Question 1

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

Accepted Answer

A) True 
 B)False  False

Question 2

The exchange rate is

Accepted Answer

A)  another term for "interest rate." 
B)  another term for "growth rate." 
C)  the rate at which goods trade for one another across international borders. 
D)  the price of one currency in terms of another currency. 
A)  another term for "interest rate." 
B)  another term for "growth rate." 
C)  the rate at which goods trade for one another across international borders. 
D)  the price of one currency in terms of another currency. D

Question 3

Figure 19-2  
-Of the graphs in Figure 19-2,which one shows the effects on the exchange rate of an expansion in Japan?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4 C

Question 4

Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory,explain the exchange rate between the yen and the euro.

Accepted Answer

Purchasing power parity theory holds tha

Question 5

The purchasing power parity theory of exchange rate determination maintains that

Accepted Answer

A)  the exchange rate between two nations' currencies is determined by the percent of gold that backs each nation's currency. 
B)  the exchange rate between two nations' currencies adjusts to reflect differences in the price levels in the two nations. 
C)  in the short run,exchange rates are determined by central bank intervention in the currency markets. 
D)  the exchange rate between two currencies is determined by the debt that each nation owes to the World Bank. 
A)  the exchange rate between two nations' currencies is determined by the percent of gold that backs each nation's currency. 
B)  the exchange rate between two nations' currencies adjusts to reflect differences in the price levels in the two nations. 
C)  in the short run,exchange rates are determined by central bank intervention in the currency markets. 
D)  the exchange rate between two currencies is determined by the debt that each nation owes to the World Bank.

Question 6

Purchasing power parity explains how exchange rates cause price differences between two countries.

Accepted Answer

A) True 
 B)False

Question 7

Under the gold standard,

Accepted Answer

A)  each nation had discretion over its monetary policy. 
B)  trade-deficit nations had less control over their money supply than trade-surplus nations. 
C)  trade-surplus nations had less control over their money supply than trade-deficit nations. 
D)  no nation had control over its domestic monetary policy. 
A)  each nation had discretion over its monetary policy. 
B)  trade-deficit nations had less control over their money supply than trade-surplus nations. 
C)  trade-surplus nations had less control over their money supply than trade-deficit nations. 
D)  no nation had control over its domestic monetary policy.

Question 8

The U.S.Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japanese discount rate.The likely outcome of currency speculation in response to this news is that

Accepted Answer

A)  the dollar will depreciate. 
B)  the dollar will appreciate. 
C)  the yen will appreciate. 
D)  both the dollar and yen will appreciate. 
A)  the dollar will depreciate. 
B)  the dollar will appreciate. 
C)  the yen will appreciate. 
D)  both the dollar and yen will appreciate.

Question 9

The decline in the value of the dollar from 1985 to 1988 was beneficial to

Accepted Answer

A)  American tourists travelling to Europe. 
B)  firms importing goods into America. 
C)  American exporting businesses. 
D)  foreigners holding U.S.government bonds. 
A)  American tourists travelling to Europe. 
B)  firms importing goods into America. 
C)  American exporting businesses. 
D)  foreigners holding U.S.government bonds.

Question 10

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Accepted Answer

A)  Panama 
B)  Ecuador 
C)  Zimbabwe 
D)  all of the above 
A)  Panama 
B)  Ecuador 
C)  Zimbabwe 
D)  all of the above

Question 11

Under the Bretton Woods system of fixed exchange rates,

Accepted Answer

A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency. 
A)  devaluations were frequent and small. 
B)  devaluations were usually unforeseen. 
C)  the IMF ensured that exchange rates were never changed. 
D)  speculators could profit from an attack on a weak currency.

Question 12

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

Accepted Answer

A)  appreciated. 
B)  depreciated. 
C)  been revalued. 
D)  been devalued. 
A)  appreciated. 
B)  depreciated. 
C)  been revalued. 
D)  been devalued.

Question 13

A fixed exchange rate can be maintained by a government as long as it has sufficient

Accepted Answer

A)  supplies of its own currency. 
B)  foreign reserves. 
C)  gold and other precious metals. 
D)  tax revenues. 
A)  supplies of its own currency. 
B)  foreign reserves. 
C)  gold and other precious metals. 
D)  tax revenues.

Question 14

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

Accepted Answer

A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70. 
A)  15 cents. 
B)  57 cents 
C)  62 cents. 
D)  $15.70.

Question 15

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

Accepted Answer

A)  its money supply. 
B)  its interest rates. 
C)  its level of real GDP. 
D)  aggregate demand. 
A)  its money supply. 
B)  its interest rates. 
C)  its level of real GDP. 
D)  aggregate demand.

Question 16

There are at least three exchange rates between every pair of national currencies.

Accepted Answer

A) True 
 B)False

Question 17

When goods or services cross international borders

Accepted Answer

A)  countries must ship gold to make payment. 
B)  money must generally move in the opposite direction. 
C)  a future shipment must be made to offset the current purchase. 
D)  payment must be made in another good,using barter. 
A)  countries must ship gold to make payment. 
B)  money must generally move in the opposite direction. 
C)  a future shipment must be made to offset the current purchase. 
D)  payment must be made in another good,using barter.

Question 18

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

Accepted Answer

A)  fixed exchange rates. 
B)  expansionary monetary policies. 
C)  contractionary monetary policies. 
D)  state ownership of industry. 
A)  fixed exchange rates. 
B)  expansionary monetary policies. 
C)  contractionary monetary policies. 
D)  state ownership of industry.

Question 19

A country with an undervalued currency

Accepted Answer

A)  will have a balance of payments deficit. 
B)  will accumulate reserves of foreign currencies. 
C)  will suffer losses of foreign reserves. 
D)  must intervene in the foreign exchange market to buy its own currency. 
A)  will have a balance of payments deficit. 
B)  will accumulate reserves of foreign currencies. 
C)  will suffer losses of foreign reserves. 
D)  must intervene in the foreign exchange market to buy its own currency.

Question 20

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

Accepted Answer

A) True 
 B)False

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

The exchange rate is

Figure 19-2 -Of the graphs in Figure 19-2,which one shows the effects on the exchange rate of an expansion in Japan?

Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory,explain the exchange rate between the yen and the euro.

The purchasing power parity theory of exchange rate determination maintains that

Purchasing power parity explains how exchange rates cause price differences between two countries.

Under the gold standard,

The U.S.Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japanese discount rate.The likely outcome of currency speculation in response to this news is that

The decline in the value of the dollar from 1985 to 1988 was beneficial to

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Under the Bretton Woods system of fixed exchange rates,

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

A fixed exchange rate can be maintained by a government as long as it has sufficient

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

There are at least three exchange rates between every pair of national currencies.

When goods or services cross international borders

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

A country with an undervalued currency

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and The Macroeconomy

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Exam 19: The International Monetary System Order Or Disorder

Purchasing power parity is widely accepted as a better explainer of short-run changes in exchange rates than interest rate effects.

The exchange rate is

Figure 19-2 -Of the graphs in Figure 19-2,which one shows the effects on the exchange rate of an expansion in Japan?

Suppose a Lexus LS400 and a Mercedes C300 are considered to be of equivalent value.The Lexus sells for 6,000,000 Japanese yen in Tokyo and the Mercedes sells for 50,000 euros in Stuttgart.Using the purchasing power parity theory,explain the exchange rate between the yen and the euro.

The purchasing power parity theory of exchange rate determination maintains that

Purchasing power parity explains how exchange rates cause price differences between two countries.

Under the gold standard,

The U.S.Secretary of the Treasury met with the Japanese Finance Minister to discuss possible cuts in the Japanese discount rate.The likely outcome of currency speculation in response to this news is that

The decline in the value of the dollar from 1985 to 1988 was beneficial to

Which of the following countries has gone so far as to adopt the U.S.dollar as its domestic currency?

Under the Bretton Woods system of fixed exchange rates,

If market forces change the exchange rate value of one dollar from 80 yen to 83.25 yen,then the dollar has

A fixed exchange rate can be maintained by a government as long as it has sufficient

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

A deficit nation in a fixed exchange rate system can improve its balance of payments by increasing

There are at least three exchange rates between every pair of national currencies.

When goods or services cross international borders

IMF advice to countries such as Russia and Argentina that suffer from exchange rates crises often requires these countries to adopt

A country with an undervalued currency

The demand for U.S.dollars is derived from foreign demand for U.S.exports.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

Exchange Rates and The Macroeconomy

Filters