Question 1

The Bretton Woods System was a system of ________ exchange rates against the United States dollar.

Accepted Answer

A)  flexible 
B)  variable 
C)  floating 
D)  fixed

Question 2

When the value of a currency is fixed relative to a particular country's currency,this is referred to as a ________ exchange rate.

Accepted Answer

A)  permanent 
B)  variable 
C)  floating 
D)  pegged

Question 3

The real exchange rate is the amount of an overseas currency that can be purchased with the local (domestic)currency.

Accepted Answer

A) True 
 B)False

Question 4

If the balance on the current account is -$8.42 billion and the balance on the financial account is $7.53 billion,what is the balance on the capital account,assuming no statistical discrepancy?

Accepted Answer

A)  $15.95 billion 
B)  $0 billion 
C)  -$0.89 billion 
D)  $0.89 billion

Question 5

Which of the following would decrease the value of the Australian dollar in the long run?

Accepted Answer

A)  A decrease in inflation in Australia relative to other countries. 
B)  A decrease in the demand for Australian goods relative to goods from other countries. 
C)  An increase in Australian tariffs on foreign goods. 
D)  A decrease in the supply of Australian dollars on the foreign exchange market.

Question 6

The Australian dollar was floated in

Accepted Answer

A)  1974. 
B)  1983. 
C)  1989. 
D)  2001.

Question 7

The theory of purchasing power parity implies that

Accepted Answer

A)  in the long run, the prices of goods in different countries will be the same when measured in a common currency. 
B)  the prices of goods in different countries are always the same. 
C)  the nominal exchange rates will equate over time. 
D)  demand and supply have no influence over the exchange rate.

Question 8

Adoption of the euro as both a medium of exchange and unit of account in the EU countries serves to increase competition among European firms and decrease individual countries' monetary policy options when confronted by recessions and booms.

Accepted Answer

A) True 
 B)False

Question 9

Under the Bretton Woods System,central banks were committed to selling ________ in exchange for their own currencies.

Accepted Answer

A)  gold 
B)  British pounds 
C)  US dollars 
D)  German marks

Question 10

What factors occur in the real world that prevent purchasing power parity from occurring fully in the long run?

Accepted Answer

The answer of What factors occur in the real world...

Question 11

When the market value of the dollar falls relative to other currencies around the world,we say that the

Accepted Answer

A)  dollar has appreciated. 
B)  dollar has depreciated. 
C)  demand for dollars has decreased. 
D)  supply of dollars has decreased.

Question 12

Figure 19.2 
-Refer to Figure 19.2.An appreciation of the dollar is represented as a movement from

Accepted Answer

A)  B to A. 
B)  D to C. 
C)  C to B. 
D)  C to A.

Question 13

The supply of dollars in exchange for yen will decline,if,ceteris paribus,

Accepted Answer

A)  Japanese interest rates rise relative to interest rates in other countries. 
B)  there is a recession in Australia. 
C)  speculators think the value of the dollar will fall relative to the yen. 
D)  the desirability of investing in Japan rises.

Question 14

The balance of payments is a

Accepted Answer

A)  measure of the value of merchandise goods bought and sold on international trade markets. 
B)  summary record of a country's financial transactions with other countries. 
C)  record of the value of goods and services bought and sold between countries. 
D)  summary record of a country's purchases and sales of goods and services on international trade markets.

Question 15

Since the 1980s in Australia,the balance on goods and services has

Accepted Answer

A)  usually been positive. 
B)  usually been negative. 
C)  led to a current account surplus. 
D)  led to capital flows out of the financial account.

Question 16

Australia usually operates with a large current account deficit.

Accepted Answer

A) True 
 B)False

Question 17

Private saving is equal to

Accepted Answer

A)  national income plus consumption plus taxes. 
B)  national income minus consumption plus taxes. 
C)  national income minus consumption minus taxes. 
D)  national income plus consumption minus taxes.

Question 18

Assume that a Big Mac burger costs $3.57 in Australia and 7.80 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Accepted Answer

A)  $1.19 
B)  $2.60 
C)  $4.23 
D)  $10.71

Question 19

Assume that the exchange rate between the dollar and the euro is €1 = $1.Suppose the exchange rate changes to €1.25 = $1.What is the price in dollars of a €200 pair of Italian shoes before and after the exchange rate change?

Accepted Answer

A)  $200 before; $160 after 
B)  $200 before; $250 after 
C)  $160 before; $125 after 
D)  $125 before; $160 after

Question 20

The Bretton Woods System was a

Accepted Answer

A)  system of fixed exchange rates based on the gold standard. 
B)  system of fixed exchange rates where central banks fixed the value of their currencies against the United States dollar. 
C)  system of floating exchange rates where central banks floated the value of their currencies. 
D)  system of managed-float exchange rates where demand and supply mainly determined the value of currencies with occasional government intervention.

Exam 19: Comparative Advantage, international Trade, and Exchange Rates

The Bretton Woods System was a system of ________ exchange rates against the United States dollar.

When the value of a currency is fixed relative to a particular country's currency,this is referred to as a ________ exchange rate.

The real exchange rate is the amount of an overseas currency that can be purchased with the local (domestic)currency.

If the balance on the current account is -$8.42 billion and the balance on the financial account is $7.53 billion,what is the balance on the capital account,assuming no statistical discrepancy?

Which of the following would decrease the value of the Australian dollar in the long run?

The Australian dollar was floated in

The theory of purchasing power parity implies that

Adoption of the euro as both a medium of exchange and unit of account in the EU countries serves to increase competition among European firms and decrease individual countries' monetary policy options when confronted by recessions and booms.

Under the Bretton Woods System,central banks were committed to selling ________ in exchange for their own currencies.

What factors occur in the real world that prevent purchasing power parity from occurring fully in the long run?

When the market value of the dollar falls relative to other currencies around the world,we say that the

Figure 19.2 -Refer to Figure 19.2.An appreciation of the dollar is represented as a movement from

The supply of dollars in exchange for yen will decline,if,ceteris paribus,

The balance of payments is a

Since the 1980s in Australia,the balance on goods and services has

Australia usually operates with a large current account deficit.

Private saving is equal to

Assume that a Big Mac burger costs $3.57 in Australia and 7.80 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Assume that the exchange rate between the dollar and the euro is €1 = $1.Suppose the exchange rate changes to €1.25 = $1.What is the price in dollars of a €200 pair of Italian shoes before and after the exchange rate change?

The Bretton Woods System was a