Question 1

If the U.S.exports passenger jet aircraft, what is the effect in the foreign exchange market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 2

The most important single factor in determining the exchange rate in the short run is

Accepted Answer

A) inflation differentials. 
B) interest rate differentials. 
C) monetary growth differentials. 
D) price differentials.

Question 3

Explain three factors that would cause the dollar to appreciate.

Accepted Answer

The answer of Explain three factors that would cause the...

Question 4

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac, fries, and a Coke cost $3.91 in San Francisco, how much should the same order cost in yen in Osaka?

Accepted Answer

A) 0.03 
B) 325 
C) 392 
D) 422

Question 5

The exchange rate is the price of one currency in terms of another.

Accepted Answer

A) True 
 B)False

Question 6

At any given moment there is one exchange rate

Accepted Answer

A) for currencies in the free world. 
B) between every pair of currencies. 
C) for all the world's currencies. 
D) established by the Federal Reserve Board.

Question 7

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

Accepted Answer

A) Revalued 
B) Devalued 
C) Depreciated 
D) Appreciated

Question 8

The Big Mac index is a measure of how well the purchasing power parity theory works.

Accepted Answer

A) True 
 B)False

Question 9

The U.S.Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japanese discount rate.The likely outcome of currency speculation in response to this news is that

Accepted Answer

A) the dollar will depreciate. 
B) the dollar will appreciate. 
C) the yen will appreciate. 
D) both the dollar and yen will appreciate.

Question 10

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

Accepted Answer

A) the government gains more control over the economy. 
B) floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. 
C) exchange controls become unnecessary. 
D) fiscal and monetary policy can focus more on domestic conditions.

Question 11

If nations erect tariffs and quotas to restrict trade, what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?

Accepted Answer

A) They will be understated for tariffs and overstated for quotas. 
B) They will be overstated for tariffs and understated for quotas. 
C) They will be the correct values. 
D) They will be incorrect.

Question 12

Which of the following would cause a decrease in the demand for U.S.dollars?

Accepted Answer

A) an economic boom in the United States 
B) an economic boom in Europe 
C) increased vacations in the United States by Europeans 
D) a recession in Europe

Question 13

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

Accepted Answer

A) depreciate 
B) devalue 
C) revalue 
D) appreciate

Question 14

If Americans decide to buy more South African diamonds, what is the effect in the foreign market?

Accepted Answer

A) It will increase demand for U.S.dollars. 
B) It will decrease demand for U.S.dollars. 
C) It will increase supply of U.S.dollars. 
D) It will decrease supply of U.S.dollars.

Question 15

The main component of the monetary union created by the Treaty of Maastricht is a(n)

Accepted Answer

A) single currency. 
B) gold standard. 
C) bilateral barter system of currencies. 
D) unified stock market.

Question 16

Americans needing foreign currencies get those currencies from a bank.The ultimate source of these currencies is

Accepted Answer

A) U.S.investments abroad. 
B) U.S.exports to foreign countries. 
C) U.S.imports of foreign goods and services. 
D) the International Monetary Fund.

Question 17

Under a gold standard, a balance of payments deficit automatically

Accepted Answer

A) raised interest rates. 
B) decreased exports. 
C) increased domestic prices. 
D) increased imports.

Question 18

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.

Accepted Answer

A) True 
 B)False

Exam 36: The International Monetary System: Order or Disorder

If the U.S.exports passenger jet aircraft, what is the effect in the foreign exchange market?

The most important single factor in determining the exchange rate in the short run is

Explain three factors that would cause the dollar to appreciate.

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac, fries, and a Coke cost $3.91 in San Francisco, how much should the same order cost in yen in Osaka?

The exchange rate is the price of one currency in terms of another.

At any given moment there is one exchange rate

What happened to the peso when the Argentine government succumbed to the market forces in 2002?

The Big Mac index is a measure of how well the purchasing power parity theory works.

The U.S.Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japanese discount rate.The likely outcome of currency speculation in response to this news is that

The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that

If nations erect tariffs and quotas to restrict trade, what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?

Which of the following would cause a decrease in the demand for U.S.dollars?

A country running a balance of payments surplus in a fixed exchange rate system may have to ____ its currency.

If Americans decide to buy more South African diamonds, what is the effect in the foreign market?

The main component of the monetary union created by the Treaty of Maastricht is a(n)

Americans needing foreign currencies get those currencies from a bank.The ultimate source of these currencies is

Under a gold standard, a balance of payments deficit automatically

Interest rate differentials can cause rapid fluctuations in short-run exchange rates.