Question 1

The shorter the pass-through period, the sooner the impact of depreciation on export prices and import prices.

Accepted Answer

A) True 
 B)False

Question 2

According to the J-curve effect, currency appreciation

Accepted Answer

A)  decreases a trade surplus. 
B)  increases a trade surplus. 
C)  decreases a trade surplus before increasing a trade surplus. 
D)  increases a trade surplus before decreasing a trade surplus. 
A)  decreases a trade surplus. 
B)  increases a trade surplus. 
C)  decreases a trade surplus before increasing a trade surplus. 
D)  increases a trade surplus before decreasing a trade surplus.

Question 3

The longer the currency pass-through period, the _______ required for currency depreciation to have the intended effect on the trade balance.

Accepted Answer

A)  shorter the time period 
B)  longer the time period 
C)  larger the spending cut 
D)  smaller the spending cut 
A)  shorter the time period 
B)  longer the time period 
C)  larger the spending cut 
D)  smaller the spending cut

Question 4

According to the J-curve concept, there are multiple potential outcomes on the balance of payments from a currency depreciation.Which of the following is NOT one of those outcomes?

Accepted Answer

A)  The effects of a currency depreciation are transmitted primarily via the income adjusted mechanism. 
B)  The effects of a currency depreciation are likely to be adverse or negative in the short run. 
C)  In the long run, the effects of a currency depreciation are likely to be positive given favorable elasticity conditions. 
D)  The effects of a currency depreciation may be influenced by offsetting devaluations made by other countries. 
A)  The effects of a currency depreciation are transmitted primarily via the income adjusted mechanism. 
B)  The effects of a currency depreciation are likely to be adverse or negative in the short run. 
C)  In the long run, the effects of a currency depreciation are likely to be positive given favorable elasticity conditions. 
D)  The effects of a currency depreciation may be influenced by offsetting devaluations made by other countries.

Question 5

How is the absorption approach used for analyzing the effects of currency devaluation?

Accepted Answer

The absorption approach provides insight

Question 6

According to the absorption approach, an increase in domestic expenditures must occur for currency devaluation to promote balance of trade equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

According to the Marshall-Lerner condition, currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

Accepted Answer

A)  0.5. 
B)  1.0. 
C)  1.5. 
D)  2.0. 
A)  0.5. 
B)  1.0. 
C)  1.5. 
D)  2.0.

Question 8

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.An appreciation of the dollar's exchange value

Accepted Answer

A)  enhances its international competitiveness. 
B)  worsens its international competitiveness. 
C)  does not affect its international competitiveness. 
D)  None of these are correct. 
A)  enhances its international competitiveness. 
B)  worsens its international competitiveness. 
C)  does not affect its international competitiveness. 
D)  None of these are correct.

Question 9

Complete currency pass through suggests that if the dollar's exchange value depreciates by 10 percent, imports will become 10 percent more expensive to Americans while U.S.exports will become 10 percent cheaper to foreigners.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  perfectly inelastic 
B)  relatively inelastic 
C)  unit elastic 
D)  relatively elastic 
A)  perfectly inelastic 
B)  relatively inelastic 
C)  unit elastic 
D)  relatively elastic

Question 11

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.Assume that Toyota behaves like a monopolist in the U.S.market.A shift in the marginal cost curve from MC0 to MC1 leads to

Accepted Answer

A)  a complete pass-through of the depreciation of the dollar. 
B)  a complete pass-through of the appreciation of the dollar. 
C)  a partial pass-through of the depreciation of the dollar. 
D)  a partial pass-through of the appreciation of the dollar. 
A)  a complete pass-through of the depreciation of the dollar. 
B)  a complete pass-through of the appreciation of the dollar. 
C)  a partial pass-through of the depreciation of the dollar. 
D)  a partial pass-through of the appreciation of the dollar.

Question 12

According to the Marshall-Lerner condition, currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

Accepted Answer

A) True 
 B)False

Question 13

According to the absorption approach, currency devaluation best improves a country's trade balance when its economy is at maximum capacity.

Accepted Answer

A) True 
 B)False

Question 14

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.A depreciation of the dollar's exchange value

Accepted Answer

A)  enhances its international competitiveness. 
B)  worsens its international competitiveness. 
C)  does not affect its international competitiveness. 
D)  None of these are correct. 
A)  enhances its international competitiveness. 
B)  worsens its international competitiveness. 
C)  does not affect its international competitiveness. 
D)  None of these are correct.

Question 15

The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money, and the resulting impact on domestic expenditure levels.

Accepted Answer

A) True 
 B)False

Question 16

According to the Marshall-Lerner condition, currency depreciation has no effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

Accepted Answer

A)  0.1. 
B)  0.5. 
C)  1.0. 
D)  2.0. 
A)  0.1. 
B)  0.5. 
C)  1.0. 
D)  2.0.

Question 17

The absorption approach to currency depreciation focuses on

Accepted Answer

A)  the purchasing power of money. 
B)  relative price effects. 
C)  income effects. 
D)  price elasticity of demand. 
A)  the purchasing power of money. 
B)  relative price effects. 
C)  income effects. 
D)  price elasticity of demand.

Question 18

The extent to which a change in the exchange rate leads to changes in import and export prices is known as

Accepted Answer

A)  the J-curve effect. 
B)  the Marshall-Lerner condition. 
C)  the absorption approach. 
D)  the pass-through effect. 
A)  the J-curve effect. 
B)  the Marshall-Lerner condition. 
C)  the absorption approach. 
D)  the pass-through effect.

Question 19

The purpose of currency devaluation is to cause a depreciation in a currency's exchange value.

Accepted Answer

A) True 
 B)False

Question 20

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the

Accepted Answer

A)  recognition lag. 
B)  decision lag. 
C)  replacement lag. 
D)  production lag. 
A)  recognition lag. 
B)  decision lag. 
C)  replacement lag. 
D)  production lag.

The shorter the pass-through period, the sooner the impact of depreciation on export prices and import prices.

According to the J-curve effect, currency appreciation

The longer the currency pass-through period, the _______ required for currency depreciation to have the intended effect on the trade balance.

According to the J-curve concept, there are multiple potential outcomes on the balance of payments from a currency depreciation.Which of the following is NOT one of those outcomes?

How is the absorption approach used for analyzing the effects of currency devaluation?

According to the absorption approach, an increase in domestic expenditures must occur for currency devaluation to promote balance of trade equilibrium.

According to the Marshall-Lerner condition, currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.An appreciation of the dollar's exchange value

Complete currency pass through suggests that if the dollar's exchange value depreciates by 10 percent, imports will become 10 percent more expensive to Americans while U.S.exports will become 10 percent cheaper to foreigners.

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

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.Assume that Toyota behaves like a monopolist in the U.S.market.A shift in the marginal cost curve from MC₀ to MC₁ leads to

According to the Marshall-Lerner condition, currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

According to the absorption approach, currency devaluation best improves a country's trade balance when its economy is at maximum capacity.

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.A depreciation of the dollar's exchange value

The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money, and the resulting impact on domestic expenditure levels.

According to the Marshall-Lerner condition, currency depreciation has no effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

The absorption approach to currency depreciation focuses on

The extent to which a change in the exchange rate leads to changes in import and export prices is known as

The purpose of currency devaluation is to cause a depreciation in a currency's exchange value.

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the

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

The shorter the pass-through period, the sooner the impact of depreciation on export prices and import prices.

According to the J-curve effect, currency appreciation

The longer the currency pass-through period, the _______ required for currency depreciation to have the intended effect on the trade balance.

According to the J-curve concept, there are multiple potential outcomes on the balance of payments from a currency depreciation.Which of the following is NOT one of those outcomes?

How is the absorption approach used for analyzing the effects of currency devaluation?

According to the absorption approach, an increase in domestic expenditures must occur for currency devaluation to promote balance of trade equilibrium.

According to the Marshall-Lerner condition, currency depreciation would have a negative effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.An appreciation of the dollar's exchange value

Complete currency pass through suggests that if the dollar's exchange value depreciates by 10 percent, imports will become 10 percent more expensive to Americans while U.S.exports will become 10 percent cheaper to foreigners.

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

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.Assume that Toyota behaves like a monopolist in the U.S.market.A shift in the marginal cost curve from MC0 to MC1 leads to

According to the Marshall-Lerner condition, currency depreciation will worsen a country's balance of trade if the country's elasticity of demand for imports plus the foreign demand elasticity for the country's exports exceeds 1.0.

According to the absorption approach, currency devaluation best improves a country's trade balance when its economy is at maximum capacity.

Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.A depreciation of the dollar's exchange value

The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money, and the resulting impact on domestic expenditure levels.

According to the Marshall-Lerner condition, currency depreciation has no effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

The absorption approach to currency depreciation focuses on

The extent to which a change in the exchange rate leads to changes in import and export prices is known as

The purpose of currency devaluation is to cause a depreciation in a currency's exchange value.

The time period that it takes for companies to increase output of commodities for which demand has increased due to currency depreciation is known as the

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 13.1. 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.Assume that Toyota behaves like a monopolist in the U.S.market.A shift in the marginal cost curve from MC₀ to MC₁ leads to