Question 1

What does it mean when one currency is "pegged" against another currency?

Accepted Answer

One currency is pegged against

Question 2

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Accepted Answer

A) True 
 B)False

Question 3

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

Accepted Answer

A) unable to conduct monetary policy. 
B) unable to conduct fiscal policy. 
C) using currency which is backed by gold. 
D) using a floating currency. 
A) unable to conduct monetary policy. 
B) unable to conduct fiscal policy. 
C) using currency which is backed by gold. 
D) using a floating currency.

Question 4

If the exchange rate between the U.S.dollar and the Indian rupee (rupees per dollar)is greater 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 India and then selling them in the United States. 
B) Purchasing power parity predicts that the value of the dollar will rise as traders take advantage of arbitrage opportunities. 
C) Purchasing power parity predicts that the dollar is undervalued 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 India and then selling them in the United States. 
B) Purchasing power parity predicts that the value of the dollar will rise as traders take advantage of arbitrage opportunities. 
C) Purchasing power parity predicts that the dollar is undervalued as traders take advantage of arbitrage opportunities. 
D) There are no arbitrage opportunities for which traders can take advantage.

Question 5

The three most important international financial centers today are

Accepted Answer

A) New York,Los Angeles,and London. 
B) London,Tokyo,and Beijing. 
C) San Francisco,Paris,and Mexico City. 
D) Tokyo,London,and New York. 
A) New York,Los Angeles,and London. 
B) London,Tokyo,and Beijing. 
C) San Francisco,Paris,and Mexico City. 
D) Tokyo,London,and New York.

Question 6

If the rate of productivity growth in the United States exceeds the rate of productivity growth 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 7

The Bulgarian currency,the lev,is pegged to the euro at a rate of 1.96 leva (leva is the plural of lev)to the euro.At the pegged exchange rate,how many euros would be exchanged for one lev?

Accepted Answer

A) 0.51 
B) 1.00 
C) 1.96 
D) 3.84 
A) 0.51 
B) 1.00 
C) 1.96 
D) 3.84

Question 8

Table 19-1
   Source: "The Big Mac Index," Economist,July 16,2015.
-Refer to Table 19-1.Fill in the missing values in the above table.Assume the Big Mac is selling for $4.79 in the United States.Explain whether the U.S.dollar is overvalued or undervalued relative to each of the other currencies and predict what will happen in the future to each exchange rate.

Accepted Answer

To calculate the implied exchange rate,d

Question 9

If a firm in Thailand borrows dollars from a U.S.bank,its interest payments on the loan in bahts will decrease if the baht appreciates against the dollar.

Accepted Answer

A) True 
 B)False

Question 10

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 11

The International Monetary Fund was created to facilitate the borrowing and lending of dollar reserves to central banks of the countries participating in the Bretton Wood System.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is most important in explaining exchange rate fluctuations in the short run?

Accepted Answer

A) relative price levels across countries 
B) preferences for domestic and foreign goods 
C) interest rates 
D) relative rates of productivity growth across countries 
A) relative price levels across countries 
B) preferences for domestic and foreign goods 
C) interest rates 
D) relative rates of productivity growth across countries

Question 13

Which aspects of globalization help to increase growth in the world economy?

Accepted Answer

Economic growth relies on the channel th

Question 14

Under the Bretton Woods exchange rate system,set up in 1944,which of the following was true?

Accepted Answer

A) Americans could sell their dollars to the American government in exchange for gold. 
B) Americans could sell their dollars to the American government in exchange for silver. 
C) Americans could sell their dollars to foreign central banks in exchange for gold. 
D) Foreign central banks could sell their dollars to the American government in exchange for gold. 
A) Americans could sell their dollars to the American government in exchange for gold. 
B) Americans could sell their dollars to the American government in exchange for silver. 
C) Americans could sell their dollars to foreign central banks in exchange for gold. 
D) Foreign central banks could sell their dollars to the American government in exchange for gold.

Question 15

If the GDP deflator in the United States is 114,and the GDP deflator in Ukraine is 142,which of the following exchange rates would the theory of purchasing power parity predict in the long run? (The Ukrainian currency is the hryvnia. )

Accepted Answer

A) 0.80 hryvnias per dollar 
B) 1.25 hryvnias per dollar 
C) 2.80 hryvnias per dollar 
D) 28 hryvnias per dollar 
A) 0.80 hryvnias per dollar 
B) 1.25 hryvnias per dollar 
C) 2.80 hryvnias per dollar 
D) 28 hryvnias per dollar

Question 16

Figure 19-6  
-Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) Lack of investment in infrastructure causes Mexican productivity to fall relative to American productivity. 
B) A possibility of diseased poultry in The United States causes Mexican consumers to decrease their preferences for U.S.-raised chickens relative to Mexican-raised chickens. 
C) A new trade agreement with Mexico results in the United States removing all tariffs on sugar imported from Mexico. 
D) An expansionary monetary policy in Mexico causes an increase in the price level of Mexican goods relative to U.S.goods. 
A) Lack of investment in infrastructure causes Mexican productivity to fall relative to American productivity. 
B) A possibility of diseased poultry in The United States causes Mexican consumers to decrease their preferences for U.S.-raised chickens relative to Mexican-raised chickens. 
C) A new trade agreement with Mexico results in the United States removing all tariffs on sugar imported from Mexico. 
D) An expansionary monetary policy in Mexico causes an increase in the price level of Mexican goods relative to U.S.goods.

Question 17

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 18

What is the difference between a devaluation and a revaluation of a currency?

Accepted Answer

A devaluation is a reduction i

Question 19

If a country's currency is determined only by the demand and supply for that country's currency,the country is said to have a

Accepted Answer

A) floating exchange rate. 
B) fixed exchange rate. 
C) gold standard. 
D) managed float. 
A) floating exchange rate. 
B) fixed exchange rate. 
C) gold standard. 
D) managed float.

Question 20

In the United States today,the U.S.dollar is backed by

Accepted Answer

A) gold. 
B) silver. 
C) U.S.Treasury securities. 
D) none of the above 
A) gold. 
B) silver. 
C) U.S.Treasury securities. 
D) none of the above

What does it mean when one currency is "pegged" against another currency?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

If the exchange rate between the U.S.dollar and the Indian rupee (rupees per dollar)is greater than the relative purchasing power between the two countries,which of the following would be true?

The three most important international financial centers today are

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

The Bulgarian currency,the lev,is pegged to the euro at a rate of 1.96 leva (leva is the plural of lev)to the euro.At the pegged exchange rate,how many euros would be exchanged for one lev?

If a firm in Thailand borrows dollars from a U.S.bank,its interest payments on the loan in bahts will decrease if the baht appreciates against the dollar.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

The International Monetary Fund was created to facilitate the borrowing and lending of dollar reserves to central banks of the countries participating in the Bretton Wood System.

Which of the following is most important in explaining exchange rate fluctuations in the short run?

Which aspects of globalization help to increase growth in the world economy?

Under the Bretton Woods exchange rate system,set up in 1944,which of the following was true?

If the GDP deflator in the United States is 114,and the GDP deflator in Ukraine is 142,which of the following exchange rates would the theory of purchasing power parity predict in the long run? (The Ukrainian currency is the hryvnia. )

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

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

What is the difference between a devaluation and a revaluation of a currency?

If a country's currency is determined only by the demand and supply for that country's currency,the country is said to have a

In the United States today,the U.S.dollar is backed by

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

What does it mean when one currency is "pegged" against another currency?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Countries that use the euro as their currency face similar concerns as countries did during the years of the gold standard in that each are (were)

If the exchange rate between the U.S.dollar and the Indian rupee (rupees per dollar)is greater than the relative purchasing power between the two countries,which of the following would be true?

The three most important international financial centers today are

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

The Bulgarian currency,the lev,is pegged to the euro at a rate of 1.96 leva (leva is the plural of lev)to the euro.At the pegged exchange rate,how many euros would be exchanged for one lev?

If a firm in Thailand borrows dollars from a U.S.bank,its interest payments on the loan in bahts will decrease if the baht appreciates against the dollar.

U.S.dollars can currently be exchanged for gold by foreign central banks,but not by U.S.citizens.

The International Monetary Fund was created to facilitate the borrowing and lending of dollar reserves to central banks of the countries participating in the Bretton Wood System.

Which of the following is most important in explaining exchange rate fluctuations in the short run?

Which aspects of globalization help to increase growth in the world economy?

Under the Bretton Woods exchange rate system,set up in 1944,which of the following was true?

If the GDP deflator in the United States is 114,and the GDP deflator in Ukraine is 142,which of the following exchange rates would the theory of purchasing power parity predict in the long run? (The Ukrainian currency is the hryvnia. )

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

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

What is the difference between a devaluation and a revaluation of a currency?

If a country's currency is determined only by the demand and supply for that country's currency,the country is said to have a

In the United States today,the U.S.dollar is backed by

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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