Question 1

Long-run determinants of exchange rate include labor productivity levels, inflation rates, consumer preferences for goods and services, and trade barriers.

Accepted Answer

A) True 
 B)False

Question 2

What is the asset market approach to exchange rate determination?

Accepted Answer

Over short periods of time, decisions to

Question 3

Under a system of floating exchange rates, relatively low productivity and high inflation rates in the United States result in

Accepted Answer

A)  an increase in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciation in the dollar. 
B)  an increase in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar. 
C)  a decrease in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciation in the dollar. 
D)  a decrease in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar. 
A)  an increase in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciation in the dollar. 
B)  an increase in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar. 
C)  a decrease in the demand for foreign currency, a decrease in the supply of foreign currency, and a depreciation in the dollar. 
D)  a decrease in the demand for foreign currency, an increase in the supply of foreign currency, and an appreciation in the dollar.

Question 4

Given a system of floating exchange rates, assume that Boeing Inc.of the United States places a large order, payable in yen, with a Japanese contractor for jet engine parts.The immediate effect of this transaction will be a shift in the

Accepted Answer

A)  supply curve of yen to the left, which causes the dollar to appreciate against the yen. 
B)  supply curve of yen to the right, which causes the dollar to depreciate against the yen. 
C)  demand curve for yen to the left, which causes the dollar to appreciate against the yen. 
D)  demand curve for yen to the right, which causes the dollar to depreciate against the yen. 
A)  supply curve of yen to the left, which causes the dollar to appreciate against the yen. 
B)  supply curve of yen to the right, which causes the dollar to depreciate against the yen. 
C)  demand curve for yen to the left, which causes the dollar to appreciate against the yen. 
D)  demand curve for yen to the right, which causes the dollar to depreciate against the yen.

Question 5

In the long run, exchange rates are primarily determined by

Accepted Answer

A)  agreements among governments of the world's industrial countries. 
B)  relative interest rates in developing countries and industrial countries. 
C)  economic fundamentals, such as relative productivity levels. 
D)  the rate at which country's currencies exchange for gold. 
A)  agreements among governments of the world's industrial countries. 
B)  relative interest rates in developing countries and industrial countries. 
C)  economic fundamentals, such as relative productivity levels. 
D)  the rate at which country's currencies exchange for gold.

Question 6

In a free market, what determines exchange rates in the long run and the short run?

Accepted Answer

The long-run determinants of exchange ra

Question 7

If Canada runs a trade surplus with Mexico, and exchange rates are floating, then

Accepted Answer

A)  the peso will depreciate relative to the dollar. 
B)  the dollar will depreciate relative to the peso. 
C)  the prices of all foreign goods will fall for Canadians. 
D)  the prices of all foreign goods will rise for Canadians. 
A)  the peso will depreciate relative to the dollar. 
B)  the dollar will depreciate relative to the peso. 
C)  the prices of all foreign goods will fall for Canadians. 
D)  the prices of all foreign goods will rise for Canadians.

Question 8

If Mexico's labor productivity rises relative to Europe's labor productivity, then

Accepted Answer

A)  the peso tends to depreciate against the euro in the short run. 
B)  the peso tends to appreciate against the euro in the short run. 
C)  the peso tends to depreciate against the euro in the long run. 
D)  the peso tends to appreciate against the euro in the long run. 
A)  the peso tends to depreciate against the euro in the short run. 
B)  the peso tends to appreciate against the euro in the short run. 
C)  the peso tends to depreciate against the euro in the long run. 
D)  the peso tends to appreciate against the euro in the long run.

Question 9

If U.S.labor productivity growth is 2 percent per annum and Swiss labor productivity growth is 6 percent per annum, then the dollar will depreciate against the franc under a system of floating exchange rates.

Accepted Answer

A) True 
 B)False

Question 10

Under a system of floating exchange rates, a Japanese trade surplus against Canada would result in a(n)

Accepted Answer

A)  rise in the dollar price of the yen. 
B)  fall in the dollar price of the yen. 
C)  rise in the yen price of the dollar. 
D)  unchanged dollar/yen exchange rate. 
A)  rise in the dollar price of the yen. 
B)  fall in the dollar price of the yen. 
C)  rise in the yen price of the dollar. 
D)  unchanged dollar/yen exchange rate.

Question 11

Concerning exchange rate forecasting, technical analysis extrapolates from past exchange-rate trends while ignoring economic and political determinants of exchange rates.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the exchange value of the dollar currently equals one hundred yen.As a result of changing economic conditions, suppose that people anticipate that the dollar will be worth 120 yen in three months.This expectation results in

Accepted Answer

A)  an increase in the value of U.S. exports to Japan. 
B)  an increase in the demand for the yen. 
C)  a decrease in the demand for dollars. 
D)  an increase in the demand for dollars. 
A)  an increase in the value of U.S. exports to Japan. 
B)  an increase in the demand for the yen. 
C)  a decrease in the demand for dollars. 
D)  an increase in the demand for dollars.

Question 13

If the U.S.interest rate rises relative to the foreign interest rate, then in the foreign exchange market

Accepted Answer

A)  the demand for dollars increases, and the supply of dollars increases. 
B)  the demand for dollars increases, and the supply of dollars decreases. 
C)  the demand for dollars decreases, and the supply of dollars increases. 
D)  the demand for dollars decreases, and the supply of dollars decreases. 
A)  the demand for dollars increases, and the supply of dollars increases. 
B)  the demand for dollars increases, and the supply of dollars decreases. 
C)  the demand for dollars decreases, and the supply of dollars increases. 
D)  the demand for dollars decreases, and the supply of dollars decreases.

Question 14

Exchange rate determination in the short run is underlied by which of the following?

Accepted Answer

A)  Tariffs and quotas affect trade patterns only in the short run. 
B)  Prices of goods and services affect trade patterns only in the short run. 
C)  Expected returns on financial assets affect investment flows in the short run. 
D)  Preferences for goods and services affect trade flows only in the short run. 
A)  Tariffs and quotas affect trade patterns only in the short run. 
B)  Prices of goods and services affect trade patterns only in the short run. 
C)  Expected returns on financial assets affect investment flows in the short run. 
D)  Preferences for goods and services affect trade flows only in the short run.

Question 15

According to the law of one price, identical goods should cost the same in all nations, assuming there are no shipping costs nor trade barriers.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is likely to result in long-run depreciation of the U.S.dollar relative to the euro?

Accepted Answer

A)  relatively low interest rates in the United States 
B)  relatively high labor productivity in the United States 
C)  tariffs levied by the United States on steel imports from Europe 
D)  stronger American preferences for goods produced in Europe 
A)  relatively low interest rates in the United States 
B)  relatively high labor productivity in the United States 
C)  tariffs levied by the United States on steel imports from Europe 
D)  stronger American preferences for goods produced in Europe

Question 17

If apples sell for $50 per box in the United States and 2000 pesos per box in Mexico, then the law of one price asserts that you should be able to exchange $1 for 25 pesos.

Accepted Answer

A) True 
 B)False

Question 18

If the interest rate in Japan increases while the interest rate in the United States remains constant, then

Accepted Answer

A)  the demand curve for dollars shifts to the left. 
B)  the demand curve for dollars shifts to the right. 
C)  the demand curve for yen shifts to the left. 
D)  the demand curves for both yen and dollars remain constant. 
A)  the demand curve for dollars shifts to the left. 
B)  the demand curve for dollars shifts to the right. 
C)  the demand curve for yen shifts to the left. 
D)  the demand curves for both yen and dollars remain constant.

Question 19

The purchasing-power-parity theory is used to predict exchange-rate movements in the short run.

Accepted Answer

A) True 
 B)False

Question 20

The relationship between the exchange rate and the prices of tradable goods is known as the

Accepted Answer

A)  purchasing-power-parity theory. 
B)  asset-markets theory. 
C)  monetary theory. 
D)  balance-of-payments theory. 
A)  purchasing-power-parity theory. 
B)  asset-markets theory. 
C)  monetary theory. 
D)  balance-of-payments theory.

Long-run determinants of exchange rate include labor productivity levels, inflation rates, consumer preferences for goods and services, and trade barriers.

What is the asset market approach to exchange rate determination?

Under a system of floating exchange rates, relatively low productivity and high inflation rates in the United States result in

Given a system of floating exchange rates, assume that Boeing Inc.of the United States places a large order, payable in yen, with a Japanese contractor for jet engine parts.The immediate effect of this transaction will be a shift in the

In the long run, exchange rates are primarily determined by

In a free market, what determines exchange rates in the long run and the short run?

If Canada runs a trade surplus with Mexico, and exchange rates are floating, then

If Mexico's labor productivity rises relative to Europe's labor productivity, then

If U.S.labor productivity growth is 2 percent per annum and Swiss labor productivity growth is 6 percent per annum, then the dollar will depreciate against the franc under a system of floating exchange rates.

Under a system of floating exchange rates, a Japanese trade surplus against Canada would result in a(n)

Concerning exchange rate forecasting, technical analysis extrapolates from past exchange-rate trends while ignoring economic and political determinants of exchange rates.

Suppose that the exchange value of the dollar currently equals one hundred yen.As a result of changing economic conditions, suppose that people anticipate that the dollar will be worth 120 yen in three months.This expectation results in

If the U.S.interest rate rises relative to the foreign interest rate, then in the foreign exchange market

Exchange rate determination in the short run is underlied by which of the following?

According to the law of one price, identical goods should cost the same in all nations, assuming there are no shipping costs nor trade barriers.

Which of the following is likely to result in long-run depreciation of the U.S.dollar relative to the euro?

If apples sell for $50 per box in the United States and 2000 pesos per box in Mexico, then the law of one price asserts that you should be able to exchange $1 for 25 pesos.

If the interest rate in Japan increases while the interest rate in the United States remains constant, then

The purchasing-power-parity theory is used to predict exchange-rate movements in the short run.

The relationship between the exchange rate and the prices of tradable goods 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

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 12: Exchange Rate Determination

Long-run determinants of exchange rate include labor productivity levels, inflation rates, consumer preferences for goods and services, and trade barriers.

What is the asset market approach to exchange rate determination?

Under a system of floating exchange rates, relatively low productivity and high inflation rates in the United States result in

Given a system of floating exchange rates, assume that Boeing Inc.of the United States places a large order, payable in yen, with a Japanese contractor for jet engine parts.The immediate effect of this transaction will be a shift in the

In the long run, exchange rates are primarily determined by

In a free market, what determines exchange rates in the long run and the short run?

If Canada runs a trade surplus with Mexico, and exchange rates are floating, then

If Mexico's labor productivity rises relative to Europe's labor productivity, then

If U.S.labor productivity growth is 2 percent per annum and Swiss labor productivity growth is 6 percent per annum, then the dollar will depreciate against the franc under a system of floating exchange rates.

Under a system of floating exchange rates, a Japanese trade surplus against Canada would result in a(n)

Concerning exchange rate forecasting, technical analysis extrapolates from past exchange-rate trends while ignoring economic and political determinants of exchange rates.

Suppose that the exchange value of the dollar currently equals one hundred yen.As a result of changing economic conditions, suppose that people anticipate that the dollar will be worth 120 yen in three months.This expectation results in

If the U.S.interest rate rises relative to the foreign interest rate, then in the foreign exchange market

Exchange rate determination in the short run is underlied by which of the following?

According to the law of one price, identical goods should cost the same in all nations, assuming there are no shipping costs nor trade barriers.

Which of the following is likely to result in long-run depreciation of the U.S.dollar relative to the euro?

If apples sell for $50 per box in the United States and 2000 pesos per box in Mexico, then the law of one price asserts that you should be able to exchange $1 for 25 pesos.

If the interest rate in Japan increases while the interest rate in the United States remains constant, then

The purchasing-power-parity theory is used to predict exchange-rate movements in the short run.

The relationship between the exchange rate and the prices of tradable goods 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

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters