Question 1

If the Chinese currency devalues compared to the US dollar,then

Accepted Answer

A)  US producers will benefit;Chinese consumers will benefit
B)  US producers will benefit;Chinese consumers will hurt
C)  US producers will hurt;Chinese consumers will benefit
D)  US producers will hurt;Chinese consumers will hurt D

Question 2

Borrowing in foreign currency to buy imports or invest in foreign currency,

Accepted Answer

A)  decreases demand for the domestic currency,appreciating the domestic currency
B)  increases demand for the domestic currency,depreciating the domestic currency
C)  increases demand for the domestic currency,appreciating the domestic currency
D)  does not affect the exchange rates D

Question 3

An individual in the US wants to buy a car from England which costs 12,000 pounds.If the exchange rate is $1.75/pound,how much will it cost him in dollar terms?

Accepted Answer

A)  $21,000
B)  $6,800
C)  $12,000
D)  Need more information A

Question 4

The demand for dollars is downward sloping because when dollar value rises,

Accepted Answer

A)  Foreigners demand more of US goods and services
B)  Foreigners demand less of US goods and services
C)  Foreigners demand more dollars
D)  It does not depend on the dollar value

Question 5

All of the following are true,except

Accepted Answer

A)  Bubbles are prices that cannot be explained by normal economic forces
B)  Many economists don't think bubbles exist
C)  Many economists have a clear idea about how to model bubbles
D)  All of the above are true

Question 6

If the US interest rate is 4% per year and the Mexico interest rate is 9% per year,which of the following is true:

Accepted Answer

A)  The dollar will depreciate 5% in one year.
B)  The peso will appreciate 9% in one year.
C)  The peso will depreciate 5% in one year.
D)  The dollar will appreciate 9% in one year.

Question 7

If Chinese consumers want to buy US goods,they will

Accepted Answer

A)  buy Yuans to sell US Dollars
B)  Sell Yuans to buy US Dollars
C)  Demand Yuan
D)  Both b and c

Question 8

An increase in the US demand for pound causes

Accepted Answer

A)  An appreciation of the pound
B)  Depreciation in the dollar
C)  None of the above
D)  Both a and b

Question 9

If buyers expect prices to ________ faster than the interest rate,it makes sense to _____ as much money as possible to _____ now in order to ______ in the future.

Accepted Answer

A)  Increase;borrow;buy;sell
B)  increase;save;buy;sell
C)  decrease;save;buy;sell
D)  decrease;borrow;sell;buy

Question 10

The purchasing power parity predicts that if US price level falls relative to the Mexico price level,then

Accepted Answer

A)  Dollar value will rise relative to the peso
B)  Dollar value will fall relative to the peso
C)  There is no effect on either currency
D)  PPP predicts price level will normalize in the long-run

Question 11

Holding other things constant,increases in the price level in the US will

Accepted Answer

A)  Cause the dollar to gain value
B)  Cause the dollar to lose value
C)  Does not affect the dollar value
D)  None of the above

Question 12

Holding other things constant,an appreciation of the US Dollar to the Chinese Yuan might cause the demand for Yuan to _____________ and the supply for Yuan to __________.

Accepted Answer

A)  Increase;decrease
B)  Increase,increase
C)  Decrease;Increase
D)  Decrease;Decrease

Question 13

Currency devaluations hurt

Accepted Answer

A)  Consumers but help suppliers
B)  Suppliers
C)  Suppliers but help consumers
D)  None of the above

Question 14

Holding other things constant,a decrease in the inflation rate in the US compared to the Canadian economy may cause the demand for dollar to _____________ and the supply for dollar to __________.

Accepted Answer

A)  Increase;decrease
B)  Increase,increase
C)  Decrease;Increase
D)  Decrease;Decrease

Question 15

Currency devaluations hurt consumers because they make imports ________ expensive in the _____________ currency.

Accepted Answer

A)  Less;domestic
B)  Less;foreign
C)  More;domestic
D)  More;foreign

Question 16

Borrowing in foreign currencies to spend or invest domestically,

Accepted Answer

A)  decreases demand for the domestic currency,appreciating the domestic currency
B)  increases demand for the domestic currency,depreciating the domestic currency
C)  increases demand for the domestic currency,appreciating the domestic currency
D)  does not affect the exchange rates

Question 17

If buyers expect future price increase,they will ___________ their purchases to avoid it.Similarly,sellers will __________ selling to take advantage of it.

Accepted Answer

A)  Accelerate;accelerate
B)  Accelerate;delay
C)  Delay;accelerate
D)  Delay;delay

Question 18

US are experiencing a productivity growth.When comparing to other countries with lower productivity growth,we expect to see

Accepted Answer

A)  Its exchange rate appreciating
B)  Its exchange rate depreciating
C)  It has no effect on the US exchange rate
D)  None of the above

Question 19

Holding other things constant,decreases in the price level in the US will

Accepted Answer

A)  Cause the dollar to gain value
B)  Cause the dollar to lose value
C)  Does not affect the dollar value
D)  None of the above

Question 20

An individual in the US wants to buy office equipment from England which costs 2,800 pounds.If the exchange rate is $1.92/pound,how much will it cost him in dollar terms?

Accepted Answer

A)  $2,800
B)  $5,376
C)  $1,458
D)  Need more information

Exam 11: Foreign Exchange, trade, and Bubbles