Question 1

Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?

Accepted Answer

A)  A high rate of inflation exists 
B)  A fixed exchange-rate system exists 
C)  Purchasing power parity exists 
D)  The foreign exchange market is in equilibrium 
E)  Arbitrage opportunities exist 
A)  A high rate of inflation exists 
B)  A fixed exchange-rate system exists 
C)  Purchasing power parity exists 
D)  The foreign exchange market is in equilibrium 
E)  Arbitrage opportunities exist

Question 2

Under both the gold standard and the gold exchange standard countries bought and sold U.S. dollars to maintain a fixed exchange rate with the dollar.

Accepted Answer

A) True 
 B)False

Question 3

When the domestic currency depreciates, domestic goods become more expensive to foreign buyers.

Accepted Answer

A) True 
 B)False

Question 4

The World Bank obtains the funds it lends by:

Accepted Answer

A)  selling bonds on the international bond market. 
B)  selling bonds to countries it has loaned funds to. 
C)  collecting each country's annual membership fee or quota. 
D)  levying a small tax on every foreign exchange conversion worldwide. 
E)  depending on voluntary subsidies from member nations. 
A)  selling bonds on the international bond market. 
B)  selling bonds to countries it has loaned funds to. 
C)  collecting each country's annual membership fee or quota. 
D)  levying a small tax on every foreign exchange conversion worldwide. 
E)  depending on voluntary subsidies from member nations.

Question 5

Equilibrium in the foreign exchange market occurs:

Accepted Answer

A)  at the point where the foreign exchange demand and supply curves intersect. 
B)  at the point where the foreign exchange demand and supply curves reach maximum separation. 
C)  when two nations' economic leaders agree on the appropriate exchange rate. 
D)  when two nations' diplomatic leaders agree on an exchange rate that meets both countries' needs. 
E)  only by chance, if at all, because they change very frequently. 
A)  at the point where the foreign exchange demand and supply curves intersect. 
B)  at the point where the foreign exchange demand and supply curves reach maximum separation. 
C)  when two nations' economic leaders agree on the appropriate exchange rate. 
D)  when two nations' diplomatic leaders agree on an exchange rate that meets both countries' needs. 
E)  only by chance, if at all, because they change very frequently.

Question 6

Demand for U.S. dollars by speculators is likely to increase if the dollar is expected to depreciate in the near future.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that the price of an ounce of gold is 120 pesos in Mexico and 2,400 yen in Japan. Then the Japanese yen is worth two hundred times the value of a Mexican peso.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the price of an ounce of silver is 100 nuevos soles in Peru and $400 in the United States. This implies:

Accepted Answer

A)  the Peruvian nuevo sol is worth four times the value of a U.S. dollar. 
B)  the Peruvian nuevo sol is worth one-fourth the value of a U.S. dollar. 
C)  Peru's economy must be four times larger than the U.S. economy. 
D)  the U.S. economy must be four times larger than that of Peru. 
E)  the U.S. dollar is worth four times the value of a Peruvian nuevo sol. 
A)  the Peruvian nuevo sol is worth four times the value of a U.S. dollar. 
B)  the Peruvian nuevo sol is worth one-fourth the value of a U.S. dollar. 
C)  Peru's economy must be four times larger than the U.S. economy. 
D)  the U.S. economy must be four times larger than that of Peru. 
E)  the U.S. dollar is worth four times the value of a Peruvian nuevo sol.

Question 9

Under the flexible exchange rate system, when a country tries to stimulate economic growth and improve its employment rates, it is likely to cause:

Accepted Answer

A)  the domestic inflation rate to rise and the domestic currency to depreciate. 
B)  the domestic inflation rate to rise and the domestic currency to appreciate. 
C)  the domestic inflation rate and the value of the domestic currency to remain constant. 
D)  the domestic inflation rate to fall and the domestic currency to appreciate. 
E)  the domestic inflation rate to fall and the domestic currency to depreciate. 
A)  the domestic inflation rate to rise and the domestic currency to depreciate. 
B)  the domestic inflation rate to rise and the domestic currency to appreciate. 
C)  the domestic inflation rate and the value of the domestic currency to remain constant. 
D)  the domestic inflation rate to fall and the domestic currency to appreciate. 
E)  the domestic inflation rate to fall and the domestic currency to depreciate.

Question 10

The primary function of the World Bank is to:

Accepted Answer

A)  lend money to the World Trade Organization. 
B)  provide loans to countries experiencing huge budget deficit. 
C)  finance economic development in poor countries. 
D)  assist countries experiencing balance of payments deficits. 
E)  finance the fiscal stabilization program of the U.S. government. 
A)  lend money to the World Trade Organization. 
B)  provide loans to countries experiencing huge budget deficit. 
C)  finance economic development in poor countries. 
D)  assist countries experiencing balance of payments deficits. 
E)  finance the fiscal stabilization program of the U.S. government.

Question 11

Which of the following exchange rate systems have a legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate?

Accepted Answer

A)  Gold standard 
B)  Gold exchange standard 
C)  Crawling band 
D)  Horizontal band 
E)  Currency board 
A)  Gold standard 
B)  Gold exchange standard 
C)  Crawling band 
D)  Horizontal band 
E)  Currency board

Question 12

Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.

Accepted Answer

A)  currency board 
B)  crawling peg 
C)  reserve currency 
D)  conventional fixed peg 
E)  independent float 
A)  currency board 
B)  crawling peg 
C)  reserve currency 
D)  conventional fixed peg 
E)  independent float

Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?

Under both the gold standard and the gold exchange standard countries bought and sold U.S. dollars to maintain a fixed exchange rate with the dollar.

When the domestic currency depreciates, domestic goods become more expensive to foreign buyers.

The World Bank obtains the funds it lends by:

Equilibrium in the foreign exchange market occurs:

Demand for U.S. dollars by speculators is likely to increase if the dollar is expected to depreciate in the near future.

Suppose that the price of an ounce of gold is 120 pesos in Mexico and 2,400 yen in Japan. Then the Japanese yen is worth two hundred times the value of a Mexican peso.

Suppose the price of an ounce of silver is 100 nuevos soles in Peru and $400 in the United States. This implies:

Under the flexible exchange rate system, when a country tries to stimulate economic growth and improve its employment rates, it is likely to cause:

The primary function of the World Bank is to:

Which of the following exchange rate systems have a legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate?

Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Filters

Exam 21: Exchapterange Rates and Financial Links Between Countries

Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?

Under both the gold standard and the gold exchange standard countries bought and sold U.S. dollars to maintain a fixed exchange rate with the dollar.

When the domestic currency depreciates, domestic goods become more expensive to foreign buyers.

The World Bank obtains the funds it lends by:

Equilibrium in the foreign exchange market occurs:

Demand for U.S. dollars by speculators is likely to increase if the dollar is expected to depreciate in the near future.

Suppose that the price of an ounce of gold is 120 pesos in Mexico and 2,400 yen in Japan. Then the Japanese yen is worth two hundred times the value of a Mexican peso.

Suppose the price of an ounce of silver is 100 nuevos soles in Peru and $400 in the United States. This implies:

Under the flexible exchange rate system, when a country tries to stimulate economic growth and improve its employment rates, it is likely to cause:

The primary function of the World Bank is to:

Which of the following exchange rate systems have a legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate?

Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Filters