overvalued at exchange rates less than $.02/rupee. 
C) To achieve an exchange rate greater than $.02/rupee,the Reserve Bank of India must buy surplus dollars with rupees. 
D) Indian exports to the United States are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
A) U.S.imports are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate. 
B) The rupee is overvalued at exchange rates less than $.02/rupee. 
C) To achieve an exchange rate greater than $.02/rupee,the Reserve Bank of India must buy surplus dollars with rupees. 
D) Indian exports to the United States are more expensive at exchange rates greater than $.02/rupee than at the equilibrium exchange rate.

Question 8

Fluctuating exchange rates can alter a multinational firm's profits and losses.German company Bayer produces products in Germany and sells them in the United States.If the dollar depreciates against the euro,then Bayer's sales in the United States should ________ because it will take ________ U.S.dollars to purchase the German-made products.

Accepted Answer

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

Question 9

If a country sets a pegged exchange rate that is below 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 decreasing 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 decreasing the pegged exchange rate

Question 10

You decide to work in London for the next 5 years,accumulate some savings,then move back to the United States and convert your savings from British pounds to dollars.At the time of your move,economists predict that consumers in the United States have lost their affinity for British products,and expect that this declining preference for British products will continue for the next decade.How should this influence your decision to work and save in London?

Accepted Answer

A) You should be discouraged as the declining U.S.preference for British goods should increase the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
B) You should be discouraged as the declining U.S.preference for British goods should decrease the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
C) You should be encouraged as the declining U.S.preference for British goods should decrease the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
D) You should be encouraged as the declining U.S.preference for British goods should increase the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
A) You should be discouraged as the declining U.S.preference for British goods should increase the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
B) You should be discouraged as the declining U.S.preference for British goods should decrease the value of the pound to the dollar and decrease the value of your savings when converted to dollars. 
C) You should be encouraged as the declining U.S.preference for British goods should decrease the value of the pound to the dollar and raise the value of your savings when converted to dollars. 
D) You should be encouraged as the declining U.S.preference for British goods should increase the value of the pound to the dollar and raise the value of your savings when converted to dollars.

Question 11

Refer to the Article Summary.The convertible peso (CUC)is worth 25 times the peso (CUP),yet Cuban officials have for years treated the two currencies as being of equal value.This indicates that the peso (CUP)is ________ compared to the convertible peso (CUC),and would need to be ________ for the two currencies to reach the market equilibrium exchange rate.

Accepted Answer

A) undervalued;revalued 
B) undervalued;devalued 
C) overvalued;revalued 
D) overvalued;devalued 
A) undervalued;revalued 
B) undervalued;devalued 
C) overvalued;revalued 
D) overvalued;devalued

Question 12

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Accepted Answer

A) pressure for the value of the baht to decline. 
B) pressure for the value of the baht to rise. 
C) an increase in the equilibrium value of the baht. 
D) a decrease in the supply of the baht in foreign exchange markets. 
A) pressure for the value of the baht to decline. 
B) pressure for the value of the baht to rise. 
C) an increase in the equilibrium value of the baht. 
D) a decrease in the supply of the baht in foreign exchange markets.

Question 13

If a country's currency ________ the dollar,its exchange rate is fixed.

Accepted Answer

A) is exchanged in currency markets for 
B) depreciates against 
C) is pegged to 
D) has a floating exchange rate value which is equal to 
A) is exchanged in currency markets for 
B) depreciates against 
C) is pegged to 
D) has a floating exchange rate value which is equal to

Question 14

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

Accepted Answer

A) $1 = 2 pesos. 
B) $1 = 4 pesos. 
C) $1 = 1/2 peso. 
D) $1 = 1/4 peso. 
E) $0.50 = 1/2 peso. 
A) $1 = 2 pesos. 
B) $1 = 4 pesos. 
C) $1 = 1/2 peso. 
D) $1 = 1/4 peso. 
E) $0.50 = 1/2 peso.

Question 15

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

Accepted Answer

A) True 
 B)False

Question 16

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

Accepted Answer

A) The value of the Canadian dollar relative to the U.S.dollar increased during this time. 
B) The U.S.dollar depreciated during this time. 
C) The Canadian dollar appreciated during this time. 
D) The U.S.dollar appreciated relative to the Canadian dollar during this time. 
A) The value of the Canadian dollar relative to the U.S.dollar increased during this time. 
B) The U.S.dollar depreciated during this time. 
C) The Canadian dollar appreciated during this time. 
D) The U.S.dollar appreciated relative to the Canadian dollar during this time.

Question 17

Pegging a country's exchange rate to the dollar can be advantageous if

Accepted Answer

A) the country does not trade much with the United States. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy. 
A) the country does not trade much with the United States. 
B) investors believe the dollar to be more stable than the domestic country's currency. 
C) a country wishes to conduct independent monetary policy. 
D) imports are not a significant fraction of the goods the country's consumers buy.

Question 18

Figure 19-9  
-Refer to Figure 19-9.According to the graph,is there a surplus or shortage of Saudi Arabian riyal in exchange for U.S.dollars? To maintain the pegged exchange rate,will the Saudi central bank need to buy riyal in exchange for dollars or sell riyal in exchange for dollars? How many riyal will the Saudi central bank need to buy or sell?

Accepted Answer

There is a surplus of riyal in exchange

Question 19

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

Accepted Answer

A) the gold standard 
B) a managed float exchange rate system 
C) the Bretton Woods System 
D) a fiat system 
A) the gold standard 
B) a managed float exchange rate system 
C) the Bretton Woods System 
D) a fiat system

Question 20

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

Accepted Answer

A) there was a surplus of yuan on the market that the Chinese government had to purchase to maintain the peg,depleting China's reserves of dollars. 
B) there was a surplus of dollars on the market that the Chinese government had to purchase to maintain the peg. 
C) the prices of Chinese exports were higher than they would have been without the peg. 
D) the equilibrium value of the yuan was below the pegged value of the yuan. 
A) there was a surplus of yuan on the market that the Chinese government had to purchase to maintain the peg,depleting China's reserves of dollars. 
B) there was a surplus of dollars on the market that the Chinese government had to purchase to maintain the peg. 
C) the prices of Chinese exports were higher than they would have been without the peg. 
D) the equilibrium value of the yuan was below the pegged value of the yuan.

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

If the rate of inflation in the United States exceeds the rate of inflation in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Firms in Thailand that had while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged the equilibrium exchange rate for the baht.

Figure 19-3 -Refer to Figure 19-3.Which of the following is not true?

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee. )

When the value of a currency is determined mostly by demand and supply,but with occasional government intervention,the exchange rate system is defined as

Figure 19-7 -Refer to Figure 19-7.Which of the following is true?

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

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

If a country's currency ________ the dollar,its exchange rate is fixed.

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

Pegging a country's exchange rate to the dollar can be advantageous if

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

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

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Exam 19: The International Financial System

If speculators believe a currency is soon going to be revalued,they will increase their demand for that currency.

If the rate of inflation in the United States exceeds the rate of inflation in Great Britain we would expect the U.S.dollar to depreciate in value against the British pound.

Firms in Thailand that had ________ while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Figure 19-3 -Refer to Figure 19-3.Which of the following is not true?

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee. )

When the value of a currency is determined mostly by demand and supply,but with occasional government intervention,the exchange rate system is defined as

Figure 19-7 -Refer to Figure 19-7.Which of the following is true?

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

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

If a country's currency ________ the dollar,its exchange rate is fixed.

Suppose Mexico and the United States are on the gold standard.If there is a half an ounce of gold in the dollar,and one quarter an ounce of gold in the peso,then the exchange rate is

The German central bank,the Bundesbank,faced the risk of increased inflation caused by its actions to support an overvalued deutsche mark in the 1960s.

In 2011,a number of Canadians purchased homes in Arizona.Which of the following would not be a logical explanation for this?

Pegging a country's exchange rate to the dollar can be advantageous if

Under which exchange rate system was a dollar redeemable for gold only if the dollar was presented by a foreign central bank?

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

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

Firms in Thailand that had while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged the equilibrium exchange rate for the baht.