Question 1

The criteria for joining the EMU was laid out by

Accepted Answer

A) the Treaty of Maastricht in 1992. 
B) the Tokyo Round in 1979. 
C) the Uruguay Round in 1986. 
D) the Treaty of Versailles in 1919. 
E) the Recovery and Reinvestment Act of 2009. 
A) the Treaty of Maastricht in 1992. 
B) the Tokyo Round in 1979. 
C) the Uruguay Round in 1986. 
D) the Treaty of Versailles in 1919. 
E) the Recovery and Reinvestment Act of 2009. A

Question 2

All else equal, an increase in the demand for the U.S. dollar results in an appreciation of the dollar.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following countries has adopted the euro as its currency since 1999?

Accepted Answer

A) Germany 
B) The United Kingdom 
C) Denmark 
D) Sweden 
E) China 
A) Germany 
B) The United Kingdom 
C) Denmark 
D) Sweden 
E) China A

Question 4

An appreciation of a country's currency leads to

Accepted Answer

A) both an increase in exports and imports, leaving net exports unchanged. 
B) an increase in net exports. 
C) a decrease in net exports. 
D) both a decrease in exports and imports, leaving net exports unchanged. 
E) either an increase or decrease in net exports, depending on the size of the country. 
A) both an increase in exports and imports, leaving net exports unchanged. 
B) an increase in net exports. 
C) a decrease in net exports. 
D) both a decrease in exports and imports, leaving net exports unchanged. 
E) either an increase or decrease in net exports, depending on the size of the country.

Question 5

The euro will appreciate against the dollar if

Accepted Answer

A) U.S.residents demand more European goods. 
B) U.S.residents demand fewer European goods. 
C) European residents demand more U.S.goods. 
D) European residents demand more European goods. 
E) U.S.residents demand fewer U.S.goods. 
A) U.S.residents demand more European goods. 
B) U.S.residents demand fewer European goods. 
C) European residents demand more U.S.goods. 
D) European residents demand more European goods. 
E) U.S.residents demand fewer U.S.goods.

Question 6

A depreciation of the domestic currency occurs when it takes more units of foreign currency to buy a unit of domestic currency.

Accepted Answer

A) True 
 B)False

Question 7

Assume that one U.S. dollar equals 100 yen. An American student wants to pay 500,000 yen in tuition for a university in the Japan. How many dollars should she exchange in order to have the dollars to pay the tuition?

Accepted Answer

A) $500. 
B) $5,000. 
C) $50,000. 
D) $500,000. 
E) $50,000,000. 
A) $500. 
B) $5,000. 
C) $50,000. 
D) $500,000. 
E) $50,000,000.

Question 8

It is possible to have both a fixed exchange rate and control over your own monetary policy if you impose strict controls on financial capital flows into and out of your country.

Accepted Answer

A) True 
 B)False

Question 9

Purchasing power parity exists when domestic currency

Accepted Answer

A) buys more goods abroad as at home. 
B) buys the same amount of goods abroad as at home. 
C) buys less goods abroad as at home. 
D) is not convertible to a foreign currency. 
E) has a fixed exchange rate with a foreign currency. 
A) buys more goods abroad as at home. 
B) buys the same amount of goods abroad as at home. 
C) buys less goods abroad as at home. 
D) is not convertible to a foreign currency. 
E) has a fixed exchange rate with a foreign currency.

Question 10

If a country fixes its currency to the dollar, its economy becomes closely linked to the actions of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 11

Which is the theory that suggests that the exchange rate will adjust so that the prices of goods in different countries are the same?

Accepted Answer

A) Price differentials 
B) The law of zero price 
C) The law of multiple prices 
D) Purchasing power parity 
E) Comparative advantage 
A) Price differentials 
B) The law of zero price 
C) The law of multiple prices 
D) Purchasing power parity 
E) Comparative advantage

Question 12

Assume that $1 equals 100 yen. A Japanese student wants to pay $4,000 in tuition for a university in the United States. How many yen should she exchange in order to have the dollars to pay the tuition?

Accepted Answer

A) 25,000 yen. 
B) 250,000 yen. 
C) 40,000 yen. 
D) 400,000 yen. 
E) 4,000,000 yen. 
A) 25,000 yen. 
B) 250,000 yen. 
C) 40,000 yen. 
D) 400,000 yen. 
E) 4,000,000 yen.

Question 13

The yen has depreciated if $1 equaled 100 yen yesterday but 105 yen today.

Accepted Answer

A) True 
 B)False

Question 14

The U.S. dollar has appreciated against the euro if it has taken more euros to purchase one dollar.

Accepted Answer

A) True 
 B)False

Question 15

If there is an increase in the U.S. demand for European goods, then

Accepted Answer

A) both the dollar and the euro will appreciate. 
B) both the dollar and the euro will depreciate. 
C) the dollar will depreciate against the euro. 
D) the dollar will appreciate against the euro. 
E) the exchange rate between the dollar and the euro will remain unchanged, but their exchange rates will appreciate against other currencies. 
A) both the dollar and the euro will appreciate. 
B) both the dollar and the euro will depreciate. 
C) the dollar will depreciate against the euro. 
D) the dollar will appreciate against the euro. 
E) the exchange rate between the dollar and the euro will remain unchanged, but their exchange rates will appreciate against other currencies.

Question 16

The Economic and Monetary Union in Europe is a currency union.

Accepted Answer

A) True 
 B)False

Question 17

A government may apply a policy of revaluation when it believes its currency is

Accepted Answer

A) overvalued. 
B) undervalued. 
C) at par. 
D) at equilibrium. 
E) in purchasing power parity. 
A) overvalued. 
B) undervalued. 
C) at par. 
D) at equilibrium. 
E) in purchasing power parity.

Question 18

"European countries that want the benefits of fixed exchange rates with their neighboring countries without the costs could simply impose strict controls on investment flows into and out of their country." Answer true or false about this statement. Explain.

Accepted Answer

This statement is true to a certain exte

Question 19

All else equal, a higher inflation rate in the U.S. leads to

Accepted Answer

A) a decrease in U.S.exports but an increase in U.S.imports. 
B) an increase in U.S.exports but a decrease in U.S.imports. 
C) an increase in both U.S.exports and imports. 
D) a decrease in both U.S.exports and imports. 
E) no change in either U.S.exports or imports. 
A) a decrease in U.S.exports but an increase in U.S.imports. 
B) an increase in U.S.exports but a decrease in U.S.imports. 
C) an increase in both U.S.exports and imports. 
D) a decrease in both U.S.exports and imports. 
E) no change in either U.S.exports or imports.

Question 20

According to the theory of purchasing power parity, if inflation is 5 percent in the U.S. and 2 percent in Canada, then

Accepted Answer

A) the U.S.dollar will appreciate against the Canadian dollar over time. 
B) the U.S.dollar will depreciate against the Canadian dollar over time. 
C) both the U.S.dollar and the Canadian dollar will appreciate against other currencies. 
D) both the U.S.dollar and the Canadian dollar will depreciate against other currencies. 
E) nothing will occur. 
A) the U.S.dollar will appreciate against the Canadian dollar over time. 
B) the U.S.dollar will depreciate against the Canadian dollar over time. 
C) both the U.S.dollar and the Canadian dollar will appreciate against other currencies. 
D) both the U.S.dollar and the Canadian dollar will depreciate against other currencies. 
E) nothing will occur.

Exam 30: International Finance

The criteria for joining the EMU was laid out by

All else equal, an increase in the demand for the U.S. dollar results in an appreciation of the dollar.

Which of the following countries has adopted the euro as its currency since 1999?

An appreciation of a country's currency leads to

The euro will appreciate against the dollar if

A depreciation of the domestic currency occurs when it takes more units of foreign currency to buy a unit of domestic currency.

Assume that one U.S. dollar equals 100 yen. An American student wants to pay 500,000 yen in tuition for a university in the Japan. How many dollars should she exchange in order to have the dollars to pay the tuition?

It is possible to have both a fixed exchange rate and control over your own monetary policy if you impose strict controls on financial capital flows into and out of your country.

Purchasing power parity exists when domestic currency

If a country fixes its currency to the dollar, its economy becomes closely linked to the actions of the Federal Reserve.

Which is the theory that suggests that the exchange rate will adjust so that the prices of goods in different countries are the same?

Assume that $1 equals 100 yen. A Japanese student wants to pay $4,000 in tuition for a university in the United States. How many yen should she exchange in order to have the dollars to pay the tuition?

The yen has depreciated if $1 equaled 100 yen yesterday but 105 yen today.

The U.S. dollar has appreciated against the euro if it has taken more euros to purchase one dollar.

If there is an increase in the U.S. demand for European goods, then

The Economic and Monetary Union in Europe is a currency union.

A government may apply a policy of revaluation when it believes its currency is

"European countries that want the benefits of fixed exchange rates with their neighboring countries without the costs could simply impose strict controls on investment flows into and out of their country." Answer true or false about this statement. Explain.

All else equal, a higher inflation rate in the U.S. leads to

According to the theory of purchasing power parity, if inflation is 5 percent in the U.S. and 2 percent in Canada, then

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

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