Question 1

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Accepted Answer

A) pressure for the value of the baht to decline. 
B) pressure for the value of the baht to rise. 
C) an increase in the equilibrium value of the baht. 
D) a decrease in the supply of the baht in foreign exchange markets. 
A) pressure for the value of the baht to decline. 
B) pressure for the value of the baht to rise. 
C) an increase in the equilibrium value of the baht. 
D) a decrease in the supply of the baht in foreign exchange markets. A

Question 2

Figure 19-4  
-Refer to Figure 19-4.The equilibrium exchange rate is originally at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.If the government abandons the peg,the equilibrium exchange rate would be

Accepted Answer

A) $4/pound. 
B) $3/pound. 
C) $2/pound. 
D) less than $2/pound. 
A) $4/pound. 
B) $3/pound. 
C) $2/pound. 
D) less than $2/pound. C

Question 3

Figure 19-6  
-Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) Lack of investment in infrastructure causes Mexican productivity to fall relative to American productivity. 
B) A possibility of diseased poultry in The United States causes Mexican consumers to decrease their preferences for U.S.-raised chickens relative to Mexican-raised chickens. 
C) A new trade agreement with Mexico results in the United States removing all tariffs on sugar imported from Mexico. 
D) An expansionary monetary policy in Mexico causes an increase in the price level of Mexican goods relative to U.S.goods. 
A) Lack of investment in infrastructure causes Mexican productivity to fall relative to American productivity. 
B) A possibility of diseased poultry in The United States causes Mexican consumers to decrease their preferences for U.S.-raised chickens relative to Mexican-raised chickens. 
C) A new trade agreement with Mexico results in the United States removing all tariffs on sugar imported from Mexico. 
D) An expansionary monetary policy in Mexico causes an increase in the price level of Mexican goods relative to U.S.goods. B

Question 4

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

Accepted Answer

Under the gold standard,the exchange rat

Question 5

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory.In January 2017,the Economist reported that the average price of a Big Mac in the United States was $4.93.In Mexico,the average price of a Big Mac at that time was 49 pesos.If the exchange rate between the dollar and the peso was 13.60 pesos per dollar,explain how it would be profitable to buy Big Macs in Mexico instead of in the United States.

Accepted Answer

If a Big Mac costs $4.93 in the United S

Question 6

If inflation in Mexico is lower than it is in the United States

Accepted Answer

A) the purchasing power of the peso in buying Mexican goods will fall relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the peso will rise in the long run. 
D) the purchasing power of the dollar in buying American goods will rise relative to the peso. 
A) the purchasing power of the peso in buying Mexican goods will fall relative to the dollar. 
B) the value of the dollar will rise in the long run. 
C) the value of the peso will rise in the long run. 
D) the purchasing power of the dollar in buying American goods will rise relative to the peso.

Question 7

Figure 19-8  
-Refer to Figure 19-8.The equilibrium exchange rate is originally at A,$1.25/euro.Suppose the European Central Bank pegs its currency at $1.00/euro.Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D2.If the European Central Bank abandons the peg,the equilibrium exchange rate would be

Accepted Answer

A) $1.00/euro. 
B) $1.25/euro. 
C) $1.50/euro. 
D) $1.75/euro. 
A) $1.00/euro. 
B) $1.25/euro. 
C) $1.50/euro. 
D) $1.75/euro.

Question 8

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to ________ in Thailand and exchange ________.This change in investment by foreigners is termed capital flight.

Accepted Answer

A) purchase more investments; dollars for baht to purchase these investments 
B) sell off their investments; the baht they received for dollars 
C) sell off their investments; the dollars they received for baht 
D) purchase more investments; baht for dollars to purchase these investments 
A) purchase more investments; dollars for baht to purchase these investments 
B) sell off their investments; the baht they received for dollars 
C) sell off their investments; the dollars they received for baht 
D) purchase more investments; baht for dollars to purchase these investments

Question 9

China's exchange rate system from 1994 through 2005 is an example of

Accepted Answer

A) a floating exchange rate system. 
B) a managed float exchange rate system. 
C) a fixed exchange rate system. 
D) a flexible exchange rate system. 
E) the Bretton Woods System. 
A) a floating exchange rate system. 
B) a managed float exchange rate system. 
C) a fixed exchange rate system. 
D) a flexible exchange rate system. 
E) the Bretton Woods System.

Question 10

Figure 19-4  
-Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift

Accepted Answer

A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million. 
A) there is a shortage of pounds equal to 600 million. 
B) there is a surplus of pounds equal to 400 million. 
C) there is a shortage of pounds equal to 400 million. 
D) there is a surplus of pounds equal to 600 million. 
E) there is a shortage of pounds equal to 200 million.

Question 11

From the nineteenth century until the 1930s,the United states most consistently adhered to

Accepted Answer

A) the gold standard. 
B) the Bretton Woods system. 
C) a freely-floating exchange rate. 
D) a managed-float exchange rate system. 
A) the gold standard. 
B) the Bretton Woods system. 
C) a freely-floating exchange rate. 
D) a managed-float exchange rate system.

Question 12

The Danish currency,the krone,is pegged to the euro at a rate of 7.46 kroner (kroner is the plural of krone)to the euro.At the pegged exchange rate,how many euros would be exchanged for one krone?

Accepted Answer

A) 0.07 
B) 0.13 
C) 1.76 
D) 7.46 
A) 0.07 
B) 0.13 
C) 1.76 
D) 7.46

Question 13

Limits on the flow of foreign exchange and financial investment across countries are called

Accepted Answer

A) capital controls. 
B) fixed exchange rates. 
C) credit constraints. 
D) currency restrictions. 
A) capital controls. 
B) fixed exchange rates. 
C) credit constraints. 
D) currency restrictions.

Question 14

Figure 19-1  
-Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

Accepted Answer

A) U.S.productivity falls relative to European productivity. 
B) Americans increase their preferences for goods produced in the EU relative to American goods. 
C) The United States imposes a quota on wine from the European Union. 
D) The price level of goods produced in the EU decreases relative to the price level of goods produced in the United States. 
A) U.S.productivity falls relative to European productivity. 
B) Americans increase their preferences for goods produced in the EU relative to American goods. 
C) The United States imposes a quota on wine from the European Union. 
D) The price level of goods produced in the EU decreases relative to the price level of goods produced in the United States.

Question 15

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes it more difficult to maintain the existing exchange rate.

Accepted Answer

A) True 
 B)False

Question 16

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

Accepted Answer

A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation. 
A) purchasing power parity. 
B) currency arbitrage. 
C) destabilizing speculation. 
D) exchange rate manipulation.

Question 17

The currencies of Poland and Iceland (the zloty and the krona,respectively)declined in value relative to the euro following the financial crisis of 2008.This means that the

Accepted Answer

A) zloty and krona appreciated in value against the euro. 
B) euro depreciated in value against the zloty and the krona. 
C) zloty and krona depreciated in value against the euro. 
D) zloty depreciated in value against the krona. 
E) Both A and B are correct. 
A) zloty and krona appreciated in value against the euro. 
B) euro depreciated in value against the zloty and the krona. 
C) zloty and krona depreciated in value against the euro. 
D) zloty depreciated in value against the krona. 
E) Both A and B are correct.

Question 18

Under the Bretton Woods exchange rate system,the U.S.government agreed to buy or sell gold at a fixed price of ________ per ounce.

Accepted Answer

A) $1 
B) $35 
C) $100 
D) $400 
A) $1 
B) $35 
C) $100 
D) $400

Question 19

A currency pegged at a value above the market equilibrium exchange rate is

Accepted Answer

A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) depreciating in value relative to its pegged currency. 
A) overvalued. 
B) undervalued. 
C) achieving purchasing power parity. 
D) depreciating in value relative to its pegged currency.

Question 20

Under the gold standard,the government must have enough gold to back up any

Accepted Answer

A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank. 
A) increase in money demand. 
B) increase in the money supply. 
C) change in its currency's exchange rate. 
D) foreign currency deposits in its central bank.

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

If inflation in Mexico is lower than it is in the United States

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to in Thailand and exchange .This change in investment by foreigners is termed capital flight.

China's exchange rate system from 1994 through 2005 is an example of

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D₂.After the shift

From the nineteenth century until the 1930s,the United states most consistently adhered to

The Danish currency,the krone,is pegged to the euro at a rate of 7.46 kroner (kroner is the plural of krone)to the euro.At the pegged exchange rate,how many euros would be exchanged for one krone?

Limits on the flow of foreign exchange and financial investment across countries are called

Figure 19-1 -Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes it more difficult to maintain the existing exchange rate.

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

The currencies of Poland and Iceland (the zloty and the krona,respectively)declined in value relative to the euro following the financial crisis of 2008.This means that the

Under the Bretton Woods exchange rate system,the U.S.government agreed to buy or sell gold at a fixed price of ________ per ounce.

A currency pegged at a value above the market equilibrium exchange rate is

Under the gold standard,the government must have enough gold to back up any

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

Exam 19: The International Financial System

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Figure 19-6 -Refer to Figure 19-6.Which of the following would cause the change depicted in the figure above?

What determined the exchange rates among currencies under the gold standard,and what caused the gold standard to collapse?

If inflation in Mexico is lower than it is in the United States

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to ________ in Thailand and exchange ________.This change in investment by foreigners is termed capital flight.

China's exchange rate system from 1994 through 2005 is an example of

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D2.After the shift

From the nineteenth century until the 1930s,the United states most consistently adhered to

The Danish currency,the krone,is pegged to the euro at a rate of 7.46 kroner (kroner is the plural of krone)to the euro.At the pegged exchange rate,how many euros would be exchanged for one krone?

Limits on the flow of foreign exchange and financial investment across countries are called

Figure 19-1 -Refer to Figure 19-1.Which of the following would cause the change depicted in the figure above?

In a fixed exchange rate system,speculation regarding an expected revaluation or devaluation of a currency makes it more difficult to maintain the existing exchange rate.

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

The currencies of Poland and Iceland (the zloty and the krona,respectively)declined in value relative to the euro following the financial crisis of 2008.This means that the

Under the Bretton Woods exchange rate system,the U.S.government agreed to buy or sell gold at a fixed price of ________ per ounce.

A currency pegged at a value above the market equilibrium exchange rate is

Under the gold standard,the government must have enough gold to back up any

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

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to in Thailand and exchange .This change in investment by foreigners is termed capital flight.

Figure 19-4 -Refer to Figure 19-4.The equilibrium exchange rate is at A,$3/pound.Suppose the British government pegs its currency at $4/pound.Speculators expect that the value of the pound will drop and this shifts the demand curve for pounds to D₂.After the shift