Question 1

A market-determined $\underline {  \text { increase }  }$ in the dollar price of the pound is associated with:

Accepted Answer

A)  Revaluation of the dollar 
B)  Devaluation of the dollar 
C)  Appreciation of the dollar 
D)  Depreciation of the dollar 
A)  Revaluation of the dollar 
B)  Devaluation of the dollar 
C)  Appreciation of the dollar 
D)  Depreciation of the dollar

Question 2

If the Japanese yen $\underline {  \text { depreciates }  }$against other currencies in the exchange markets, this will:

Accepted Answer

A)  Have no effect on the Japanese balance of trade 
B)  Tend to worsen the Japanese balance of trade 
C)  Tend to improve the Japanese balance of trade 
D)  None of the above 
A)  Have no effect on the Japanese balance of trade 
B)  Tend to worsen the Japanese balance of trade 
C)  Tend to improve the Japanese balance of trade 
D)  None of the above

Question 3

A potential $\underline {  \text { limitation }  }$ of freely floating exchange rates is that:

Accepted Answer

A)  Countries require a larger amount of international reserves than otherwise 
B)  Countries are unable to initiate economic policies to combat unemployment 
C)  Exchange rates may experience wide and frequent fluctuations 
D)  Demand tends to be highly sensitive to price movements 
A)  Countries require a larger amount of international reserves than otherwise 
B)  Countries are unable to initiate economic policies to combat unemployment 
C)  Exchange rates may experience wide and frequent fluctuations 
D)  Demand tends to be highly sensitive to price movements

Question 4

Under a pegged exchange-rate system, which does not explain why a country would have a balance-of-payments $\underline {  \text { deficit }  }$?

Accepted Answer

A)  Very high rates of inflation occur domestically 
B)  Foreigners discriminate against domestic products 
C)  Technological advance is superior abroad 
D)  The domestic currency is undervalued relative to other currencies 
A)  Very high rates of inflation occur domestically 
B)  Foreigners discriminate against domestic products 
C)  Technological advance is superior abroad 
D)  The domestic currency is undervalued relative to other currencies

Question 5

Under managed floating exchange rates, the Federal Reserve could offset an appreciation of the dollar against the yen by:

Accepted Answer

A)  Increasing the money supply which promotes falling interest rates and net investment outflows 
B)  Increasing the money supply which promotes rising interest rates and net investment inflows 
C)  Decreasing the money supply which promotes falling interest rates and net investment outflows 
D)  Decreasing the money supply which promotes rising interest rates and net investment inflows 
A)  Increasing the money supply which promotes falling interest rates and net investment outflows 
B)  Increasing the money supply which promotes rising interest rates and net investment inflows 
C)  Decreasing the money supply which promotes falling interest rates and net investment outflows 
D)  Decreasing the money supply which promotes rising interest rates and net investment inflows

Question 6

Given a two-country world, suppose Japan revalues the yen by 15 percent and South Korea revalues the won by 12 percent. This results in:

Accepted Answer

A)  An appreciation in the value of both currencies 
B)  A depreciation in the value of both currencies 
C)  An appreciation in the value of the yen against the won 
D)  A depreciation in the value of the yen against the won 
A)  An appreciation in the value of both currencies 
B)  A depreciation in the value of both currencies 
C)  An appreciation in the value of the yen against the won 
D)  A depreciation in the value of the yen against the won

Question 7

A potential $\underline {   \text { disadvantage } }$ of freely floating exchange rates is that there would:

Accepted Answer

A)  Exist excessive amounts of hedging in the foreign exchange markets 
B)  Be a lack of incentive to initiate exchange arbitrage 
C)  Be excessive amounts of destabilizing speculation 
D)  Exist a devaluation bias in the exchange markets 
A)  Exist excessive amounts of hedging in the foreign exchange markets 
B)  Be a lack of incentive to initiate exchange arbitrage 
C)  Be excessive amounts of destabilizing speculation 
D)  Exist a devaluation bias in the exchange markets

Question 8

Because there is no exchange stabilization fund under floating exchange rates, any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

Accepted Answer

A) True 
 B)False

Question 9

Under a floating exchange rate system, if there occurs a $\underline {  \text { fall }  }$in the dollar price of the franc:

Accepted Answer

A)  American exports to France will be cheaper in francs 
B)  American exports to France will be more expensive in francs 
C)  American imports from France will be more expensive in dollars 
D)  None of the above 
A)  American exports to France will be cheaper in francs 
B)  American exports to France will be more expensive in francs 
C)  American imports from France will be more expensive in dollars 
D)  None of the above

Question 10

Under adjustable pegged exchange rates, if the rate of inflation in the United States $\underline {  \text { exceeds }  }$ the rate of inflation of its trading partners:

Accepted Answer

A)  U.S. exports tend to rise and imports tend to fall 
B)  U.S. imports tend to rise and exports tend to fall 
C)  U.S. foreign exchange reserves tend to rise 
D)  U.S. foreign exchange reserves remain constant 
A)  U.S. exports tend to rise and imports tend to fall 
B)  U.S. imports tend to rise and exports tend to fall 
C)  U.S. foreign exchange reserves tend to rise 
D)  U.S. foreign exchange reserves remain constant

Question 11

Large industrial nations with diversified economies and small trade sectors have generally pegged their currencies to one of the world's key currencies.

Accepted Answer

A) True 
 B)False

Question 12

Which exchange-rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?

Accepted Answer

A)  Dual exchange rates 
B)  Managed floating exchange rates 
C)  Adjustable pegged exchange rates 
D)  Crawling pegged exchange rates 
A)  Dual exchange rates 
B)  Managed floating exchange rates 
C)  Adjustable pegged exchange rates 
D)  Crawling pegged exchange rates

Question 13

When pursued over the long run, a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.

Accepted Answer

A) True 
 B)False

Question 14

Under managed floating exchange rates, if the rate of inflation in the United States is $\underline {  \text { less }  }$ than the rate of inflation of its trading partners, the dollar will likely:

Accepted Answer

A)  Appreciate against foreign currencies 
B)  Depreciate against foreign currencies 
C)  Be officially revalued by the government 
D)  Be officially devalued by the government 
A)  Appreciate against foreign currencies 
B)  Depreciate against foreign currencies 
C)  Be officially revalued by the government 
D)  Be officially devalued by the government

Question 15

Under managed floating exchange rates, a central bank would initiate:

Accepted Answer

A)  Contractionary monetary policy to offset a depreciation of its currency 
B)  Contractionary monetary policy to offset an appreciation of its currency 
C)  Expansionary monetary policy to offset a depreciation of its currency 
D)  None of the above 
A)  Contractionary monetary policy to offset a depreciation of its currency 
B)  Contractionary monetary policy to offset an appreciation of its currency 
C)  Expansionary monetary policy to offset a depreciation of its currency 
D)  None of the above

Question 16

The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond unacceptable levels from the official exchange rate.

Accepted Answer

A) True 
 B)False

Question 17

Under managed floating exchange rates, central bank intervention is used to offset temporary fluctuations in exchange rates that contribute to uncertainty in carrying out transactions in international trade and finance.

Accepted Answer

A) True 
 B)False

Question 18

Under a floating exchange rate system, an $\underline {\text { increase }}$ in U.S. imports of Japanese goods will cause the demand schedule for Japanese yen to:

Accepted Answer

A)  Increase, inducing a depreciation in the yen 
B)  Decrease, inducing a depreciation in the yen 
C)  Increase, inducing an appreciation in the yen 
D)  Decrease, inducing an appreciation in the yen 
A)  Increase, inducing a depreciation in the yen 
B)  Decrease, inducing a depreciation in the yen 
C)  Increase, inducing an appreciation in the yen 
D)  Decrease, inducing an appreciation in the yen

Question 19

Figure 15.1 shows the market for the Swiss franc. In the figure, the initial demand for marks and supply of marks are depicted by DS1U1B10S1U1B0 and SS1U1B10S1U1B0 respectively.
Figure 15.1. The Market for the Swiss Franc
  
-Refer to Figure 15.1. Suppose that the United States increases its imports from Switzerland, resulting in a rise in the demand for francs from D0 to D1. Under a floating exchange rate system, the new equilibrium exchange rate would be:

Accepted Answer

A)  $0.40 per franc 
B)  $0.50 per franc 
C)  $0.60 per franc 
D)  $0.70 per franc 
A)  $0.40 per franc 
B)  $0.50 per franc 
C)  $0.60 per franc 
D)  $0.70 per franc

Question 20

If the Japanese yen $\underline {  \text { appreciates }  }$ against other currencies in the exchange markets, this will:

Accepted Answer

A)  Have no effect on the Japanese balance of trade 
B)  Tend to improve the Japanese balance of trade 
C)  Tend to worsen the Japanese balance of trade 
D)  None of the above 
A)  Have no effect on the Japanese balance of trade 
B)  Tend to improve the Japanese balance of trade 
C)  Tend to worsen the Japanese balance of trade 
D)  None of the above

A market-determined $\underline { \text { increase } }$ in the dollar price of the pound is associated with:

If the Japanese yen $\underline { \text { depreciates } }$ against other currencies in the exchange markets, this will:

A potential $\underline { \text { limitation } }$ of freely floating exchange rates is that:

Under a pegged exchange-rate system, which does not explain why a country would have a balance-of-payments $\underline { \text { deficit } }$ ?

Under managed floating exchange rates, the Federal Reserve could offset an appreciation of the dollar against the yen by:

Given a two-country world, suppose Japan revalues the yen by 15 percent and South Korea revalues the won by 12 percent. This results in:

A potential $\underline { \text { disadvantage } }$ of freely floating exchange rates is that there would:

Because there is no exchange stabilization fund under floating exchange rates, any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

Under a floating exchange rate system, if there occurs a $\underline { \text { fall } }$ in the dollar price of the franc:

Under adjustable pegged exchange rates, if the rate of inflation in the United States $\underline { \text { exceeds } }$ the rate of inflation of its trading partners:

Large industrial nations with diversified economies and small trade sectors have generally pegged their currencies to one of the world's key currencies.

Which exchange-rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?

When pursued over the long run, a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.

Under managed floating exchange rates, if the rate of inflation in the United States is $\underline { \text { less } }$ than the rate of inflation of its trading partners, the dollar will likely:

Under managed floating exchange rates, a central bank would initiate:

The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond unacceptable levels from the official exchange rate.

Under managed floating exchange rates, central bank intervention is used to offset temporary fluctuations in exchange rates that contribute to uncertainty in carrying out transactions in international trade and finance.

Under a floating exchange rate system, an $\underline {\text { increase }}$ in U.S. imports of Japanese goods will cause the demand schedule for Japanese yen to:

If the Japanese yen $\underline { \text { appreciates } }$ against other currencies in the exchange markets, this will:

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

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Macroeconomic Policy in an Open Economy

International Banking: Reserves, Debt, and Risk

Filters

Exam 15: Exchange-Rate Systems and Currency Crises

A market-determined increase ‾\underline { \text { increase } } increase ​ in the dollar price of the pound is associated with:

If the Japanese yen depreciates ‾\underline { \text { depreciates } } depreciates ​ against other currencies in the exchange markets, this will:

A potential limitation ‾\underline { \text { limitation } } limitation ​ of freely floating exchange rates is that:

Under a pegged exchange-rate system, which does not explain why a country would have a balance-of-payments deficit ‾\underline { \text { deficit } } deficit ​ ?

Under managed floating exchange rates, the Federal Reserve could offset an appreciation of the dollar against the yen by:

Given a two-country world, suppose Japan revalues the yen by 15 percent and South Korea revalues the won by 12 percent. This results in:

A potential disadvantage ‾\underline { \text { disadvantage } } disadvantage ​ of freely floating exchange rates is that there would:

Because there is no exchange stabilization fund under floating exchange rates, any holdings of international reserves serve as working balances rather than to maintain a given exchange rate for any currency.

Under a floating exchange rate system, if there occurs a fall ‾\underline { \text { fall } } fall ​ in the dollar price of the franc:

Under adjustable pegged exchange rates, if the rate of inflation in the United States exceeds ‾\underline { \text { exceeds } } exceeds ​ the rate of inflation of its trading partners:

Large industrial nations with diversified economies and small trade sectors have generally pegged their currencies to one of the world's key currencies.

Which exchange-rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?

When pursued over the long run, a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.

Under managed floating exchange rates, if the rate of inflation in the United States is less ‾\underline { \text { less } } less ​ than the rate of inflation of its trading partners, the dollar will likely:

Under managed floating exchange rates, a central bank would initiate:

The purpose of an exchange stabilization fund is to ensure that the market exchange rate does not deviate beyond unacceptable levels from the official exchange rate.

Under managed floating exchange rates, central bank intervention is used to offset temporary fluctuations in exchange rates that contribute to uncertainty in carrying out transactions in international trade and finance.

Under a floating exchange rate system, an increase ‾\underline {\text { increase }} increase ​ in U.S. imports of Japanese goods will cause the demand schedule for Japanese yen to:

If the Japanese yen appreciates ‾\underline { \text { appreciates } } appreciates ​ against other currencies in the exchange markets, this will:

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

Exchange-Rate Determination

Mechanisms of International Adjustment

Exchange-Rate Adjustments and the Balance of Payments

Macroeconomic Policy in an Open Economy

International Banking: Reserves, Debt, and Risk

Filters

A market-determined $\underline { \text { increase } }$ in the dollar price of the pound is associated with:

If the Japanese yen $\underline { \text { depreciates } }$ against other currencies in the exchange markets, this will:

A potential $\underline { \text { limitation } }$ of freely floating exchange rates is that:

Under a pegged exchange-rate system, which does not explain why a country would have a balance-of-payments $\underline { \text { deficit } }$ ?

A potential $\underline { \text { disadvantage } }$ of freely floating exchange rates is that there would:

Under a floating exchange rate system, if there occurs a $\underline { \text { fall } }$ in the dollar price of the franc:

Under adjustable pegged exchange rates, if the rate of inflation in the United States $\underline { \text { exceeds } }$ the rate of inflation of its trading partners:

Under managed floating exchange rates, if the rate of inflation in the United States is $\underline { \text { less } }$ than the rate of inflation of its trading partners, the dollar will likely:

Under a floating exchange rate system, an $\underline {\text { increase }}$ in U.S. imports of Japanese goods will cause the demand schedule for Japanese yen to:

If the Japanese yen $\underline { \text { appreciates } }$ against other currencies in the exchange markets, this will: