Question 1

In today's world market,the value of a dollar at any given time depends on

Accepted Answer

A)  congressional mandate. 
B)  signed international agreements. 
C)  the price of gold. 
D)  the current exchange rate. 
E)  EMS guidelines. 
A)  congressional mandate. 
B)  signed international agreements. 
C)  the price of gold. 
D)  the current exchange rate. 
E)  EMS guidelines. D

Question 2

The International Monetary Fund was established to

Accepted Answer

A)  ensure flexibility of exchange rates. 
B)  maintain a stable system of exchange rates. 
C)  make long-term loans to member countries. 
D)  create an international currency. 
E)  manage the affairs of the International Bank for Reconstruction and Development. 
A)  ensure flexibility of exchange rates. 
B)  maintain a stable system of exchange rates. 
C)  make long-term loans to member countries. 
D)  create an international currency. 
E)  manage the affairs of the International Bank for Reconstruction and Development. B

Question 3

In the face of a balance-of-payments deficit,a country may maintain its exchange rate at a fixed level by

Accepted Answer

A)  buying gold. 
B)  buying its own currency on foreign exchanges. 
C)  encouraging imports. 
D)  spending more abroad. 
E)  doing nothing; its exchange rate automatically adjusts by supply and demand. 
A)  buying gold. 
B)  buying its own currency on foreign exchanges. 
C)  encouraging imports. 
D)  spending more abroad. 
E)  doing nothing; its exchange rate automatically adjusts by supply and demand. B

Question 4

Globalization

Accepted Answer

A)  affects primarily goods-producing industries. 
B)  is solely a late twentieth-century phenomenon. 
C)  reduces the volume of international trade. 
D)  faces little opposition within developed countries of the world. 
E)  leads to greater integration of the world economy. 
A)  affects primarily goods-producing industries. 
B)  is solely a late twentieth-century phenomenon. 
C)  reduces the volume of international trade. 
D)  faces little opposition within developed countries of the world. 
E)  leads to greater integration of the world economy.

Question 5

If the exchange rate is $0.75 U.S.dollar to 1 Canadian dollar,then in terms of the Canadian dollar to the U.S.dollar,it is

Accepted Answer

A)  0.75 to 1. 
B)  0.33 to 1. 
C)  1.33 to 1. 
D)  1.75 to 1. 
E)  3 to 1. 
A)  0.75 to 1. 
B)  0.33 to 1. 
C)  1.33 to 1. 
D)  1.75 to 1. 
E)  3 to 1.

Question 6

For countries on the gold standard,bilateral exchange rates equal

Accepted Answer

A)  the ratio of the size of the country's gold stock to that of another country. 
B)  the reciprocal of the differences between each country's gold supplies. 
C)  the ratio of the amount of gold in a unit of each country's monetary unit. 
D)  a ratio that fluctuates according to the inflows and outflows of gold from one country to another. 
E)  the sizes of their gold stocks divided by the reciprocal of the absolute value of their trade deficit or surplus. 
A)  the ratio of the size of the country's gold stock to that of another country. 
B)  the reciprocal of the differences between each country's gold supplies. 
C)  the ratio of the amount of gold in a unit of each country's monetary unit. 
D)  a ratio that fluctuates according to the inflows and outflows of gold from one country to another. 
E)  the sizes of their gold stocks divided by the reciprocal of the absolute value of their trade deficit or surplus.

Question 7

The following question are based on the following diagrams, showing the demand and supply of U.S. dollars in terms of Danish krone. For all cases D₀ and S₀ are initial demand and supply and D₁ and S₁ are new demand and supply. Assume an initial exchange rate of 9 krone to $1.
  
-Which diagram best reflects the effect of a decrease in U.S.tourism in Denmark?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 8

Suppose,under a system of flexible exchange rates,a small TV costs $150 in the United States and 15,000 yen in Japan.Other things being equal,the exchange rate is

Accepted Answer

A)  1 yen equals $0.15. 
B)  $1 equals 15 yen. 
C)  1 yen equals $0.01. 
D)  $1 equals 150 yen. 
E)  $1 equals 1,500 yen. 
A)  1 yen equals $0.15. 
B)  $1 equals 15 yen. 
C)  1 yen equals $0.01. 
D)  $1 equals 150 yen. 
E)  $1 equals 1,500 yen.

Question 9

A country's currency appreciates relative to other currencies when

Accepted Answer

A)  its inflation rate exceeds that of other countries. 
B)  its rate of economic growth exceeds that of other countries. 
C)  its interest rate levels rise more rapidly than elsewhere. 
D)  it increases the price of gold. 
E)  gold flows into the country from abroad. 
A)  its inflation rate exceeds that of other countries. 
B)  its rate of economic growth exceeds that of other countries. 
C)  its interest rate levels rise more rapidly than elsewhere. 
D)  it increases the price of gold. 
E)  gold flows into the country from abroad.

Question 10

On June 1,2004,the following foreign exchange rates were quoted.For 1 U.S.dollar you would receive 8.28 Chinese renminbi,110.64 Japanese yen,11.48 Mexican pesos,29.04 Russian roubles,or 0.544 British pounds.A unit of which country's currency would give you the fewest U.S.dollars?

Accepted Answer

A)  China 
B)  Japan 
C)  Mexico 
D)  Russia 
E)  Great Britain 
A)  China 
B)  Japan 
C)  Mexico 
D)  Russia 
E)  Great Britain

Question 11

Under a system of fixed exchange rates,a balance-of-payments surplus means that a country's currency is

Accepted Answer

A)  partially valued. 
B)  undervalued. 
C)  overvalued. 
D)  devalued. 
E)  revalued. 
A)  partially valued. 
B)  undervalued. 
C)  overvalued. 
D)  devalued. 
E)  revalued.

Question 12

The main criticism most contemporary economists would make of the Bretton Woods agreement is that it

Accepted Answer

A)  was inherently inflexible and thus not adaptable to changing economic conditions. 
B)  was based on the false assumption that the ability of one country to compete with another changes over time. 
C)  depended too heavily on adherence to the gold standard. 
D)  demanded a fundamental realignment of currencies for which most countries were unprepared. 
E)  meant that the only way to balance imports and exports was through the use of tariffs and quotas. 
A)  was inherently inflexible and thus not adaptable to changing economic conditions. 
B)  was based on the false assumption that the ability of one country to compete with another changes over time. 
C)  depended too heavily on adherence to the gold standard. 
D)  demanded a fundamental realignment of currencies for which most countries were unprepared. 
E)  meant that the only way to balance imports and exports was through the use of tariffs and quotas.

Question 13

In the long run,under a system of flexible exchange rates

Accepted Answer

A)  countries' gold revenues will be proportional to their trade balances. 
B)  the exchange rate between any two currencies will reflect price level differences between the two countries. 
C)  currency markets will no longer play an important role in international trade. 
D)  most countries will have balance-of-trade surpluses. 
E)  the foreign currency reserves of all countries will approach zero. 
A)  countries' gold revenues will be proportional to their trade balances. 
B)  the exchange rate between any two currencies will reflect price level differences between the two countries. 
C)  currency markets will no longer play an important role in international trade. 
D)  most countries will have balance-of-trade surpluses. 
E)  the foreign currency reserves of all countries will approach zero.

Question 14

The exchange rate is the

Accepted Answer

A)  number of units of one currency that exchanges for a unit of another currency. 
B)  volume of currency that flows internationally during a year. 
C)  number of ounces of gold annually used in trade. 
D)  ratio of exports to imports. 
E)  annual turnover rate of the money supply. 
A)  number of units of one currency that exchanges for a unit of another currency. 
B)  volume of currency that flows internationally during a year. 
C)  number of ounces of gold annually used in trade. 
D)  ratio of exports to imports. 
E)  annual turnover rate of the money supply.

Question 15

The following question are based on the following diagrams, showing the demand and supply of U.S. dollars in terms of Danish krone. For all cases D₀ and S₀ are initial demand and supply and D₁ and S₁ are new demand and supply. Assume an initial exchange rate of 9 krone to $1.
  
-Which diagram best illustrates the effect of an increase in the U.S.demand for Danish cheese and cookware?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 16

Under a system of flexible exchange rates,the currency of a country experiencing a balance of payments deficit would (relative to other currencies)

Accepted Answer

A)  appreciate, causing an increase in net exports. 
B)  appreciate, causing a decrease in net exports. 
C)  depreciate, causing a decrease in net exports. 
D)  depreciate, causing an increase in net exports. 
E)  depreciate or appreciate, depending on supply and demand. 
A)  appreciate, causing an increase in net exports. 
B)  appreciate, causing a decrease in net exports. 
C)  depreciate, causing a decrease in net exports. 
D)  depreciate, causing an increase in net exports. 
E)  depreciate or appreciate, depending on supply and demand.

Question 17

-In the diagram above,under fixed exchange rates,a foreign currency shortage for Americans is best illustrated by distance

Accepted Answer

A)  AB. 
B)  BE. 
C)  CD. 
D)  BE + CD. 
E)  BE - CD. 
A)  AB. 
B)  BE. 
C)  CD. 
D)  BE + CD. 
E)  BE - CD.

Question 18

If,under the gold standard,the United States was importing more from Britain than it was exporting to Britain,price levels in the United States and Britain would,respectively

Accepted Answer

A)  rise and rise. 
B)  remain unchanged and rise. 
C)  remain unchanged and fall. 
D)  fall and rise. 
E)  rise and fall. 
A)  rise and rise. 
B)  remain unchanged and rise. 
C)  remain unchanged and fall. 
D)  fall and rise. 
E)  rise and fall.

Question 19

Under which of the following systems does appreciation and depreciation of a country's currency occur?

Accepted Answer

A)  the gold standard 
B)  the multinational exchange standard 
C)  fixed exchange rates 
D)  flexible exchange rates 
E)  equation of exchange rates 
A)  the gold standard 
B)  the multinational exchange standard 
C)  fixed exchange rates 
D)  flexible exchange rates 
E)  equation of exchange rates

Question 20

Under which of the following systems will an imbalance in trade be most likely to cause changes in a country's money supply and price levels,leading to a restoration of trade equilibrium?

Accepted Answer

A)  the gold standard 
B)  the multinational exchange standard 
C)  the stable exchange standard 
D)  flexible exchange rates 
E)  equation of exchange rates 
A)  the gold standard 
B)  the multinational exchange standard 
C)  the stable exchange standard 
D)  flexible exchange rates 
E)  equation of exchange rates

Exam 28: Exchange Rates and the Balance of Payments

In today's world market,the value of a dollar at any given time depends on

The International Monetary Fund was established to

In the face of a balance-of-payments deficit,a country may maintain its exchange rate at a fixed level by

Globalization

If the exchange rate is $0.75 U.S.dollar to 1 Canadian dollar,then in terms of the Canadian dollar to the U.S.dollar,it is

For countries on the gold standard,bilateral exchange rates equal

Suppose,under a system of flexible exchange rates,a small TV costs $150 in the United States and 15,000 yen in Japan.Other things being equal,the exchange rate is

A country's currency appreciates relative to other currencies when

On June 1,2004,the following foreign exchange rates were quoted.For 1 U.S.dollar you would receive 8.28 Chinese renminbi,110.64 Japanese yen,11.48 Mexican pesos,29.04 Russian roubles,or 0.544 British pounds.A unit of which country's currency would give you the fewest U.S.dollars?

Under a system of fixed exchange rates,a balance-of-payments surplus means that a country's currency is

The main criticism most contemporary economists would make of the Bretton Woods agreement is that it

In the long run,under a system of flexible exchange rates

The exchange rate is the

Under a system of flexible exchange rates,the currency of a country experiencing a balance of payments deficit would (relative to other currencies)

-In the diagram above,under fixed exchange rates,a foreign currency shortage for Americans is best illustrated by distance

If,under the gold standard,the United States was importing more from Britain than it was exporting to Britain,price levels in the United States and Britain would,respectively

Under which of the following systems does appreciation and depreciation of a country's currency occur?

Under which of the following systems will an imbalance in trade be most likely to cause changes in a country's money supply and price levels,leading to a restoration of trade equilibrium?

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

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