Question 1

Stabilizing speculation reinforces market forces by intensifying an appreciation or a depreciation in a currency's exchange value.

Accepted Answer

A) True 
 B)False

Question 2

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar, then she will attempt to lower both bid and offer rates for the franc to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

Accepted Answer

A) True 
 B)False

Question 3

When you arrive at Heathrow Airport in London and go to the foreign exchange kiosk to exchange dollars for pounds, you are trading in the

Accepted Answer

A)  spot market. 
B)  forward market. 
C)  futures market. 
D)  options market. 
A)  spot market. 
B)  forward market. 
C)  futures market. 
D)  options market.

Question 4

As the dollar's exchange value appreciates against the pound, U.S.residents tend to import more British goods and thus demand more pounds.

Accepted Answer

A) True 
 B)False

Question 5

A person needing foreign exchange immediately would purchase it on the spot market.

Accepted Answer

A) True 
 B)False

Question 6

Most foreign exchange trading occurs between banks and

Accepted Answer

A)  national governments. 
B)  other banks. 
C)  corporations. 
D)  household investors. 
A)  national governments. 
B)  other banks. 
C)  corporations. 
D)  household investors.

Question 7

Throughout the world, the foreign exchange market is open for business only during the hours of 9 A.M.to 3 P.M., Pacific Standard Time.

Accepted Answer

A) True 
 B)False

Question 8

In the early 1980s, the Federal Reserve pursued a tight monetary policy.All else being equal, the impact of that policy was to ____ interest rates in the United States relative to those in Europe and cause the dollar to ____ against European currencies.

Accepted Answer

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

Question 9

The supply of francs is derived from the desire of the Swiss to purchase German goods, make investments in Germany, repay debts to German lenders, and extend transfer payments to German residents.

Accepted Answer

A) True 
 B)False

Question 10

How is the equilibrium rate of exchange determined?

Accepted Answer

The equilibrium rate of exchan

Question 11

The demand curve for British pounds slopes downward because as the dollar ______ British goods become ______ for Americans.Therefore, Americans purchase ______ British goods, and the quantity of pounds demanded increases.

Accepted Answer

A)  appreciates against the pound; less expensive; more 
B)  appreciates against the pound; more expensive; fewer 
C)  depreciates against the pound; less expensive; more 
D)  depreciates against the pound; more expensive; more 
A)  appreciates against the pound; less expensive; more 
B)  appreciates against the pound; more expensive; fewer 
C)  depreciates against the pound; less expensive; more 
D)  depreciates against the pound; more expensive; more

Question 12

If the trade-weighted dollar moves from an index value to 100 to 110, then the dollar depreciates by 10 percent against the trade-weighted averages of the exchange rates of the major trading partners of the United States.

Accepted Answer

A) True 
 B)False

Question 13

The pound shows a forward discount against the dollar (the forward rate is less than the spot rate) when

Accepted Answer

A)  interest rates in the United Kingdom are higher than those in the United States. 
B)  interest rates in the United Kingdom are lower than those in the United States. 
C)  real GDP is higher in the United Kingdom than in the United States. 
D)  real GDP is lower in the United Kingdom than in the United States. 
A)  interest rates in the United Kingdom are higher than those in the United States. 
B)  interest rates in the United Kingdom are lower than those in the United States. 
C)  real GDP is higher in the United Kingdom than in the United States. 
D)  real GDP is lower in the United Kingdom than in the United States.

Question 14

Figure 11.1. Supply and Demand Schedules of Francs
​  
-Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) ____ of the dollar against the franc and a(n) ____ in U.S.international competitiveness.

Accepted Answer

A)  depreciation, improvement 
B)  depreciation, worsening 
C)  appreciation, improvement 
D)  appreciation, worsening 
A)  depreciation, improvement 
B)  depreciation, worsening 
C)  appreciation, improvement 
D)  appreciation, worsening

Question 15

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, an increase in the demand schedule causes an appreciation of the dollar against the pound.

Accepted Answer

A) True 
 B)False

Question 16

Most foreign exchange trading is carried out in the forward market.

Accepted Answer

A) True 
 B)False

Question 17

International investors who hedge against exchange rate risk often use currency forward contracts.

Accepted Answer

A) True 
 B)False

Question 18

Concerning foreign exchange trading, a "forward contract"

Accepted Answer

A)  has no defined expiration date at which settlement must occur. 
B)  has contract costs based on the brokerage fees for sell and buy orders. 
C)  is issued by a major commercial bank, like Citibank or Barclays. 
D)  is traded on IMM's market floor. 
A)  has no defined expiration date at which settlement must occur. 
B)  has contract costs based on the brokerage fees for sell and buy orders. 
C)  is issued by a major commercial bank, like Citibank or Barclays. 
D)  is traded on IMM's market floor.

Question 19

Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs?

Accepted Answer

A)  price inflation in France 
B)  an increase in U.S. real income 
C)  a decrease in the Swiss money supply 
D)  falling interest rates in Switzerland 
A)  price inflation in France 
B)  an increase in U.S. real income 
C)  a decrease in the Swiss money supply 
D)  falling interest rates in Switzerland

Question 20

Suppose that Sears owes one million yen to a Japanese electronics manufacturer in three months.It could hedge against the risk of a depreciation of the dollar against the yen by contracting to purchase one million yen in the forward market, at today's forward rate, for delivery in three months.

Accepted Answer

A) True 
 B)False

Stabilizing speculation reinforces market forces by intensifying an appreciation or a depreciation in a currency's exchange value.

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar, then she will attempt to lower both bid and offer rates for the franc to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

When you arrive at Heathrow Airport in London and go to the foreign exchange kiosk to exchange dollars for pounds, you are trading in the

As the dollar's exchange value appreciates against the pound, U.S.residents tend to import more British goods and thus demand more pounds.

A person needing foreign exchange immediately would purchase it on the spot market.

Most foreign exchange trading occurs between banks and

Throughout the world, the foreign exchange market is open for business only during the hours of 9 A.M.to 3 P.M., Pacific Standard Time.

In the early 1980s, the Federal Reserve pursued a tight monetary policy.All else being equal, the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to against European currencies.

The supply of francs is derived from the desire of the Swiss to purchase German goods, make investments in Germany, repay debts to German lenders, and extend transfer payments to German residents.

How is the equilibrium rate of exchange determined?

The demand curve for British pounds slopes downward because as the dollar British goods become for Americans.Therefore, Americans purchase __ British goods, and the quantity of pounds demanded increases.

If the trade-weighted dollar moves from an index value to 100 to 110, then the dollar depreciates by 10 percent against the trade-weighted averages of the exchange rates of the major trading partners of the United States.

The pound shows a forward discount against the dollar (the forward rate is less than the spot rate) when

Figure 11.1. Supply and Demand Schedules of Francs -Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) of the dollar against the franc and a(n) in U.S.international competitiveness.

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, an increase in the demand schedule causes an appreciation of the dollar against the pound.

Most foreign exchange trading is carried out in the forward market.

International investors who hedge against exchange rate risk often use currency forward contracts.

Concerning foreign exchange trading, a "forward contract"

Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs?

Suppose that Sears owes one million yen to a Japanese electronics manufacturer in three months.It could hedge against the risk of a depreciation of the dollar against the yen by contracting to purchase one million yen in the forward market, at today's forward rate, for delivery in three months.

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

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 11: Foreign Exchange

Stabilizing speculation reinforces market forces by intensifying an appreciation or a depreciation in a currency's exchange value.

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar, then she will attempt to lower both bid and offer rates for the franc to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

When you arrive at Heathrow Airport in London and go to the foreign exchange kiosk to exchange dollars for pounds, you are trading in the

As the dollar's exchange value appreciates against the pound, U.S.residents tend to import more British goods and thus demand more pounds.

A person needing foreign exchange immediately would purchase it on the spot market.

Most foreign exchange trading occurs between banks and

Throughout the world, the foreign exchange market is open for business only during the hours of 9 A.M.to 3 P.M., Pacific Standard Time.

In the early 1980s, the Federal Reserve pursued a tight monetary policy.All else being equal, the impact of that policy was to ____ interest rates in the United States relative to those in Europe and cause the dollar to ____ against European currencies.

The supply of francs is derived from the desire of the Swiss to purchase German goods, make investments in Germany, repay debts to German lenders, and extend transfer payments to German residents.

How is the equilibrium rate of exchange determined?

The demand curve for British pounds slopes downward because as the dollar ______ British goods become ______ for Americans.Therefore, Americans purchase ______ British goods, and the quantity of pounds demanded increases.

If the trade-weighted dollar moves from an index value to 100 to 110, then the dollar depreciates by 10 percent against the trade-weighted averages of the exchange rates of the major trading partners of the United States.

The pound shows a forward discount against the dollar (the forward rate is less than the spot rate) when

Figure 11.1. Supply and Demand Schedules of Francs ​ -Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) ____ of the dollar against the franc and a(n) ____ in U.S.international competitiveness.

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, an increase in the demand schedule causes an appreciation of the dollar against the pound.

Most foreign exchange trading is carried out in the forward market.

International investors who hedge against exchange rate risk often use currency forward contracts.

Concerning foreign exchange trading, a "forward contract"

Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs?

Suppose that Sears owes one million yen to a Japanese electronics manufacturer in three months.It could hedge against the risk of a depreciation of the dollar against the yen by contracting to purchase one million yen in the forward market, at today's forward rate, for delivery in three months.

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

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

In the early 1980s, the Federal Reserve pursued a tight monetary policy.All else being equal, the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to against European currencies.

The demand curve for British pounds slopes downward because as the dollar British goods become for Americans.Therefore, Americans purchase __ British goods, and the quantity of pounds demanded increases.

Figure 11.1. Supply and Demand Schedules of Francs -Refer to Figure 11.1.Suppose the exchange rate is $.70 per franc.Free-market forces would lead to a(n) of the dollar against the franc and a(n) in U.S.international competitiveness.