Question 1

When the value of a currency is determined ________,the exchange rate system is defined as a floating exchange rate system.

Accepted Answer

A) only by supply and demand 
B) by its issuing government 
C) mostly by supply and demand,but with occasional government intervention 
D) by its issuing government,with occasional readjustments in value 
A) only by supply and demand 
B) by its issuing government 
C) mostly by supply and demand,but with occasional government intervention 
D) by its issuing government,with occasional readjustments in value

Question 2

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

Accepted Answer

A) True 
 B)False

Question 3

A currency pegged at a value below the market equilibrium exchange rate is

Accepted Answer

A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) None of the above are correct. 
A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) None of the above are correct.

Question 4

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) increase exports and increase the current account deficit. 
B) reduce capital inflows. 
C) reduce exports and reduce economic growth. 
D) increase Chinese holdings of dollars. 
A) increase exports and increase the current account deficit. 
B) reduce capital inflows. 
C) reduce exports and reduce economic growth. 
D) increase Chinese holdings of dollars.

Question 7

All of the following actions were taken by the Thai government to help Thailand maintain its peg against the dollar in the 1990s except

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) imposing restrictions on exports to the United States to prevent too many dollars from entering the economy. 
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) imposing restrictions on exports to the United States to prevent too many dollars from entering the economy.

Question 8

European governments removed many restrictions on flows of capital into and out of Europe in the ________.This policy increased both U.S.investment in European stocks and bonds and European investment in U.S.stocks and bonds.

Accepted Answer

A) 1950s and 1960s 
B) 1960s and 1970s 
C) 1970s and 1980s 
D) 1980s and 1990s 
A) 1950s and 1960s 
B) 1960s and 1970s 
C) 1970s and 1980s 
D) 1980s and 1990s

Question 9

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Accepted Answer

A) Because the yuan was undervalued at the pegged exchange rate,the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely. 
B) Because the yuan was overvalued at the pegged exchange rate,competing firms from other countries feared that abandoning the peg would lead to an increase in Chinese exports. 
C) Competitors feared that the declining value of the dollar would continue to make Chinese goods more expensive. 
D) Because China's population is so large relative to other countries,the pegged exchange rate made the goods of foreign competing firms much less expensive than domestic Chinese goods. 
A) Because the yuan was undervalued at the pegged exchange rate,the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely. 
B) Because the yuan was overvalued at the pegged exchange rate,competing firms from other countries feared that abandoning the peg would lead to an increase in Chinese exports. 
C) Competitors feared that the declining value of the dollar would continue to make Chinese goods more expensive. 
D) Because China's population is so large relative to other countries,the pegged exchange rate made the goods of foreign competing firms much less expensive than domestic Chinese goods.

Question 10

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 Switzerland,the average price of a Big Mac at that time was 6.50 Swiss francs.If the exchange rate between the dollar and the Swiss franc was 0.93 Swiss francs per dollar,how would purchasing power parity predict the exchange rate will change in the long run? Support your answer graphically.

Accepted Answer

The dollar in this example is "undervalu

Question 11

Why do countries peg their currencies,and what problems can result from pegging?

Accepted Answer

Countries peg their currencies to make p

Question 12

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 13

The current exchange rate system in the United States is best described as a

Accepted Answer

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

Question 14

Before 1980,most U.S.corporations raised funds

Accepted Answer

A) in U.S.and foreign banks. 
B) in U.S.stock and bond markets or in U.S.banks. 
C) in U.S.stock and bond markets or in foreign capital markets. 
D) in U.S.banks or in foreign capital markets. 
A) in U.S.and foreign banks. 
B) in U.S.stock and bond markets or in U.S.banks. 
C) in U.S.stock and bond markets or in foreign capital markets. 
D) in U.S.banks or in foreign capital markets.

Question 15

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 16

What factors are not important in determining exchange rate fluctuations in the long run?

Accepted Answer

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

Question 17

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

Accepted Answer

Foreign investors are more likely to buy

Question 18

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound)is evidence that the pound is ________ versus the dollar.This surplus can be reduced or eliminated through a ________ of the pound.

Accepted Answer

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

Question 19

During what period of time did the United States most consistently adhere to the gold standard?

Accepted Answer

A) from the nineteenth century until the 1930s 
B) from the eighteenth century until the nineteenth century 
C) from 1914 until 1929 
D) from 1944 until 1980 
A) from the nineteenth century until the 1930s 
B) from the eighteenth century until the nineteenth century 
C) from 1914 until 1929 
D) from 1944 until 1980

Question 20

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

Accepted Answer

If the dollar is "overvalued," that mean

When the value of a currency is determined ________,the exchange rate system is defined as a floating exchange rate system.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

A currency pegged at a value below the market equilibrium exchange rate is

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

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

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

All of the following actions were taken by the Thai government to help Thailand maintain its peg against the dollar in the 1990s except

European governments removed many restrictions on flows of capital into and out of Europe in the ________.This policy increased both U.S.investment in European stocks and bonds and European investment in U.S.stocks and bonds.

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Why do countries peg their currencies,and what problems can result from pegging?

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

The current exchange rate system in the United States is best described as a

Before 1980,most U.S.corporations raised funds

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

What factors are not important in determining exchange rate fluctuations in the long run?

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound)is evidence that the pound is versus the dollar.This surplus can be reduced or eliminated through a of the pound.

During what period of time did the United States most consistently adhere to the gold standard?

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

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

When the value of a currency is determined ________,the exchange rate system is defined as a floating exchange rate system.

Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system.

A currency pegged at a value below the market equilibrium exchange rate is

The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued.

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

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

All of the following actions were taken by the Thai government to help Thailand maintain its peg against the dollar in the 1990s except

European governments removed many restrictions on flows of capital into and out of Europe in the ________.This policy increased both U.S.investment in European stocks and bonds and European investment in U.S.stocks and bonds.

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Why do countries peg their currencies,and what problems can result from pegging?

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

The current exchange rate system in the United States is best described as a

Before 1980,most U.S.corporations raised funds

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

What factors are not important in determining exchange rate fluctuations in the long run?

Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound)is evidence that the pound is ________ versus the dollar.This surplus can be reduced or eliminated through a ________ of the pound.

During what period of time did the United States most consistently adhere to the gold standard?

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

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

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound)is evidence that the pound is versus the dollar.This surplus can be reduced or eliminated through a of the pound.