Exam 19: The International Financial System

Table 30-1 Source: "The Big Mac Index," Economist, July 28, 2011. -Refer to Table 30-1.Fill in the missing values in the above table.Assume the Big Mac is selling for $4.07 in the United States.Explain whether the U.S.dollar is overvalued or undervalued relative to each of the other currencies and predict what will happen in the future to each exchange rate.

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Question 1

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To calculate the implied exchange rate,divide the foreign currency price of a Big Mac by the U.S.price.
The U.S.dollar is overvalued if the actual exchange rate is greater than the implied exchange rate,and undervalued if the actual exchange rate is less than the implied exchange rate.In this case,the U.S.dollar is overvalued against the Peruvian new sol and the Turkish lira,and it is undervalued against the Danish krone and Swedish krona.Overvaluation of the U.S.dollar would lead us to predict that the value of the dollar would fall in the future relative to the new sol and the lira.Undervaluation of the U.S.dollar would lead us to predict that the dollar's value would rise in the future relative to the krone and the krona.

Although the pegged exchange rate between the yuan and the dollar has the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would .

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Question 2

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How will the exchange rate (foreign currency per dollar)respond to an increase in preference for imported goods in the United States in the long run?

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Question 3

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During the Chinese experience with pegging the yuan to the dollar,the yuan was .As a result,there was a of dollars on the market,and the Chinese government had to purchase dollars to maintain the peg.

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Question 4

If a country's currency ________ the dollar,its exchange rate is fixed.

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Question 5

Figure 30-7 -Refer to Figure 30-7.The graph above depicts supply and demand for U.S.dollars during a trading day,where the quantity is millions of dollars. In order to support a fixed exchange rate of 0.30 pounds per dollar,the British central bank must

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Question 6

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee.)

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Question 7

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

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Question 8

Under the Bretton Woods system,U.S.dollars were redeemable for ________ only if the dollars were presented by a foreign central bank?

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Question 9

The Bretton Woods exchange rate system was a

(Multiple Choice)

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Question 10

The currency adopted by most countries in ________ is referred to as the euro.

(Multiple Choice)

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Question 11

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

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Question 12

By the late 1950s,dollars held by foreign central banks exceeded the official dollar value of U.S.gold reserves.

(True/False)

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Question 13

If one U.S.dollar could be exchanged for one Australian dollar in 1970,and one U.S.dollar can now be exchanged for 0.98 Australian dollars,which of the following is true?

(Multiple Choice)

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Question 14

Figure 30-7 -Limits on the flow of foreign exchange and financial investment across countries are called

(Multiple Choice)

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Question 15

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

(Multiple Choice)

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Question 16

If currencies around the world are based on the gold standard,and the EU lowers the amount of gold for which the euro will trade,then holding all else constant,

(Multiple Choice)

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Question 17

If interest rates in the United States fall,

(Multiple Choice)

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Question 18

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in the United States in the long run?

(Multiple Choice)

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Question 19

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

(True/False)

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Question 20

Showing 1 - 20 of 132

Although the pegged exchange rate between the yuan and the dollar has the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would .

How will the exchange rate (foreign currency per dollar)respond to an increase in preference for imported goods in the United States in the long run?

During the Chinese experience with pegging the yuan to the dollar,the yuan was .As a result,there was a of dollars on the market,and the Chinese government had to purchase dollars to maintain the peg.

If a country's currency ________ the dollar,its exchange rate is fixed.

Figure 30-7 -Refer to Figure 30-7.The graph above depicts supply and demand for U.S.dollars during a trading day,where the quantity is millions of dollars. In order to support a fixed exchange rate of 0.30 pounds per dollar,the British central bank must

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee.)

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Under the Bretton Woods system,U.S.dollars were redeemable for ________ only if the dollars were presented by a foreign central bank?

The Bretton Woods exchange rate system was a

The currency adopted by most countries in ________ is referred to as the euro.

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

By the late 1950s,dollars held by foreign central banks exceeded the official dollar value of U.S.gold reserves.

If one U.S.dollar could be exchanged for one Australian dollar in 1970,and one U.S.dollar can now be exchanged for 0.98 Australian dollars,which of the following is true?

Figure 30-7 -Limits on the flow of foreign exchange and financial investment across countries are called

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

If currencies around the world are based on the gold standard,and the EU lowers the amount of gold for which the euro will trade,then holding all else constant,

If interest rates in the United States fall,

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in the United States in the long run?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

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Exam 19: The International Financial System

Although the pegged exchange rate between the yuan and the dollar has ________ the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would ________.

How will the exchange rate (foreign currency per dollar)respond to an increase in preference for imported goods in the United States in the long run?

During the Chinese experience with pegging the yuan to the dollar,the yuan was ________.As a result,there was a ________ of dollars on the market,and the Chinese government had to purchase dollars to maintain the peg.

If a country's currency ________ the dollar,its exchange rate is fixed.

Figure 30-7 -Refer to Figure 30-7.The graph above depicts supply and demand for U.S.dollars during a trading day,where the quantity is millions of dollars. In order to support a fixed exchange rate of 0.30 pounds per dollar,the British central bank must

If the average productivity of Indian firms is rising more quickly than the average productivity of American firms,which of the following would you expect to see? (India's currency is the rupee.)

Figure 30-1 -Refer to Figure 30-1. Which of the following would cause the change depicted in the figure above?

Under the Bretton Woods system,U.S.dollars were redeemable for ________ only if the dollars were presented by a foreign central bank?

The Bretton Woods exchange rate system was a

The currency adopted by most countries in ________ is referred to as the euro.

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run except

By the late 1950s,dollars held by foreign central banks exceeded the official dollar value of U.S.gold reserves.

If one U.S.dollar could be exchanged for one Australian dollar in 1970,and one U.S.dollar can now be exchanged for 0.98 Australian dollars,which of the following is true?

Figure 30-7 -Limits on the flow of foreign exchange and financial investment across countries are called

A persistent shortage or surplus of a currency under the Bretton Woods system was evidence of

If currencies around the world are based on the gold standard,and the EU lowers the amount of gold for which the euro will trade,then holding all else constant,

If interest rates in the United States fall,

How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in the United States in the long run?

In order to maintain an undervalued yuan to encourage a trade surplus,the Chinese government must buy dollars and increase the supply of yuan.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

Filters

Although the pegged exchange rate between the yuan and the dollar has the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would .

During the Chinese experience with pegging the yuan to the dollar,the yuan was .As a result,there was a of dollars on the market,and the Chinese government had to purchase dollars to maintain the peg.