Question 1

An American computer is priced at $1,500.If the exchange rate between the U.S.dollar and the Japanese yen is $0.01 per yen,the equivalent price of the computer in yen is approximately __________ yen.

Accepted Answer

A)  15,000 
B)  15 
C)  1,500,000 
D)  150,000

Question 2

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.If the inflation rate in the United States rises relative to the inflation rate in Mexico,it follows that

Accepted Answer

A)  the dollar will appreciate and the peso will depreciate. 
B)  both the dollar and the peso will appreciate, although the peso will appreciate before the dollar appreciates. 
C)  the dollar will depreciate and the peso will appreciate. 
D)  both the dollar and the peso will depreciate, although the peso will depreciate before the dollar depreciates. 
E)  There is not enough information to answer the question.

Question 3

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

Accepted Answer

A)  increase; appreciate 
B)  decrease; appreciate 
C)  increase; depreciate 
D)  decrease; depreciate

Question 4

Assume that there are only two countries in the world,the United States and Japan.What creates the demand for and supply of Japanese yen on the foreign exchange market? Name three different things that could cause the yen to appreciate in value.

Accepted Answer

The answer of Assume that there are only two countries...

Question 5

Suppose that prices in France increase by 15 percent while prices in the United States remain relatively stable.We would expect that (on the foreign exchange market)the demand for U.S.dollars will __________ and the supply of U.S.dollars will __________.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase

Question 6

The answer is: "When the official price of a currency is lowered." What is the question?

Accepted Answer

A)  What is overvaluation? 
B)  What is revaluation? 
C)  What is appreciation? 
D)  What is depreciation? 
E)  none of the above

Question 7

Under a fixed exchange rate system,if the dollar price of a Mexican peso is below its equilibrium level,the peso is said to be

Accepted Answer

A)  depreciable. 
B)  undervalued. 
C)  overvalued. 
D)  appreciable. 
E)  none of the above

Question 8

The answer is: "The price of one currency in terms of another currency." What is the question?

Accepted Answer

A)  What is a foreign currency? 
B)  What is an exchange rate? 
C)  What is a flexible exchange rate system? 
D)  What is a fixed exchange rate system?

Question 9

Exhibit 35-5
 
-Refer to Exhibit 35-5. Based on the information provided in this table,between Monday and Tuesday,the U.S.dollar ____________ against the Thai baht and the baht _____________ against the U.S.dollar.

Accepted Answer

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

Question 10

The market in which the currencies of different countries are exchanged is called the

Accepted Answer

A)  money market. 
B)  capital market. 
C)  foreign exchange market. 
D)  loanable funds market.

Question 11

Suppose that the exchange rate between the U.S.dollar and the Mexican peso starts out at $0.11 per peso. If the exchange rate then changes to $0.13 per peso,there will be a(n)__________ in the quantity demanded of dollars by Mexicans,and therefore there will be a(n)__________ in the quantity supplied of pesos to the foreign exchange market.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase

Question 12

To know whether the dollar is overvalued,we need to know

Accepted Answer

A)  what foreign currency the dollar is being compared with. 
B)  the real interest rate in the United States and the real interest rate in whatever country's currency the dollar is being compared with. 
C)  the equilibrium exchange rate between the dollar and the foreign currency the dollar is being compared with. 
D)  whether Federal Reserve monetary policy is expansionary or contractionary. 
E)  There is not enough information to answer the question.

Question 13

If,under a fixed exchange rate system,the dollar price of a Mexican peso is below its equilibrium level,then the

Accepted Answer

A)  dollar is overvalued. 
B)  peso is overvalued. 
C)  dollar has depreciated. 
D)  peso has appreciated.

Question 14

The purchasing power parity theory states that

Accepted Answer

A)  exchange rates between any two currencies will adjust to reflect changes in the relative price level of the two countries. 
B)  exchange rates between any two currencies will adjust to reflect change in the relative income growth rates of the two countries. 
C)  the larger the economic growth rate in a country, the less likely its currency will depreciate in value. 
D)  exchange rates cannot be compared over time. 
E)  currencies appreciate as often as they depreciate.

Question 15

Suppose that the exchange rate between the U.S.dollar and the Mexican peso is 1 peso = $0.11. If the U.S.dollar price per Mexican peso changes to 1 peso =$0.10,the peso is said to have __________ and the dollar to have __________.

Accepted Answer

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

Question 16

The lower the U.S.dollar price per Mexican peso,the __________ Mexican goods are for Americans and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

Accepted Answer

A)  less expensive; more, more 
B)  more expensive; fewer, fewer 
C)  more expensive; more, fewer 
D)  less expensive; more, fewer 
E)  none of the above

Question 17

In the long run,the purchasing power parity theory predicts exchange rates accurately,particularly when there is a large difference in inflation rates across countries.

Accepted Answer

A) True 
 B)False

Question 18

Proponents of the flexible exchange rate system argue that under a fixed exchange rate system,

Accepted Answer

A)  there is too great a chance that the exchange rate will diverge from the equilibrium exchange rate. 
B)  nations that experience persistent trade deficits might be tempted to impose trade barriers. 
C)  nations might sacrifice their domestic economic policy goals for the sake of maintaining the exchange rate. 
D)  b and c 
E)  a, b, and c

Question 19

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the domestic currency

Accepted Answer

A)  has appreciated. 
B)  has depreciated. 
C)  is overvalued. 
D)  is undervalued. 
E)  is revalued.

Question 20

If,under a fixed exchange rate system,the dollar price of a Mexican peso is above its equilibrium level,then the

Accepted Answer

A)  dollar is undervalued. 
B)  peso is undervalued. 
C)  dollar has appreciated. 
D)  peso has depreciated.

Exam 35: International Finance

An American computer is priced at $1,500.If the exchange rate between the U.S.dollar and the Japanese yen is $0.01 per yen,the equivalent price of the computer in yen is approximately __________ yen.

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.If the inflation rate in the United States rises relative to the inflation rate in Mexico,it follows that

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will and the yen will .

Assume that there are only two countries in the world,the United States and Japan.What creates the demand for and supply of Japanese yen on the foreign exchange market? Name three different things that could cause the yen to appreciate in value.

Suppose that prices in France increase by 15 percent while prices in the United States remain relatively stable.We would expect that (on the foreign exchange market) the demand for U.S.dollars will and the supply of U.S.dollars will .

The answer is: "When the official price of a currency is lowered." What is the question?

Under a fixed exchange rate system,if the dollar price of a Mexican peso is below its equilibrium level,the peso is said to be

The answer is: "The price of one currency in terms of another currency." What is the question?

Exhibit 35-5 -Refer to Exhibit 35-5. Based on the information provided in this table,between Monday and Tuesday,the U.S.dollar against the Thai baht and the baht _ against the U.S.dollar.

The market in which the currencies of different countries are exchanged is called the

To know whether the dollar is overvalued,we need to know

If,under a fixed exchange rate system,the dollar price of a Mexican peso is below its equilibrium level,then the

The purchasing power parity theory states that

Suppose that the exchange rate between the U.S.dollar and the Mexican peso is 1 peso = $0.11. If the U.S.dollar price per Mexican peso changes to 1 peso =$0.10,the peso is said to have and the dollar to have .

The lower the U.S.dollar price per Mexican peso,the Mexican goods are for Americans and the Mexican goods Americans will buy; thus __ pesos will be demanded.

In the long run,the purchasing power parity theory predicts exchange rates accurately,particularly when there is a large difference in inflation rates across countries.

Proponents of the flexible exchange rate system argue that under a fixed exchange rate system,

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the domestic currency

If,under a fixed exchange rate system,the dollar price of a Mexican peso is above its equilibrium level,then the

Exam 35: International Finance

An American computer is priced at $1,500.If the exchange rate between the U.S.dollar and the Japanese yen is $0.01 per yen,the equivalent price of the computer in yen is approximately __________ yen.

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.If the inflation rate in the United States rises relative to the inflation rate in Mexico,it follows that

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

Assume that there are only two countries in the world,the United States and Japan.What creates the demand for and supply of Japanese yen on the foreign exchange market? Name three different things that could cause the yen to appreciate in value.

Suppose that prices in France increase by 15 percent while prices in the United States remain relatively stable.We would expect that (on the foreign exchange market) the demand for U.S.dollars will __________ and the supply of U.S.dollars will __________.

The answer is: "When the official price of a currency is lowered." What is the question?

Under a fixed exchange rate system,if the dollar price of a Mexican peso is below its equilibrium level,the peso is said to be

The answer is: "The price of one currency in terms of another currency." What is the question?

Exhibit 35-5 -Refer to Exhibit 35-5. Based on the information provided in this table,between Monday and Tuesday,the U.S.dollar ____________ against the Thai baht and the baht _____________ against the U.S.dollar.

The market in which the currencies of different countries are exchanged is called the

To know whether the dollar is overvalued,we need to know

If,under a fixed exchange rate system,the dollar price of a Mexican peso is below its equilibrium level,then the

The purchasing power parity theory states that

Suppose that the exchange rate between the U.S.dollar and the Mexican peso is 1 peso = $0.11. If the U.S.dollar price per Mexican peso changes to 1 peso =$0.10,the peso is said to have __________ and the dollar to have __________.

The lower the U.S.dollar price per Mexican peso,the __________ Mexican goods are for Americans and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

In the long run,the purchasing power parity theory predicts exchange rates accurately,particularly when there is a large difference in inflation rates across countries.

Proponents of the flexible exchange rate system argue that under a fixed exchange rate system,

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency,the domestic currency

If,under a fixed exchange rate system,the dollar price of a Mexican peso is above its equilibrium level,then the

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will and the yen will .

Suppose that prices in France increase by 15 percent while prices in the United States remain relatively stable.We would expect that (on the foreign exchange market) the demand for U.S.dollars will and the supply of U.S.dollars will .

Exhibit 35-5 -Refer to Exhibit 35-5. Based on the information provided in this table,between Monday and Tuesday,the U.S.dollar against the Thai baht and the baht _ against the U.S.dollar.

Suppose that the exchange rate between the U.S.dollar and the Mexican peso is 1 peso = $0.11. If the U.S.dollar price per Mexican peso changes to 1 peso =$0.10,the peso is said to have and the dollar to have .

The lower the U.S.dollar price per Mexican peso,the Mexican goods are for Americans and the Mexican goods Americans will buy; thus __ pesos will be demanded.