Question 1

The Bretton Woods exchange rate system was an example of a

Accepted Answer

A) target zone. 
B) managed float. 
C) pure gold standard. 
D) modified gold standard. 
E) floating exchange rate system. 
A) target zone. 
B) managed float. 
C) pure gold standard. 
D) modified gold standard. 
E) floating exchange rate system.

Question 2

Which currency is most commonly traded?

Accepted Answer

The answer of Which currency is most commonly traded?...

Question 3

A single currency area requires

Accepted Answer

A) mobile labor and synchronized business cycles. 
B) immobile labor and synchronized business cycles. 
C) immobile labor and mobile capital. 
D) a political union. 
E) mobile labor and unsynchronized business cycles. 
A) mobile labor and synchronized business cycles. 
B) immobile labor and synchronized business cycles. 
C) immobile labor and mobile capital. 
D) a political union. 
E) mobile labor and unsynchronized business cycles.

Question 4

Which of the following is true?

Accepted Answer

A) If an exchange rate is allowed to vary across a fixed basket of currencies,it is called a hard peg. 
B) If an exchange rate is not allowed to vary against the target currency,it is called a soft peg. 
C) If an exchange is only allowed to fluctuate within a set band,it is considered to be a flexible exchange rate system. 
D) A soft peg is when a currency's exchange rate is only allowed to fluctuate within a set band. 
E) Any exchange rate policy other than completely flexible exchange rate systems is extremely uncommon today for currencies. 
A) If an exchange rate is allowed to vary across a fixed basket of currencies,it is called a hard peg. 
B) If an exchange rate is not allowed to vary against the target currency,it is called a soft peg. 
C) If an exchange is only allowed to fluctuate within a set band,it is considered to be a flexible exchange rate system. 
D) A soft peg is when a currency's exchange rate is only allowed to fluctuate within a set band. 
E) Any exchange rate policy other than completely flexible exchange rate systems is extremely uncommon today for currencies.

Question 5

Which of the following is NOT one of the determinants of the gains of adopting a single currency?

Accepted Answer

A) A well-synchronized business cycle involving all member countries 
B) The possibility of factors of production to freely move across borders 
C) The willingness and ability of member countries to design policies to address regional imbalances that may develop 
D) Widening the common market by allowing other countries to join 
E) None of the above. 
A) A well-synchronized business cycle involving all member countries 
B) The possibility of factors of production to freely move across borders 
C) The willingness and ability of member countries to design policies to address regional imbalances that may develop 
D) Widening the common market by allowing other countries to join 
E) None of the above.

Question 6

If U.S.consumers increase their demand for foreign products and foreign travel,the U.S.dollar would tend to depreciate as more dollars are supplied to foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 7

What is the largest center for currency trading?

Accepted Answer

The answer of What is the largest center for currency...

Question 8

A weak U.S.dollar leads to a higher volume of U.S.imports.

Accepted Answer

A) True 
 B)False

Question 9

Draw the demand for and supply of the U.S.dollar in each of the following cases.Diagram and explain in words the effect of each of the following events in the short run.Make sure to properly label the axes.In each case,assume the two countries under consideration are important trading partners.
(a) There is an increase in the real interest rates in the United States relative to Japan.
(b) Investment returns in the United States decrease relative to expected returns in Japan.
(c) Inflation in Japan fell relative to the inflation rate in the United States.
(d) The Japanese expect the value of the U.S.dollar to decline.
(e) The Federal Reserve raised interest rates fearing the inflationary pressures of a booming U.S.economy.

Accepted Answer

(a) Both holders of yen and holders of U

Question 10

All else equal and given the current system of exchange rates,if the United States enters a period of exceptionally strong growth,

Accepted Answer

A) the pressure on the dollar is to revalue. 
B) the pressure on the dollar is to devalue. 
C) the pressure on the dollar is to depreciate. 
D) the pressure on the dollar is to appreciate. 
E) Both A and D. 
A) the pressure on the dollar is to revalue. 
B) the pressure on the dollar is to devalue. 
C) the pressure on the dollar is to depreciate. 
D) the pressure on the dollar is to appreciate. 
E) Both A and D.

Question 11

Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would

Accepted Answer

A) have no effect on nominal exchange rates. 
B) be completely offset by changes in the real exchange rate. 
C) be completely offset by changes in the nominal exchange rate. 
D) violate the conditions for the law of one price. 
E) lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency. 
A) have no effect on nominal exchange rates. 
B) be completely offset by changes in the real exchange rate. 
C) be completely offset by changes in the nominal exchange rate. 
D) violate the conditions for the law of one price. 
E) lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency.

Question 12

The Smithsonian Agreement of 1971 was hailed by President Nixon as a fundamental reorganization of the international monetary system.In fact,what it accomplished was

Accepted Answer

A) the revaluation of the dollar. 
B) the devaluation of the dollar. 
C) the reduction of the gold content of the dollar. 
D) the elimination of gold backing for the dollar. 
E) Both B and C. 
A) the revaluation of the dollar. 
B) the devaluation of the dollar. 
C) the reduction of the gold content of the dollar. 
D) the elimination of gold backing for the dollar. 
E) Both B and C.

Question 13

How is dollarization different from monetary union?

Accepted Answer

The nations do not s

Question 14

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Accepted Answer

A) speculating. 
B) demonstrating purchasing power parity. 
C) engaging in interest rate arbitrage. 
D) responding to fluctuations in the business cycle. 
E) ignoring the nominal rate of exchange. 
A) speculating. 
B) demonstrating purchasing power parity. 
C) engaging in interest rate arbitrage. 
D) responding to fluctuations in the business cycle. 
E) ignoring the nominal rate of exchange.

Question 15

Speculation would involve using forward contracts and options to reduce the exchange rate risk on future foreign exchange transactions.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would NOT be a cause for an increased American demand for the Mexican peso?

Accepted Answer

A) The United States having lower interest rates than Mexico 
B) Increased American demand for Mexican goods 
C) The expectation by speculators that the value of the peso is edging up 
D) More economic expansion in the United States 
E) None of the above. 
A) The United States having lower interest rates than Mexico 
B) Increased American demand for Mexican goods 
C) The expectation by speculators that the value of the peso is edging up 
D) More economic expansion in the United States 
E) None of the above.

The Bretton Woods exchange rate system was an example of a

Which currency is most commonly traded?

A single currency area requires

Which of the following is true?

Which of the following is NOT one of the determinants of the gains of adopting a single currency?

If U.S.consumers increase their demand for foreign products and foreign travel,the U.S.dollar would tend to depreciate as more dollars are supplied to foreign exchange markets.

What is the largest center for currency trading?

A weak U.S.dollar leads to a higher volume of U.S.imports.

All else equal and given the current system of exchange rates,if the United States enters a period of exceptionally strong growth,

Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would

The Smithsonian Agreement of 1971 was hailed by President Nixon as a fundamental reorganization of the international monetary system.In fact,what it accomplished was

How is dollarization different from monetary union?

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Speculation would involve using forward contracts and options to reduce the exchange rate risk on future foreign exchange transactions.

Which of the following would NOT be a cause for an increased American demand for the Mexican peso?

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

Filters

Exam 10: Exchange Rates and Exchange Rate Systems

The Bretton Woods exchange rate system was an example of a

Which currency is most commonly traded?

A single currency area requires

Which of the following is true?

Which of the following is NOT one of the determinants of the gains of adopting a single currency?

If U.S.consumers increase their demand for foreign products and foreign travel,the U.S.dollar would tend to depreciate as more dollars are supplied to foreign exchange markets.

What is the largest center for currency trading?

A weak U.S.dollar leads to a higher volume of U.S.imports.

All else equal and given the current system of exchange rates,if the United States enters a period of exceptionally strong growth,

Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would

The Smithsonian Agreement of 1971 was hailed by President Nixon as a fundamental reorganization of the international monetary system.In fact,what it accomplished was

How is dollarization different from monetary union?

A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

Speculation would involve using forward contracts and options to reduce the exchange rate risk on future foreign exchange transactions.

Which of the following would NOT be a cause for an increased American demand for the Mexican peso?

The United States in a Global Economy

International Economic Institutions Since World War Ii

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Trade and the Balance of Payments

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

The Bric Countries in the World Economy

Filters