Question 1

If the dollar depreciates against the British pound, U.S. goods sold in ________ would become less expensive and British goods sold in ________ would become more expensive.

Accepted Answer

A)  the United States; the United States 
B)  the United States; Great Britain 
C)  Great Britain; Great Britain 
D)  Great Britain; the United States

Question 2

The dollar will depreciate against the euro when the European Central Bank raises interest rates.

Accepted Answer

A) True 
 B)False

Question 3

The financial account is defined as

Accepted Answer

A)  the sum of net exports, net income received from investments abroad, and net transfers abroad. 
B)  the sum of gross income received from investments abroad and as net transfers abroad. 
C)  the value of the country's net sales of assets. 
D)  net transfers abroad.

Question 4

The exchange rate of currencies between countries affects the prices of the goods purchased and sold between them.

Accepted Answer

A) True 
 B)False

Question 5

A depreciation is

Accepted Answer

A)  a decrease in the value of currency. 
B)  a decrease in the trade deficit. 
C)  an increase in the trade surplus. 
D)  an increase in the value of currency.

Question 6

Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997.

Accepted Answer

The answer of Compare and contrast the financial crises in...

Question 7

Purchasing power parity suggests that the exchange rate between two currencies reflects differences in the overall price levels in the two countries.

Accepted Answer

A) True 
 B)False

Question 8

An increase in Swiss prices will cause

Accepted Answer

A)  an increase in the demand for U.S. dollars and an increase in the exchange rate of Swiss francs per dollar. 
B)  a decrease in the demand for U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. 
C)  an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. 
D)  a decrease in the supply of U.S. dollars and an increase in the exchange rate of Swiss francs per dollar.

Question 9

If the current exchange rate is 0.65 British pounds per dollar, what is the dollar price of one British pound? If the exchange rate changes to 0.70 British pounds per dollar, what is the new dollar value of one British pound?

Accepted Answer

The answer of If the current exchange rate is 0.65...

Question 10

The purchase of a foreign asset by a U.S. resident is a

Accepted Answer

A)  deficit item on the current account. 
B)  surplus item on the current account. 
C)  deficit item on the financial account. 
D)  surplus item on the financial account.

Question 11

The Bretton Woods exchange rate system was replaced by a gold standard.

Accepted Answer

A) True 
 B)False

Question 12

A country facing a balance of payments deficit will change the pegged value of its currency; this is called a revaluation.

Accepted Answer

A) True 
 B)False

Question 13

In a balance of payments statement, the current account plus the financial account must equal the capital account.

Accepted Answer

A) True 
 B)False

Question 14

Figure 19.1
 
-Referring to Figure 19.1, if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to ________ and the peso to ________.

Accepted Answer

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

Question 15

Figure 19.2
 
-Referring to Figure 19.2, the effect of a decrease in Japanese interest rates is represented by a movement from point

Accepted Answer

A)  b to a. 
B)  a to b. 
C)  b to c. 
D)  a to d.

Question 16

The U.S. dollar will appreciate if inflation rises from 3 percent to 7 percent in the United States.

Accepted Answer

A) True 
 B)False

Question 17

A decrease in Swiss interest rates will cause

Accepted Answer

A)  an increase in the demand for U.S. dollars and an increase in the exchange rate of Swiss francs per dollar. 
B)  a decrease in the demand for U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. 
C)  an increase in the supply of U.S. dollars and a decrease in the exchange rate of Swiss francs per dollar. 
D)  a decrease in the supply of U.S. dollars and an increase in the exchange rate of Swiss francs per dollar.

Question 18

The U.S. dollar will depreciate if the Canadian inflation rate falls from 5 percent to 3 percent.

Accepted Answer

A) True 
 B)False

Question 19

Recall the Application about the price of Big Macs in China and around the world to answer the following question(s).
The following table is taken from the Application. For several years, The Economist has measured the prices of Big Macs throughout the world and compared the price differences to exchange rates.
 
-According to the table, the Big Mac would cost the same in China and the United States at an exchange rate of ________ yuan for every one U.S. dollar.

Accepted Answer

A)  1.27 
B)  2.72 
C)  3.67 
D)  6.32

Question 20

A(n)________ in U.S. interest rates will cause a decrease in the demand for U.S. dollars and a(n)________ in the (per dollar)exchange rate.

Accepted Answer

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

Exam 19: The World of International Finance

If the dollar depreciates against the British pound, U.S. goods sold in would become less expensive and British goods sold in would become more expensive.

The dollar will depreciate against the euro when the European Central Bank raises interest rates.

The financial account is defined as

The exchange rate of currencies between countries affects the prices of the goods purchased and sold between them.

A depreciation is

Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997.

Purchasing power parity suggests that the exchange rate between two currencies reflects differences in the overall price levels in the two countries.

An increase in Swiss prices will cause

If the current exchange rate is 0.65 British pounds per dollar, what is the dollar price of one British pound? If the exchange rate changes to 0.70 British pounds per dollar, what is the new dollar value of one British pound?

The purchase of a foreign asset by a U.S. resident is a

The Bretton Woods exchange rate system was replaced by a gold standard.

A country facing a balance of payments deficit will change the pegged value of its currency; this is called a revaluation.

In a balance of payments statement, the current account plus the financial account must equal the capital account.

Figure 19.1 -Referring to Figure 19.1, if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to and the peso to .

Figure 19.2 -Referring to Figure 19.2, the effect of a decrease in Japanese interest rates is represented by a movement from point

The U.S. dollar will appreciate if inflation rises from 3 percent to 7 percent in the United States.

A decrease in Swiss interest rates will cause

The U.S. dollar will depreciate if the Canadian inflation rate falls from 5 percent to 3 percent.

A(n) in U.S. interest rates will cause a decrease in the demand for U.S. dollars and a(n) in the (per dollar) exchange rate.

Exam 19: The World of International Finance

If the dollar depreciates against the British pound, U.S. goods sold in ________ would become less expensive and British goods sold in ________ would become more expensive.

The dollar will depreciate against the euro when the European Central Bank raises interest rates.

The financial account is defined as

The exchange rate of currencies between countries affects the prices of the goods purchased and sold between them.

A depreciation is

Compare and contrast the financial crises in Mexico in 1994 and in Asia in 1997.

Purchasing power parity suggests that the exchange rate between two currencies reflects differences in the overall price levels in the two countries.

An increase in Swiss prices will cause

If the current exchange rate is 0.65 British pounds per dollar, what is the dollar price of one British pound? If the exchange rate changes to 0.70 British pounds per dollar, what is the new dollar value of one British pound?

The purchase of a foreign asset by a U.S. resident is a

The Bretton Woods exchange rate system was replaced by a gold standard.

A country facing a balance of payments deficit will change the pegged value of its currency; this is called a revaluation.

In a balance of payments statement, the current account plus the financial account must equal the capital account.

Figure 19.1 -Referring to Figure 19.1, if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to ________ and the peso to ________.

Figure 19.2 -Referring to Figure 19.2, the effect of a decrease in Japanese interest rates is represented by a movement from point

The U.S. dollar will appreciate if inflation rises from 3 percent to 7 percent in the United States.

A decrease in Swiss interest rates will cause

The U.S. dollar will depreciate if the Canadian inflation rate falls from 5 percent to 3 percent.

A(n) ________ in U.S. interest rates will cause a decrease in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate.

If the dollar depreciates against the British pound, U.S. goods sold in would become less expensive and British goods sold in would become more expensive.

Figure 19.1 -Referring to Figure 19.1, if the exchange rate is currently 11 pesos per dollar, then we expect the dollar to and the peso to .

A(n) in U.S. interest rates will cause a decrease in the demand for U.S. dollars and a(n) in the (per dollar) exchange rate.