Question 1

A federal deficit that raises interest rates will, everything else being equal,

Accepted Answer

A) lead to a dollar depreciation. 
B) decrease imports. 
C) reduce exports. 
D) reduce the balance of trade deficit.

Question 2

Many experts believe that the major determinant of exchange rates in the short run is relative

Accepted Answer

A) price levels. 
B) income levels. 
C) money supplies. 
D) interest rates.

Question 3

A strong dollar helps U.S.exporters and hurts importers.

Accepted Answer

A) True 
 B)False

Question 4

Since its inception in January 1999 until 2011, the dollar has consistently appreciated against the euro.

Accepted Answer

A) True 
 B)False

Question 5

The purchasing power parity theory of exchange rate determination holds that the exchange rate between any two national currencies is fixed to reflect differences in the price levels in the two countries.

Accepted Answer

A) True 
 B)False

Question 6

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

Accepted Answer

A) True 
 B)False

Question 7

If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?

Accepted Answer

A) Supply of dollars will increase, causing appreciation of the dollar. 
B) Supply of euros will increase, causing appreciation of the euro. 
C) Demand for dollars will increase causing appreciation of the dollar. 
D) Demand for dollars will decrease, causing depreciation of the dollar.

Question 8

If exchange rates are determined in a floating rate system, what determines the value of a U.S.dollar in terms of euros?

Accepted Answer

A) government exchange rate policies 
B) IMF rules and policies 
C) demand and supply 
D) central bank interventions

Question 9

If a country is in a major recessionary phase of the business cycle, one can expect that its currency will

Accepted Answer

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

Question 10

One of the problems that monetary unions eliminate is

Accepted Answer

A) inflationary gaps. 
B) recessionary gaps. 
C) exchange rate instability. 
D) business cycles.

Question 11

An overvalued currency, such as the Argentinean peso in 2001, is an indicator of a balance of payments surplus.

Accepted Answer

A) True 
 B)False

Question 12

Under a gold standard,

Accepted Answer

A) with a balance of payments deficit, interest rates would fall and attract foreign capital. 
B) a deficit in the balance of payments increased a nation's money supply automatically. 
C) all currencies were defined in terms of gold. 
D) when a nation had a deficit in its balance of payments, more gold was flowing in than was flowing out. 
E) All of the above are correct.

Question 13

If the dollar appreciates relative to other currencies, which of the following is true?

Accepted Answer

A) It takes more foreign currency to buy a dollar. 
B) It takes more dollars to buy a foreign currency. 
C) U.S.exports will increase. 
D) Foreign purchases of U.S.goods will increase.

Question 14

In 2008-2009, Iceland and several Baltic states increased their interest rates.One would expect which of the following?

Accepted Answer

A) U.S.bond prices will fall and the dollar will appreciate. 
B) U.S.bond prices will rise and the dollar will appreciate. 
C) U.S.bond prices will fall and the dollar will depreciate. 
D) U.S.bond prices will rise and the dollar will depreciate.

Question 15

The term "dirty float" is used to describe a

Accepted Answer

A) black market in foreign currencies. 
B) floating currency that is "managed" by central bank authorities. 
C) nation that switches from free to fixed exchange rates. 
D) currency system used only in inflationary periods.

Question 16

Which of the following would cause an increase in the demand for U.S.dollars?

Accepted Answer

A) an interest rate cut in the United States 
B) an interest rate cut in Europe 
C) an interest rate increase in Europe 
D) a recession in Europe

Question 17

Exchange rates determined by the forces of demand and supply are called

Accepted Answer

A) fixed exchange rates. 
B) floating exchange rates. 
C) equilibrium exchange rates. 
D) dirty exchange rates.

Question 18

If a country is in a strong upward phase of the business cycle, one can expect that its currency will

Accepted Answer

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

Question 19

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen, then the dollar has

Accepted Answer

A) appreciated. 
B) depreciated. 
C) been revalued. 
D) been devalued.

Question 20

The dollar has depreciated if it buys less of a foreign currency.

Accepted Answer

A) True 
 B)False

Exam 36: The International Monetary System: Order or Disorder

A federal deficit that raises interest rates will, everything else being equal,

Many experts believe that the major determinant of exchange rates in the short run is relative

A strong dollar helps U.S.exporters and hurts importers.

Since its inception in January 1999 until 2011, the dollar has consistently appreciated against the euro.

The purchasing power parity theory of exchange rate determination holds that the exchange rate between any two national currencies is fixed to reflect differences in the price levels in the two countries.

Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to protect the value of their currencies against capital flight.

If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?

If exchange rates are determined in a floating rate system, what determines the value of a U.S.dollar in terms of euros?

If a country is in a major recessionary phase of the business cycle, one can expect that its currency will

One of the problems that monetary unions eliminate is

An overvalued currency, such as the Argentinean peso in 2001, is an indicator of a balance of payments surplus.

Under a gold standard,

If the dollar appreciates relative to other currencies, which of the following is true?

In 2008-2009, Iceland and several Baltic states increased their interest rates.One would expect which of the following?

The term "dirty float" is used to describe a

Which of the following would cause an increase in the demand for U.S.dollars?

Exchange rates determined by the forces of demand and supply are called

If a country is in a strong upward phase of the business cycle, one can expect that its currency will

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen, then the dollar has

The dollar has depreciated if it buys less of a foreign currency.