Question 1

According to the J-curve effect, following a currency devaluation, the balance of trade improves before it worsens.

Accepted Answer

A) True 
 B)False

Question 2

A depreciation of the dollar results in Whirlpool dishwashers becoming less competitive in Europe.

Accepted Answer

A) True 
 B)False

Question 3

Assume that Ford Motor Company obtains some of its inputs in Mexico (foreign sourcing).As the peso becomes a larger portion of Ford's total costs, a dollar depreciation leads to a/an ________ in the peso cost of a Ford vehicle and a /an __________ in the dollar cost of a Ford compared to the cost changes that occur when all input costs are dollar denominated.

Accepted Answer

A)  decrease, increase 
B)  increase, decrease 
C)  decrease, decrease 
D)  increase, increase 
A)  decrease, increase 
B)  increase, decrease 
C)  decrease, decrease 
D)  increase, increase

Question 4

Suppose a country devalues its currency.If the country's demand for imports is elastic, the price increase resulting from the devaluation results in a relatively small decrease in the volume of imports, causing total import expenditures to increase.

Accepted Answer

A) True 
 B)False

Question 5

According to the absorption approach, a currency depreciation best improves a country's balance of trade if the country operates at full employment with no excess production capacity.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the dollar appreciates 10 percent against the Swiss franc.According to the J-curve effect, the U.S.balance of trade will initially worsen, but then improve as time passes.

Accepted Answer

A) True 
 B)False

Question 7

The purpose of currency revaluation is to cause an appreciation in a currency's exchange value.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true for the J-curve effect?

Accepted Answer

A)  It applies to the interest rate effects of currency depreciation. 
B)  It applies to the income effects of currency depreciation. 
C)  It suggests that demand tends to be most elastic over the long run. 
D)  It suggests that demand tends to be least elastic over the long run. 
A)  It applies to the interest rate effects of currency depreciation. 
B)  It applies to the income effects of currency depreciation. 
C)  It suggests that demand tends to be most elastic over the long run. 
D)  It suggests that demand tends to be least elastic over the long run.

Question 9

Figure 13.2. The U.S. Market for Imported Toyotas
​  
-In Figure 13.2, D represents the U.S.demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC2 represents

Accepted Answer

A)  an appreciation of the dollar relative to the yen. 
B)  a depreciation of the yen relative to the dollar. 
C)  a depreciation of the dollar relative to the yen. 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen. 
A)  an appreciation of the dollar relative to the yen. 
B)  a depreciation of the yen relative to the dollar. 
C)  a depreciation of the dollar relative to the yen. 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen.

Question 10

According to the J-curve effect, an appreciation of the yen's exchange value has

Accepted Answer

A)  no impact on the Japanese trade balance in the short run. 
B)  no impact on the Japanese trade balance in the long run. 
C)  an immediate negative effect on the Japanese trade balance. 
D)  an immediate positive effect on the Japanese trade balance. 
A)  no impact on the Japanese trade balance in the short run. 
B)  no impact on the Japanese trade balance in the long run. 
C)  an immediate negative effect on the Japanese trade balance. 
D)  an immediate positive effect on the Japanese trade balance.

Question 11

The Marshall-Lerner condition asserts that if the sum of a country's elasticity of demand for imports and the foreign elasticity of demand for the country's exports equals 1.0, a depreciation of the country's currency will not affect its balance of trade.

Accepted Answer

A) True 
 B)False

Question 12

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil.

Accepted Answer

A)  Domestic prices rise, the purchasing power of money falls, and consumption falls. 
B)  Domestic prices rise, the purchasing power of money rises, and consumption rises. 
C)  Domestic prices fall, the purchasing power of money rises, and consumption falls. 
D)  Domestic prices fall, the purchasing power of money rises, and consumption rises. 
A)  Domestic prices rise, the purchasing power of money falls, and consumption falls. 
B)  Domestic prices rise, the purchasing power of money rises, and consumption rises. 
C)  Domestic prices fall, the purchasing power of money rises, and consumption falls. 
D)  Domestic prices fall, the purchasing power of money rises, and consumption rises.

Question 13

Currency devaluation is initiated by governmental policy rather than the free-market forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 14

From 1985 to 1988 the U.S.dollar depreciated over 50 percent against the yen, yet Japanese export prices to Americans did not come down the full extent of the dollar depreciation.This is best explained by

Accepted Answer

A)  partial currency pass-through. 
B)  complete currency pass-through. 
C)  a partial J-curve effect. 
D)  a complete J-curve effect. 
A)  partial currency pass-through. 
B)  complete currency pass-through. 
C)  a partial J-curve effect. 
D)  a complete J-curve effect.

Question 15

According to the J-curve effect, when the exchange value of a country's currency appreciates, the country's trade balance

Accepted Answer

A)  first moves toward deficit, then later toward surplus. 
B)  first moves toward surplus, then later toward deficit. 
C)  moves into deficit and stays there. 
D)  moves into surplus and stays there. 
A)  first moves toward deficit, then later toward surplus. 
B)  first moves toward surplus, then later toward deficit. 
C)  moves into deficit and stays there. 
D)  moves into surplus and stays there.

Question 16

Given favorable elasticity conditions, other things equal an appreciation of the yen results in

Accepted Answer

A)  a smaller Japanese trade deficit. 
B)  a larger Japanese trade surplus. 
C)  decreased prices for imported products for Japan. 
D)  increased prices for imported products for Japan. 
A)  a smaller Japanese trade deficit. 
B)  a larger Japanese trade surplus. 
C)  decreased prices for imported products for Japan. 
D)  increased prices for imported products for Japan.

Question 17

The ______ is a theory of exchange rate adjustment and the balance of payments that considers how domestic spending on domestic goods and the trade balance changes relative to domestic output.

Accepted Answer

A)  monetary approach 
B)  elasticity approach 
C)  portfolio approach 
D)  absorption approach 
A)  monetary approach 
B)  elasticity approach 
C)  portfolio approach 
D)  absorption approach

Question 18

By increasing relative U.S.production costs, a dollar depreciation tends to increase U.S.export prices in foreign-currency terms, which results in an increase in the quantity of U.S.goods exported abroad.

Accepted Answer

A) True 
 B)False

Question 19

When producing jetliners, suppose that Boeing employs labor and materials whose costs are denominated in dollars and Chinese yuan respectively.If the dollar's exchange value depreciates 20 percent against the yuan, the yuan-denominated cost of a Boeing jetliner falls by an amount less than 20 percent.

Accepted Answer

A) True 
 B)False

Question 20

Figure 13.1. U.S. market for Imported Toyotas  
-In Figure 13.1, D represents the U.S.demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC1 represents

Accepted Answer

A)  an appreciation of the dollar relative to the yen. 
B)  an appreciation of the yen relative to the dollar. 
C)  a depreciation of the dollar relative to the yen. 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen. 
A)  an appreciation of the dollar relative to the yen. 
B)  an appreciation of the yen relative to the dollar. 
C)  a depreciation of the dollar relative to the yen. 
D)  neither an appreciation nor a depreciation of the dollar relative to the yen.

According to the J-curve effect, following a currency devaluation, the balance of trade improves before it worsens.

A depreciation of the dollar results in Whirlpool dishwashers becoming less competitive in Europe.

Suppose a country devalues its currency.If the country's demand for imports is elastic, the price increase resulting from the devaluation results in a relatively small decrease in the volume of imports, causing total import expenditures to increase.

According to the absorption approach, a currency depreciation best improves a country's balance of trade if the country operates at full employment with no excess production capacity.

Suppose the dollar appreciates 10 percent against the Swiss franc.According to the J-curve effect, the U.S.balance of trade will initially worsen, but then improve as time passes.

The purpose of currency revaluation is to cause an appreciation in a currency's exchange value.

Which of the following is true for the J-curve effect?

Figure 13.2. The U.S. Market for Imported Toyotas -In Figure 13.2, D represents the U.S.demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₂ represents

According to the J-curve effect, an appreciation of the yen's exchange value has

The Marshall-Lerner condition asserts that if the sum of a country's elasticity of demand for imports and the foreign elasticity of demand for the country's exports equals 1.0, a depreciation of the country's currency will not affect its balance of trade.

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil.

Currency devaluation is initiated by governmental policy rather than the free-market forces of supply and demand.

From 1985 to 1988 the U.S.dollar depreciated over 50 percent against the yen, yet Japanese export prices to Americans did not come down the full extent of the dollar depreciation.This is best explained by

According to the J-curve effect, when the exchange value of a country's currency appreciates, the country's trade balance

Given favorable elasticity conditions, other things equal an appreciation of the yen results in

The ______ is a theory of exchange rate adjustment and the balance of payments that considers how domestic spending on domestic goods and the trade balance changes relative to domestic output.

By increasing relative U.S.production costs, a dollar depreciation tends to increase U.S.export prices in foreign-currency terms, which results in an increase in the quantity of U.S.goods exported abroad.

Figure 13.1. U.S. market for Imported Toyotas -In Figure 13.1, D represents the U.S.demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₁ represents

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 13: Mechanisms of International Adjustment

According to the J-curve effect, following a currency devaluation, the balance of trade improves before it worsens.

A depreciation of the dollar results in Whirlpool dishwashers becoming less competitive in Europe.

Suppose a country devalues its currency.If the country's demand for imports is elastic, the price increase resulting from the devaluation results in a relatively small decrease in the volume of imports, causing total import expenditures to increase.

According to the absorption approach, a currency depreciation best improves a country's balance of trade if the country operates at full employment with no excess production capacity.

Suppose the dollar appreciates 10 percent against the Swiss franc.According to the J-curve effect, the U.S.balance of trade will initially worsen, but then improve as time passes.

The purpose of currency revaluation is to cause an appreciation in a currency's exchange value.

Which of the following is true for the J-curve effect?

Figure 13.2. The U.S. Market for Imported Toyotas ​ -In Figure 13.2, D represents the U.S.demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC2 represents

According to the J-curve effect, an appreciation of the yen's exchange value has

The Marshall-Lerner condition asserts that if the sum of a country's elasticity of demand for imports and the foreign elasticity of demand for the country's exports equals 1.0, a depreciation of the country's currency will not affect its balance of trade.

Assume that Brazil has a constant money supply and that it devalues its currency.The monetary approach to devaluation reasons that one of the following tends to occur for Brazil.

Currency devaluation is initiated by governmental policy rather than the free-market forces of supply and demand.

From 1985 to 1988 the U.S.dollar depreciated over 50 percent against the yen, yet Japanese export prices to Americans did not come down the full extent of the dollar depreciation.This is best explained by

According to the J-curve effect, when the exchange value of a country's currency appreciates, the country's trade balance

Given favorable elasticity conditions, other things equal an appreciation of the yen results in

The ______ is a theory of exchange rate adjustment and the balance of payments that considers how domestic spending on domestic goods and the trade balance changes relative to domestic output.

By increasing relative U.S.production costs, a dollar depreciation tends to increase U.S.export prices in foreign-currency terms, which results in an increase in the quantity of U.S.goods exported abroad.

Figure 13.1. U.S. market for Imported Toyotas -In Figure 13.1, D represents the U.S.demand curve for Toyotas and MC0 represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC0 to MC1 represents

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Figure 13.2. The U.S. Market for Imported Toyotas -In Figure 13.2, D represents the U.S.demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₂ represents

Figure 13.1. U.S. market for Imported Toyotas -In Figure 13.1, D represents the U.S.demand curve for Toyotas and MC₀ represents the marginal cost of producing Toyotas.A shift in the marginal cost curve from MC₀ to MC₁ represents