Question 1

Which of the following statements about capital markets is true?

Accepted Answer

A) The U.S.capital market is currently larger than all other capital markets combined. 
B) At one time,the U.S.capital market was larger than all other capital markets combined,but that is no longer the case. 
C) There are currently large capital markets in Europe,but none in Asia. 
D) The largest capital markets in the world today are in East Asia and Latin America. 
A) The U.S.capital market is currently larger than all other capital markets combined. 
B) At one time,the U.S.capital market was larger than all other capital markets combined,but that is no longer the case. 
C) There are currently large capital markets in Europe,but none in Asia. 
D) The largest capital markets in the world today are in East Asia and Latin America.

Question 2

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

Accepted Answer

Although under the gold standard all U.S

Question 3

Figure 19-7  
-Refer to Figure 19-7.If the Indian government pegs its currency to the dollar at a value above $.02/rupee,we would say the currency is

Accepted Answer

A) undervalued. 
B) overvalued. 
C) parity valued. 
D) equilibrium valued. 
A) undervalued. 
B) overvalued. 
C) parity valued. 
D) equilibrium valued.

Question 4

A Big Mac costs $4.79 in the United States and 9.6 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Accepted Answer

A) $1.60 
B) $2.00 
C) $3.20 
D) $4.64 
A) $1.60 
B) $2.00 
C) $3.20 
D) $4.64

Question 5

Figure 19-10  
-Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of ________ and the IMF would allow a ________ in the exchange rate.

Accepted Answer

A) fundamental disequilibrium;revaluation 
B) fundamental disequilibrium;devaluation 
C) fundamental overvaluation;devaluation 
D) fundamental overvaluation;revaluation 
A) fundamental disequilibrium;revaluation 
B) fundamental disequilibrium;devaluation 
C) fundamental overvaluation;devaluation 
D) fundamental overvaluation;revaluation

Question 6

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

Accepted Answer

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

Question 7

The fixed exchange rate system set up in the 1940s was the

Accepted Answer

A) purchasing power parity exchange system. 
B) gold standard. 
C) Bretton Woods system. 
D) European Union euro system. 
A) purchasing power parity exchange system. 
B) gold standard. 
C) Bretton Woods system. 
D) European Union euro system.

Question 8

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency,rather than choosing a floating exchange rate?

Accepted Answer

A) Pegging allows the country more flexibility in conducting monetary policy. 
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports. 
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency. 
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning. 
A) Pegging allows the country more flexibility in conducting monetary policy. 
B) Pegging helps avoid inflation in imported goods caused by currency depreciation for countries with significant levels of imports. 
C) Pegging insures that interest payments stemming from foreign loans do not fluctuate with the value of the currency. 
D) Pegging reduces the uncertainty caused by currency fluctuations and thereby simplifies business planning.

Question 9

Figure 19-8  
-Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

Accepted Answer

A) there is a shortage of euros equal to 500 million. 
B) there is a surplus of euros equal to 300 million. 
C) there is a shortage of euros equal to 200 million. 
D) there is a surplus of euros equal to 700 million. 
A) there is a shortage of euros equal to 500 million. 
B) there is a surplus of euros equal to 300 million. 
C) there is a shortage of euros equal to 200 million. 
D) there is a surplus of euros equal to 700 million.

Question 10

If inflation in Mexico is lower than it is in the United States,

Accepted Answer

A) the purchasing power of the peso in buying Mexican goods will fall relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the peso will rise in the long run. 
D) the purchasing power of the dollar in buying American goods will rise relative to the peso. 
A) the purchasing power of the peso in buying Mexican goods will fall relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the peso will rise in the long run. 
D) the purchasing power of the dollar in buying American goods will rise relative to the peso.

Question 11

Why might a developing country choose to peg the value of its currency to the dollar?

Accepted Answer

The dollar is a relatively stable curren

Question 12

An increase in a fixed exchange rate from $2.00 per pound to $2.10 per pound is called a(n)________ of the pound.

Accepted Answer

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

Question 13

The year in which euro coins and paper currency were introduced and participating "euro zone" countries withdrew old domestic currencies from circulation was

Accepted Answer

A) 2007. 
B) 2002. 
C) 1999. 
D) 1995. 
A) 2007. 
B) 2002. 
C) 1999. 
D) 1995.

Question 14

The central bank of the European Union is called the

Accepted Answer

A) Bundesbank. 
B) Banco Europe. 
C) Federal Reserve. 
D) European Central Bank. 
A) Bundesbank. 
B) Banco Europe. 
C) Federal Reserve. 
D) European Central Bank.

Question 15

Figure 19-5  
-Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Accepted Answer

A) increase the surplus of Chinese yuan. 
B) decrease the surplus of Chinese yuan. 
C) decrease the shortage of Chinese yuan. 
D) increase the shortage of Chinese yuan. 
A) increase the surplus of Chinese yuan. 
B) decrease the surplus of Chinese yuan. 
C) decrease the shortage of Chinese yuan. 
D) increase the shortage of Chinese yuan.

Question 16

Figure 19-4  
-Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift,

Accepted Answer

A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million. 
A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million.

Question 17

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Accepted Answer

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

Question 18

Foreign purchases of stocks and bonds issued by U.S.corporations ________ between 1995 and 2007 and ________ in 2014.

Accepted Answer

A) increased at a slow but steady pace;increased dramatically 
B) remained stagnant;declined sharply 
C) increased dramatically;declined 
D) decreased slightly;increased slightly 
A) increased at a slow but steady pace;increased dramatically 
B) remained stagnant;declined sharply 
C) increased dramatically;declined 
D) decreased slightly;increased slightly

Question 19

Members of the European Union decided to adopt a single currency by what year?

Accepted Answer

A) 2008 
B) 2005 
C) 1999 
D) 1992 
A) 2008 
B) 2005 
C) 1999 
D) 1992

Question 20

Describe the four determinants of exchange rates in the long run.

Accepted Answer

One determinant of exchange rates in the

Which of the following statements about capital markets is true?

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

Figure 19-7 -Refer to Figure 19-7.If the Indian government pegs its currency to the dollar at a value above $.02/rupee,we would say the currency is

A Big Mac costs $4.79 in the United States and 9.6 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of and the IMF would allow a in the exchange rate.

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

The fixed exchange rate system set up in the 1940s was the

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency,rather than choosing a floating exchange rate?

Figure 19-8 -Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

If inflation in Mexico is lower than it is in the United States,

Why might a developing country choose to peg the value of its currency to the dollar?

An increase in a fixed exchange rate from $2.00 per pound to $2.10 per pound is called a(n)________ of the pound.

The year in which euro coins and paper currency were introduced and participating "euro zone" countries withdrew old domestic currencies from circulation was

The central bank of the European Union is called the

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift,

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

Foreign purchases of stocks and bonds issued by U.S.corporations between 1995 and 2007 and in 2014.

Members of the European Union decided to adopt a single currency by what year?

Describe the four determinants of exchange rates in the long run.

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

Which of the following statements about capital markets is true?

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

Figure 19-7 -Refer to Figure 19-7.If the Indian government pegs its currency to the dollar at a value above $.02/rupee,we would say the currency is

A Big Mac costs $4.79 in the United States and 9.6 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of ________ and the IMF would allow a ________ in the exchange rate.

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

The fixed exchange rate system set up in the 1940s was the

Which of the following is not an advantage to a country of choosing to fix its exchange rate against a major currency,rather than choosing a floating exchange rate?

Figure 19-8 -Refer to Figure 19-8.The equilibrium exchange rate is at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.At the pegged exchange rate,

If inflation in Mexico is lower than it is in the United States,

Why might a developing country choose to peg the value of its currency to the dollar?

An increase in a fixed exchange rate from $2.00 per pound to $2.10 per pound is called a(n)________ of the pound.

The year in which euro coins and paper currency were introduced and participating "euro zone" countries withdrew old domestic currencies from circulation was

The central bank of the European Union is called the

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift,

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Foreign purchases of stocks and bonds issued by U.S.corporations ________ between 1995 and 2007 and ________ in 2014.

Members of the European Union decided to adopt a single currency by what year?

Describe the four determinants of exchange rates in the long run.

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

Figure 19-10 -Refer to Figure 19-10.Under the Bretton Woods System of exchange rates,if the par exchange rate was $2 per pound in the figure above,and equilibrium persisted at $3,then this was evidence of and the IMF would allow a in the exchange rate.

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

Foreign purchases of stocks and bonds issued by U.S.corporations between 1995 and 2007 and in 2014.