Question 1

If prices rise in Japan, everything else constant, the dollar __________ against the yen and the yen __________ against the dollar.

Accepted Answer

A)  appreciates; appreciates 
B)  appreciates; depreciates 
C)  depreciates; appreciates 
D)  depreciates; depreciates 
A)  appreciates; appreciates 
B)  appreciates; depreciates 
C)  depreciates; appreciates 
D)  depreciates; depreciates

Question 2

A worldwide system of fixed exchange rates was organized and maintained under the International Monetary Fund

Accepted Answer

A)  in the three decades before World War I. 
B)  in the years between the world wars. 
C)  from the end of World War II until the early 1970s. 
D)  from the early 1960s to the late 1980s. 
A)  in the three decades before World War I. 
B)  in the years between the world wars. 
C)  from the end of World War II until the early 1970s. 
D)  from the early 1960s to the late 1980s.

Question 3

A sudden expectation of future appreciation of the dollar causes funds to flow __________ the United States and the dollar to actually __________.

Accepted Answer

A)  out of; depreciate 
B)  out of; appreciate 
C)  into; depreciate 
D)  into; appreciate 
A)  out of; depreciate 
B)  out of; appreciate 
C)  into; depreciate 
D)  into; appreciate

Question 4

The equilibrium price for a British pound is $1.60. At a price of $1.55 per British pound, there would be excess __________ the dollar and the dollar would __________.

Accepted Answer

A)  supply of; appreciate 
B)  supply of; depreciate 
C)  demand for; appreciate 
D)  demand for; depreciate 
A)  supply of; appreciate 
B)  supply of; depreciate 
C)  demand for; appreciate 
D)  demand for; depreciate

Question 5

Importing a foreign good increases the __________ the foreign currency and increases the __________ the currency of the importing country in the foreign exchange market.

Accepted Answer

A)  demand for; demand for 
B)  demand for; supply of 
C)  supply of; demand for 
D)  supply of; supply of 
A)  demand for; demand for 
B)  demand for; supply of 
C)  supply of; demand for 
D)  supply of; supply of

Question 6

Suppose that one-year Treasury bills yield 6 percent in the United States and 4 percent in Britain. Investors will be indifferent between them if they expect the dollar to

Accepted Answer

A)  depreciate against the pound by approximately 2 percent. 
B)  appreciate against the pound by approximately 2 percent. 
C)  depreciate against the pound by approximately 33 percent. 
D)  appreciate against the pound by approximately 33 percent. 
A)  depreciate against the pound by approximately 2 percent. 
B)  appreciate against the pound by approximately 2 percent. 
C)  depreciate against the pound by approximately 33 percent. 
D)  appreciate against the pound by approximately 33 percent.

Question 7

In comparing the returns on U.S. and German Treasury securities, investors

Accepted Answer

A)  should forecast the future dollar/euro exchange rate. 
B)  may disregard the future dollar/euro exchange rate. 
C)  should assume the future dollar/euro exchange rate is the same as today's. 
D)  should assume the euro will depreciate if the German interest rate is above the U.S. interest rate. 
A)  should forecast the future dollar/euro exchange rate. 
B)  may disregard the future dollar/euro exchange rate. 
C)  should assume the future dollar/euro exchange rate is the same as today's. 
D)  should assume the euro will depreciate if the German interest rate is above the U.S. interest rate.

Question 8

A surplus in our balance of payments causes the dollar to __________, which causes the surplus to __________.

Accepted Answer

A)  appreciate; increase 
B)  appreciate; decrease 
C)  depreciate; increase 
D)  depreciate; decrease 
A)  appreciate; increase 
B)  appreciate; decrease 
C)  depreciate; increase 
D)  depreciate; decrease

Question 9

Assume that there is an excess supply of euros in the foreign exchange market. If a fixed exchange rate system exists with the United States, the European Central Bank would have to __________ to prevent the euro from __________.

Accepted Answer

A)  buy excess euros; appreciating 
B)  buy excess euros; depreciating 
C)  sell euros; appreciating 
D)  sell euros; depreciating 
A)  buy excess euros; appreciating 
B)  buy excess euros; depreciating 
C)  sell euros; appreciating 
D)  sell euros; depreciating

Question 10

To stay with a fixed exchange rate system, a nation that is losing most of its international reserves will have no choice but to

Accepted Answer

A)  ask for or declare a devaluation. 
B)  ask for or declare a revaluation. 
C)  let its currency depreciate. 
D)  let its currency appreciate. 
A)  ask for or declare a devaluation. 
B)  ask for or declare a revaluation. 
C)  let its currency depreciate. 
D)  let its currency appreciate.

Question 11

Today, central banks __________ intervene to influence floating exchange rates.

Accepted Answer

A)  never 
B)  seldom 
C)  frequently 
D)  are required 
A)  never 
B)  seldom 
C)  frequently 
D)  are required

Question 12

Generally speaking, exchange rates are determined by

Accepted Answer

A)  supply and demand. 
B)  the International Monetary Fund. 
C)  interest rates. 
D)  differences in money growth rates. 
A)  supply and demand. 
B)  the International Monetary Fund. 
C)  interest rates. 
D)  differences in money growth rates.

Question 13

A nation running a persistent balance of payments surplus while part of a fixed exchange rate system would be required to __________ international reserves in an effort to prevent its currency from __________.

Accepted Answer

A)  amass; appreciating 
B)  amass; depreciating 
C)  pay out; appreciating 
D)  pay out; depreciating 
A)  amass; appreciating 
B)  amass; depreciating 
C)  pay out; appreciating 
D)  pay out; depreciating

Question 14

If the price of $1 is 1.67 Swiss francs, the price of a Swiss franc is

Accepted Answer

A)  $0.33. 
B)  $1.67. 
C)  $2.00. 
D)  $0.67. 
A)  $0.33. 
B)  $1.67. 
C)  $2.00. 
D)  $0.67.

Exam 10: Understanding Foreign Exchange

If prices rise in Japan, everything else constant, the dollar __________ against the yen and the yen __________ against the dollar.

A worldwide system of fixed exchange rates was organized and maintained under the International Monetary Fund

A sudden expectation of future appreciation of the dollar causes funds to flow __________ the United States and the dollar to actually __________.

The equilibrium price for a British pound is $1.60. At a price of $1.55 per British pound, there would be excess __________ the dollar and the dollar would __________.

Importing a foreign good increases the __________ the foreign currency and increases the __________ the currency of the importing country in the foreign exchange market.

Suppose that one-year Treasury bills yield 6 percent in the United States and 4 percent in Britain. Investors will be indifferent between them if they expect the dollar to

In comparing the returns on U.S. and German Treasury securities, investors

A surplus in our balance of payments causes the dollar to __________, which causes the surplus to __________.

Assume that there is an excess supply of euros in the foreign exchange market. If a fixed exchange rate system exists with the United States, the European Central Bank would have to __________ to prevent the euro from __________.

To stay with a fixed exchange rate system, a nation that is losing most of its international reserves will have no choice but to

Today, central banks __________ intervene to influence floating exchange rates.

Generally speaking, exchange rates are determined by

A nation running a persistent balance of payments surplus while part of a fixed exchange rate system would be required to __________ international reserves in an effort to prevent its currency from __________.

If the price of $1 is 1.67 Swiss francs, the price of a Swiss franc is

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

If prices rise in Japan, everything else constant, the dollar against the yen and the yen against the dollar.

A sudden expectation of future appreciation of the dollar causes funds to flow the United States and the dollar to actually .

The equilibrium price for a British pound is $1.60. At a price of $1.55 per British pound, there would be excess the dollar and the dollar would .

Importing a foreign good increases the the foreign currency and increases the the currency of the importing country in the foreign exchange market.

A surplus in our balance of payments causes the dollar to , which causes the surplus to .

Assume that there is an excess supply of euros in the foreign exchange market. If a fixed exchange rate system exists with the United States, the European Central Bank would have to to prevent the euro from .

A nation running a persistent balance of payments surplus while part of a fixed exchange rate system would be required to international reserves in an effort to prevent its currency from .