Question 1

What is exchange rate overshooting?

Accepted Answer

An exchange rate is said to ov

Question 2

The figure below illustrates the supply and demand schedules of Swiss francs under a system of floating exchange rates.
Figure 12.2.The Market for Swiss Francs
  
-Refer to Figure 12.2.If Swiss manufacturing costs increase relative to those of the United States,there would occur an increase in the supply of francs and an appreciation in the dollar's exchange value.

Accepted Answer

A) True 
 B)False

Question 3

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 4

In the long run,exchange rates are mainly determined by

Accepted Answer

A)  the difference between short-run interest rates in each county 
B)  the rate at which a country's currency exchanges for silver or gold 
C)  agreements among governments in the major banking countries of the world 
D)  market fundamentals such as productivity levels or price levels in various countries 
A)  the difference between short-run interest rates in each county 
B)  the rate at which a country's currency exchanges for silver or gold 
C)  agreements among governments in the major banking countries of the world 
D)  market fundamentals such as productivity levels or price levels in various countries

Question 5

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates.
Figure 12.1 The Market for Francs
  
-Refer to Figure 12.1.Should real interest rates in the United States rise relative to real interest rates in Switzerland,there would occur a (an):

Accepted Answer

A)  Increase in the demand for francs--decrease in the supply of francs-depreciation of the dollar 
B)  Increase in the demand for francs--decrease in the supply of francs-appreciation of the dollar 
C)  Decrease in the demand for francs--increase in the supply of francs-appreciation of the dollar 
D)  Decrease in the demand for francs--decrease in the supply of francs-depreciation of the dollar 
A)  Increase in the demand for francs--decrease in the supply of francs-depreciation of the dollar 
B)  Increase in the demand for francs--decrease in the supply of francs-appreciation of the dollar 
C)  Decrease in the demand for francs--increase in the supply of francs-appreciation of the dollar 
D)  Decrease in the demand for francs--decrease in the supply of francs-depreciation of the dollar

Question 6

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 7

If the exchange rate between Swiss francs and British pounds is 5 francs per pound,then the number of pounds that can be obtained for 200 francs equals:

Accepted Answer

A)  20 pounds 
B)  40 pounds 
C)  60 pounds 
D)  80 pounds 
A)  20 pounds 
B)  40 pounds 
C)  60 pounds 
D)  80 pounds

Question 8

All of the following are important long-run determinants of exchange rates except

Accepted Answer

A)  Consumer tastes 
B)  Trade policy 
C)  Labor productivity 
D)  Interest rates 
A)  Consumer tastes 
B)  Trade policy 
C)  Labor productivity 
D)  Interest rates

Question 9

The figure below illustrates the supply and demand schedules of Swiss francs under a system of floating exchange rates.
Figure 12.2.The Market for Swiss Francs
  
-Refer to Figure 12.2.If the Federal Reserve adopts a restrictive monetary policy that leads to relatively high interest rates in the United States,the demand for francs would decrease,the supply of francs would increase,and the dollar's exchange value would appreciate.

Accepted Answer

A) True 
 B)False

Question 10

Use the following table to answer the next two questions
European Expected value of the dollar in 3 months
Investor (dollars per euro)
Investor #1 $1.30
Investor #2 $1.20
Investor #3 $1.15
-If the current exchange value of the dollar is $1.25 per euro

Accepted Answer

A)  European Investor #1 has less incentive to invest in the United States,and thus demands fewer dollars 
B)  European Investor #2 has less incentive to invest in the United States,and thus demands fewer dollars 
C)  European Investor #3 has less incentive to invest in the United States,and thus demands fewer dollars 
D)  all three European investors have less incentive to invest in the United States,and thus demands fewer dollars 
A)  European Investor #1 has less incentive to invest in the United States,and thus demands fewer dollars 
B)  European Investor #2 has less incentive to invest in the United States,and thus demands fewer dollars 
C)  European Investor #3 has less incentive to invest in the United States,and thus demands fewer dollars 
D)  all three European investors have less incentive to invest in the United States,and thus demands fewer dollars

Question 11

Suppose that the exchange value of the dollar equals 2 British pounds.If in San Francisco a computer costs $1,000 and in London it costs 2,000 pounds,then

Accepted Answer

A)  British consumers will buy computers in San Francisco 
B)  Americans will buy computers in London 
C)  purchasing power parity prevails 
D)  purchasing power parity does not prevail 
A)  British consumers will buy computers in San Francisco 
B)  Americans will buy computers in London 
C)  purchasing power parity prevails 
D)  purchasing power parity does not prevail

Question 12

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 13

Economies with relatively high growth rates in labor productivity tend to find their currencies' exchange values appreciating under a floating exchange-rate system.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If Mexico applies tariffs to imports of manufactured goods,Mexico's demand for foreign exchange will rise and the peso will depreciate under a system of floating exchange rates.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that trade barriers and transportation costs are nonexistent.If the exchange rate is 0.9 Swiss francs per dollar,then according to the law of one price,a refrigerator that costs $1,000 in the United States will cost

Accepted Answer

A)  1,900 francs in Switzerland 
B)  900 francs in Switzerland 
C)  1,300 francs in Switzerland 
D)  1,000 francs in Switzerland 
A)  1,900 francs in Switzerland 
B)  900 francs in Switzerland 
C)  1,300 francs in Switzerland 
D)  1,000 francs in Switzerland

Question 17

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant,

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 right 
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 right 
D)  the demand curves for both yen and dollars remain constant

Question 18

Concerning exchange rate forecasting,______ are common sense models that require the gathering of a wide array of political and economic data and the interpretation of these data in terms of the timing,direction,and magnitude of exchange rate changes.

Accepted Answer

A)  judgmental forecasts 
B)  technical forecasts 
C)  fundamental forecasts 
D)  econometric forecasts 
A)  judgmental forecasts 
B)  technical forecasts 
C)  fundamental forecasts 
D)  econometric forecasts

Question 19

If the rate of growth of labor productivity in the United States rises relative to the rate of growth of labor productivity in other countries,the dollar's exchange value will depreciate.

Accepted Answer

A) True 
 B)False

Question 20

As the profitability of Japanese assets rises relative to the profitability of Australian assets,Australian residents will make additional investments in Japan; this results in an increased demand for yen and a depreciation of the dollar under a system of floating exchange rates.

Accepted Answer

A) True 
 B)False

What is exchange rate overshooting?

In the long run,exchange rates are primarily determined by:

In the long run,exchange rates are mainly determined by

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

If the exchange rate between Swiss francs and British pounds is 5 francs per pound,then the number of pounds that can be obtained for 200 francs equals:

All of the following are important long-run determinants of exchange rates except

Use the following table to answer the next two questions European Expected value of the dollar in 3 months Investor (dollars per euro) Investor #1 $1.30 Investor #2 $1.20 Investor #3 $1.15 -If the current exchange value of the dollar is $1.25 per euro

Suppose that the exchange value of the dollar equals 2 British pounds.If in San Francisco a computer costs $1,000 and in London it costs 2,000 pounds,then

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

Economies with relatively high growth rates in labor productivity tend to find their currencies' exchange values appreciating under a floating exchange-rate system.

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

If Mexico applies tariffs to imports of manufactured goods,Mexico's demand for foreign exchange will rise and the peso will depreciate under a system of floating exchange rates.

Suppose that trade barriers and transportation costs are nonexistent.If the exchange rate is 0.9 Swiss francs per dollar,then according to the law of one price,a refrigerator that costs $1,000 in the United States will cost

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant,

Concerning exchange rate forecasting,______ are common sense models that require the gathering of a wide array of political and economic data and the interpretation of these data in terms of the timing,direction,and magnitude of exchange rate changes.

If the rate of growth of labor productivity in the United States rises relative to the rate of growth of labor productivity in other countries,the dollar's exchange value will depreciate.

As the profitability of Japanese assets rises relative to the profitability of Australian assets,Australian residents will make additional investments in Japan; this results in an increased demand for yen and a depreciation of the dollar under a system of floating exchange rates.

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

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters

Exam 12: Exchange Rate Determination

What is exchange rate overshooting?

In the long run,exchange rates are primarily determined by:

In the long run,exchange rates are mainly determined by

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

If the exchange rate between Swiss francs and British pounds is 5 francs per pound,then the number of pounds that can be obtained for 200 francs equals:

All of the following are important long-run determinants of exchange rates except

Use the following table to answer the next two questions European Expected value of the dollar in 3 months Investor (dollars per euro) Investor #1 $1.30 Investor #2 $1.20 Investor #3 $1.15 -If the current exchange value of the dollar is $1.25 per euro

Suppose that the exchange value of the dollar equals 2 British pounds.If in San Francisco a computer costs $1,000 and in London it costs 2,000 pounds,then

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

Economies with relatively high growth rates in labor productivity tend to find their currencies' exchange values appreciating under a floating exchange-rate system.

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

If Mexico applies tariffs to imports of manufactured goods,Mexico's demand for foreign exchange will rise and the peso will depreciate under a system of floating exchange rates.

Suppose that trade barriers and transportation costs are nonexistent.If the exchange rate is 0.9 Swiss francs per dollar,then according to the law of one price,a refrigerator that costs $1,000 in the United States will cost

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant,

Concerning exchange rate forecasting,______ are common sense models that require the gathering of a wide array of political and economic data and the interpretation of these data in terms of the timing,direction,and magnitude of exchange rate changes.

If the rate of growth of labor productivity in the United States rises relative to the rate of growth of labor productivity in other countries,the dollar's exchange value will depreciate.

As the profitability of Japanese assets rises relative to the profitability of Australian assets,Australian residents will make additional investments in Japan; this results in an increased demand for yen and a depreciation of the dollar under a system of floating exchange rates.

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

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters