Question 1

What are the two primary reasons for U.S.individuals and business firms to want foreign currency?

Accepted Answer

A)   purchase of foreign goods,services,and investments
B)   purchase of foreign goods and services and speculation in currency
C)   purchase of foreign investments and speculation in currency
D)   speculation in currency and hoarding for economic warfareE) A) and B)
F) A) and C)

Question 2

The balance on income equals:

Accepted Answer

A)   income payments minus income received.
B)   exports minus imports.
C)   income received minus income payments.
D)   imports minus exports.E) All of the above
F) C) and D)

Question 3

Usually,a country with a rapid increase in its interest rate also sees:

Accepted Answer

A)   depreciation of its currency.
B)   appreciation of its currency.
C)   no change in the value of its currency.
D)   pressure to move to the gold standard.E) A) and C)
F) A) and B)

Question 4

The Bretton Woods agreement:

Accepted Answer

A)   set up a fixed exchange rate system maintained by purchases and sales of gold.
B)   denounced the establishment of the World Bank.
C)   set up a fixed exchange rate system maintained by purchases and sales of currency.
D)   encouraged countries to devalue their currencies to help their trade deficits.E) All of the above
F) C) and D)

Question 5

The Canadian dollar will depreciate against the U.S.dollar if U.S.citizens demand more Canadian products.

Accepted Answer

A) True 
 B)False

Question 6

Fiscal policies are hampered by flexible exchange rate systems.

Accepted Answer

A) True 
 B)False

Question 7

The basic rules of supply and demand do not apply in the foreign exchange market.

Accepted Answer

A) True 
 B)False  False

Question 8

An example of an item included in the current account is:

Accepted Answer

A)   the profits made by a South Korean company operating a plant in the United States.
B)   the stock of Google held by a South Korean investor.
C)   the deposits of a South Korean company in Citibank.
D)   a bond sold by Tesla Motors to a South Korean investor.E) A) and B)
F) B) and C)

Question 9

In recent years,China has helped make its currency ____ by ____ U.S.dollars.

Accepted Answer

A)   stronger;buying
B)   stronger;selling
C)   weaker;buying
D)   weaker;sellingE) A) and B)
F) B) and C)

Question 10

Suppose the exchange rate of U.S.dollars per British pound has moved from $1.90/pound to $1.50/pound.This means the:

Accepted Answer

A)   dollar depreciates from 0.67 pounds per dollar to 0.53 pounds per dollar.
B)   pound appreciates against the dollar.
C)   dollar can't buy as much British goods as before.
D)   dollar appreciates from 0.53 pounds per dollar to 0.67 pounds per dollar.E) C) and D)
F) A) and B)

Question 11

The real exchange rate equals the:

Accepted Answer

A)   nominal exchange rate divided by the ratio of the price levels of two countries.
B)   nominal exchange rate multiplied by the ratio of the price levels of the two countries.
C)   sum of the ratio of the price levels of the two countries.
D)   nominal exchange rate minus the ratio of the price levels of the two countries.E) A) and B)
F) A) and C)

Question 12

When a country uses a flexible (or floating) exchange rate and transactions increase the supply of its currency,the country's:

Accepted Answer

A)   products become more expensive to others.
B)   currency depreciates.
C)   currency appreciates.
D)   trade deficit increases.E) B) and D)
F) B) and C)

Question 13

The balance of trade is(are) :

Accepted Answer

A)   exports of goods and services minus imports of goods and services.
B)   exports of money minus the import of money.
C)   the total amount of exported capital assets.
D)   the total amount of imported capital assets.E) A) and C)
F) A) and D)

Question 14

Use the following to answer questions 
Figure: Exchange Rate Shifts 0;D1;e0;e1 B)  D0;D1;e1;e0 C)  D1;D0;e1;e0 D)  D1;D0;e0;e1" class="answers-bank-image d-inline" rel="preload" >
-(Figure: Exchange Rate Shifts) When demand for U.S.goods increases,the demand curve will shift from _____ to _____ and the exchange rate will shift from _____ to _____.

Accepted Answer

A)   D0;D1;e0;e1
B)   D0;D1;e1;e0
C)   D1;D0;e1;e0
D)   D1;D0;e0;e1E) All of the above
F) None of the above

Question 15

The following graph depicts a change in the market for the U.S.dollar.  According to the graph,is the dollar appreciating or depreciating? What is happening to the price of U.S.-made goods as seen by foreigners? Who benefits and who loses from this change?

Accepted Answer

The graph depicts a decline in the deman...

Question 16

Absolute purchasing power parity means that the real exchange rate is 1:1.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following currency trades is NOT consistent with the exchange rates of approximately 100 yen for US$1 and 1 British pound for US$1.50?

Accepted Answer

A)   200 yen for US$2
B)   200 yen for 2 British pounds
C)   200 British pounds for US$300
D)   300 yen for 2 British poundsE) A) and D)
F) A) and C)

Question 18

The real exchange rate is defined as the nominal rate times the inflation rate.

Accepted Answer

A) True 
 B)False

Question 19

Describe the types of conditions that may cause currencies to appreciate and depreciate.

Accepted Answer

Four fundamental conditions may cause currencies to appreciate or depreciate.The following responses provide examples that lead to a depreciation of the U.S.dollar.If we reversed these stories,in each case the dollar would appreciate.First,a change in our tastes and preferences as consumers of foreign goods will result in currency appreciation or depreciation.For example,a desire to purchase more foreign goods will lead to an increase in the demand for foreign currency and result in the depreciation of the dollar.Second,if our income growth exceeds that of other countries,our demand for imports will grow faster than that of other nations.Demand for foreign currency will again increase,resulting in the depreciation of the dollar.Third,rising inflation in the United States relative to foreign nations makes our goods and services more expensive overseas and foreign goods more attractive here at home.Imports will grow and exports will decline,again leading to a depreciation of the dollar.Fourth,the fall of interest rates in the United States relative to those of foreign countries makes financial investment in the United States less attractive.The demand for dollars is reduced,leading once again to depreciation of the dollar.In addition,when currency traders anticipate a change in these underlying fundamentals,currency speculation can affect exchange rates.

Question 20

If the United States has a current account surplus:

Accepted Answer

A)   it can run a capital account surplus.
B)   it must also run a trade surplus.
C)   it must run a capital account surplus.
D)   it must run a capital account deficit.E) None of the above
F) B) and C) D

Exam 16: Open Economy Macroeconomic

What are the two primary reasons for U.S.individuals and business firms to want foreign currency?

Correct Answer
verified

The balance on income equals:

Correct Answer
verified

Usually,a country with a rapid increase in its interest rate also sees:

Correct Answer
verified

The Bretton Woods agreement:

Correct Answer
verified

The Canadian dollar will depreciate against the U.S.dollar if U.S.citizens demand more Canadian products.

Correct Answer
verified

Fiscal policies are hampered by flexible exchange rate systems.

Correct Answer
verified

The basic rules of supply and demand do not apply in the foreign exchange market.

Correct Answer
verified
False

An example of an item included in the current account is:

Correct Answer
verified

In recent years,China has helped make its currency by U.S.dollars.

Correct Answer
verified

Suppose the exchange rate of U.S.dollars per British pound has moved from $1.90/pound to $1.50/pound.This means the:

Correct Answer
verified

The real exchange rate equals the:

Correct Answer
verified

When a country uses a flexible (or floating) exchange rate and transactions increase the supply of its currency,the country's:

Correct Answer
verified

The balance of trade is(are) :

Correct Answer
verified

Use the following to answer questions Figure: Exchange Rate Shifts -(Figure: Exchange Rate Shifts) When demand for U.S.goods increases,the demand curve will shift from ___ to _ and the exchange rate will shift from _ to ___.

Correct Answer
verified

The following graph depicts a change in the market for the U.S.dollar. According to the graph,is the dollar appreciating or depreciating? What is happening to the price of U.S.-made goods as seen by foreigners? Who benefits and who loses from this change?

Correct Answer
verified
The graph depicts a decline in the deman...
View Answer

Absolute purchasing power parity means that the real exchange rate is 1:1.

Correct Answer
verified

Which of the following currency trades is NOT consistent with the exchange rates of approximately 100 yen for US$1 and 1 British pound for US$1.50?

Correct Answer
verified

The real exchange rate is defined as the nominal rate times the inflation rate.

Correct Answer
verified

Describe the types of conditions that may cause currencies to appreciate and depreciate.

If the United States has a current account surplus:

Correct Answer
verified
D

Exam 16: Open Economy Macroeconomic

What are the two primary reasons for U.S.individuals and business firms to want foreign currency?

Correct AnswerverifiedShow Answer

The balance on income equals:

Correct AnswerverifiedShow Answer

Usually,a country with a rapid increase in its interest rate also sees:

Correct AnswerverifiedShow Answer

The Bretton Woods agreement:

Correct AnswerverifiedShow Answer

The Canadian dollar will depreciate against the U.S.dollar if U.S.citizens demand more Canadian products.

Correct AnswerverifiedShow Answer

Fiscal policies are hampered by flexible exchange rate systems.

Correct AnswerverifiedShow Answer

The basic rules of supply and demand do not apply in the foreign exchange market.

Correct AnswerverifiedFalse

An example of an item included in the current account is:

Correct AnswerverifiedShow Answer

In recent years,China has helped make its currency ____ by ____ U.S.dollars.

Correct AnswerverifiedShow Answer

Suppose the exchange rate of U.S.dollars per British pound has moved from $1.90/pound to $1.50/pound.This means the:

Correct AnswerverifiedShow Answer

The real exchange rate equals the:

Correct AnswerverifiedShow Answer

When a country uses a flexible (or floating) exchange rate and transactions increase the supply of its currency,the country's:

Correct AnswerverifiedShow Answer

The balance of trade is(are) :

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: Exchange Rate Shifts -(Figure: Exchange Rate Shifts) When demand for U.S.goods increases,the demand curve will shift from _____ to _____ and the exchange rate will shift from _____ to _____.

Correct AnswerverifiedShow Answer

The following graph depicts a change in the market for the U.S.dollar. According to the graph,is the dollar appreciating or depreciating? What is happening to the price of U.S.-made goods as seen by foreigners? Who benefits and who loses from this change?

Correct AnswerverifiedThe graph depicts a decline in the deman...View AnswerShow Answer

Absolute purchasing power parity means that the real exchange rate is 1:1.

Correct AnswerverifiedShow Answer

Which of the following currency trades is NOT consistent with the exchange rates of approximately 100 yen for US$1 and 1 British pound for US$1.50?

Correct AnswerverifiedShow Answer

The real exchange rate is defined as the nominal rate times the inflation rate.

Correct AnswerverifiedShow Answer

Describe the types of conditions that may cause currencies to appreciate and depreciate.

If the United States has a current account surplus:

Correct AnswerverifiedD

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
verified

In recent years,China has helped make its currency by U.S.dollars.

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the following to answer questions Figure: Exchange Rate Shifts -(Figure: Exchange Rate Shifts) When demand for U.S.goods increases,the demand curve will shift from ___ to _ and the exchange rate will shift from _ to ___.

Correct Answer
verified

Correct Answer
verified
The graph depicts a decline in the deman...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
D