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An increase in the supply of the Canadian dollar will have what effect?


A) The exchange rate will fall and the quantity of dollars traded will fall.
B) The exchange rate will fall and the quantity of dollars traded will rise.
C) The exchange rate will rise and the quantity of dollars traded will fall.
D) The exchange rate will rise and the quantity of dollars traded will rise.

E) A) and D)
F) A) and C)

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If a Canadian hockey stick has a price of $32,how much does it cost in: a)Europe,assuming an exchange rate of 1 euro = $1.60 Can. b)China,assuming an exchange rate of 1 Yuan = $0.20 Can.

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a)20 euros...

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Which of the following will increase Canada's effective exchange rate?


A) Depreciation of the Canadian dollar.
B) Depreciation of the American dollar.
C) Appreciation of the American dollar.
D) Appreciation of the Mexican peso.

E) B) and C)
F) A) and D)

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-Refer to the graph above to answer this question.What might cause a shift of the demand curve from D1 to D2? A) An increase in interest rates in Canada. B) An increase in Swiss prices relative to Canadian prices. C) A recession in Canada. D) An increase in interest rates in Switzerland. -Refer to the graph above to answer this question.What might cause a shift of the demand curve from D1 to D2?


A) An increase in interest rates in Canada.
B) An increase in Swiss prices relative to Canadian prices.
C) A recession in Canada.
D) An increase in interest rates in Switzerland.

E) A) and D)
F) C) and D)

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Which of the following is true if the Canadian dollar becomes overvalued?


A) There will be a surplus of Canadian dollars.
B) There will be a shortage of Canadian dollars.
C) The Canadian dollar will appreciate.
D) The money supply will increase.
E) Exports and imports will increase.

F) D) and E)
G) B) and D)

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Advocates of flexible exchange rates argue all of the following except one.Which is the exception?


A) A country with flexible exchange rates cannot have a balance of payments deficit nor suffer its consequences.
B) The problems of inflation and unemployment can be addressed by a country without concerning itself with external disruptions.
C) World trade will be greater with flexible exchange rates because international prices will more accurately reflect market conditions.
D) Fixed exchange rates often distort the patterns of output and trade.
E) Flexible exchange rates automatically produce balance of payments surpluses which can be used,for instance,to pay off the national debt.

F) None of the above
G) A) and B)

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Assuming flexible exchange rates,which of the following would result in an increase in a country's exchange rate?


A) The purchase by the central bank of its own currency.
B) The purchase by the central bank of foreign currencies.
C) The sale by the central bank of its own currencies.
D) The central bank decreasing the country's interest rates.
E) The government imposing an export tax.

F) C) and D)
G) B) and C)

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The following table contains hypothetical data for Canada's balance of payments in a particular year. The following table contains hypothetical data for Canada's balance of payments in a particular year. -Refer to the information above to answer this question.Which of the following reflects the state of Canada's capital account? A) It has a deficit of $10 billion. B) It has a deficit of $20 billion. C) It has a surplus of $5 billion. D) It has a surplus of $30 billion. -Refer to the information above to answer this question.Which of the following reflects the state of Canada's capital account?


A) It has a deficit of $10 billion.
B) It has a deficit of $20 billion.
C) It has a surplus of $5 billion.
D) It has a surplus of $30 billion.

E) None of the above
F) A) and C)

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The following table shows the price,in Canadian dollars,of utops,the currency used in the hypothetical economy of Utopia.Assume that a system of flexible exchange rates is in place. The following table shows the price,in Canadian dollars,of utops,the currency used in the hypothetical economy of Utopia.Assume that a system of flexible exchange rates is in place. -Refer to the information above to answer this question.Suppose that Utopia decided to import more products from Canada.What would we expect? A) That the demand for utops would rise and the dollar would appreciate B) That the demand for utops would fall and the dollar would depreciate. C) That the supply of utops would rise and the dollar would appreciate. D) That the supply of utops would fall and the dollar would depreciate. -Refer to the information above to answer this question.Suppose that Utopia decided to import more products from Canada.What would we expect?


A) That the demand for utops would rise and the dollar would appreciate
B) That the demand for utops would fall and the dollar would depreciate.
C) That the supply of utops would rise and the dollar would appreciate.
D) That the supply of utops would fall and the dollar would depreciate.

E) A) and B)
F) None of the above

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The following table shows the hypothetical data of exchange rates and the price of lattes. The following table shows the hypothetical data of exchange rates and the price of lattes. a)Using the relative price of latte,determine the latte exchange rate in the three countries. _____ Chinese Yuan = $1 Canadian _____ Japanese yen = $1 Canadian _____ British pound = $1 Canadian b)Compared with the latte exchange rates,are the actual exchange rates overvalued or undervalued? Chinese Yuan is __________ Japanese yen is __________ British pound is __________ c)Given your answers in b),would you expect Canadian exports to each of these countries to increase or decrease? Canadian exports to China will __________ Canadian exports to Japan will __________ Canadian exports to the United Kingdom will __________ a)Using the relative price of latte,determine the latte exchange rate in the three countries. _____ Chinese Yuan = $1 Canadian _____ Japanese yen = $1 Canadian _____ British pound = $1 Canadian b)Compared with the latte exchange rates,are the actual exchange rates overvalued or undervalued? Chinese Yuan is __________ Japanese yen is __________ British pound is __________ c)Given your answers in b),would you expect Canadian exports to each of these countries to increase or decrease? Canadian exports to China will __________ Canadian exports to Japan will __________ Canadian exports to the United Kingdom will __________

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a)12 Chinese Yuan = $1 Canadian
100 Japa...

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Assuming flexible exchange rates,explain how a shortage of Canadian dollars in the foreign exchange market is eliminated.

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A shortage occurs in the foreign exchang...

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All of the following,except one,are implications of the purchasing power parity theory.Which is the exception?


A) The relative prices of products in different countries should be the same.
B) Exchange rates will adjust to ensure that the cost of living in one country is the same as that in another.
C) Inflation should lead to the depreciation of that country's currency.
D) One hour's labour,of a given quality,should pay the same (though in different currencies) in all countries.
E) The currencies of different countries should be at par.

F) All of the above
G) C) and E)

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Which of the following is the result of an overvalued fixed exchange rate?


A) Inflation.
B) Depletion of official international reserves.
C) Increase in aggregate demand.
D) Decrease in imports.

E) A) and B)
F) All of the above

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All of the following,except one,would help to explain differences in purchasing power between countries.Which is the exception?


A) Many services are not traded internationally.
B) Financial assets are seldom traded internationally.
C) The existence of transportation and insurance costs.
D) The expression of particular preferences by consumers.
E) The existence of tariffs and other trade restrictions.

F) C) and D)
G) A) and C)

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The country of Lancore,which was on a fixed exchange-rate system and had an undervalued currency,has just adopted a flexible exchange-rate system.Which of the following statements is correct?


A) Lancores's currency will depreciate and its exports will increase as a result.
B) Lancores's currency will appreciate and its exports will increase as a result.
C) Lancores's currency will depreciate and its exports will decrease as a result.
D) Lancores's currency will appreciate and its exports will decrease as a result.

E) C) and D)
F) B) and C)

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Assuming a fixed exchange-rate system,which of the following would contribute to a Canadian balance of payments deficit?


A) Leonard Cohen and Shania Twain team up for a giant outdoor concert in Shanghai.
B) The number of Indian tourists visiting Canada increases significantly.
C) The United States increases its tariff on Canadian softwood lumber.
D) A wealthy Taiwanese family builds a mansion in Calgary.
E) Honda builds a new assembly plant outside Montreal.

F) All of the above
G) B) and C)

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"Assuming net transfers are equal to zero,a trade deficit implies a current account deficit." Evaluate this statement.

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Uncertain.It depends on net foreign fact...

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Which of the following are ways that a government can defend an overvalued exchange rate?


A) Introducing quotas or tariffs.
B) Introducing foreign exchange controls.
C) Negotiating voluntary export restrictions.
D) Creating a recession at home.
E) Introducing quotas or tariffs,introducing foreign exchange controls,negotiating voluntary export restrictions,and creating a recession at home.

F) C) and D)
G) A) and B)

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Which of the following is true of a currency devaluation?


A) It refers to the value of a currency increasing.
B) It refers to a fixed exchange rate being lowered.
C) It is not possible now that the gold standard has been abandoned.
D) It is something governments aspire to but seldom achieve.

E) A) and C)
F) C) and D)

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Suppose the price of a camera in Canada is $35 and in the United States it is $30.If the nominal exchange rate is $0.90 American dollar per Canada dollar,what is the value of Canada's real exchange rate?


A) 0.85
B) 0.90
C) 1.00
D) 1.05
E) 1.17

F) C) and D)
G) D) and E)

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