Question 1

Given a two-country world,suppose Japan devalues the yen by 20 percent and South Korea devalues the won by 15 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 2

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 3

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 the demand for francs increases from D0 to D1.Under a fixed exchange rate system,the U.S.exchange stabilization fund could maintain a fixed exchange rate of $0.50 per franc by:

Accepted Answer

A)  Selling francs for dollars on the foreign exchange market 
B)  Selling dollars for francs on the foreign exchange market 
C)  Decreasing U.S.exports,thus decreasing the supply of francs 
D)  Stimulating U.S.imports,thus increasing the demand for francs 
A)  Selling francs for dollars on the foreign exchange market 
B)  Selling dollars for francs on the foreign exchange market 
C)  Decreasing U.S.exports,thus decreasing the supply of francs 
D)  Stimulating U.S.imports,thus increasing the demand for francs

Question 4

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

Accepted Answer

A) True 
 B)False

Question 5

Under a floating exchange-rate system,which of the following best leads to a depreciation in the value of the Canadian dollar?

Accepted Answer

A)  A decrease in the Canadian money supply 
B)  A fall in the Canadian interest rate 
C)  An increase in national income overseas 
D)  Rising inflation overseas 
A)  A decrease in the Canadian money supply 
B)  A fall in the Canadian interest rate 
C)  An increase in national income overseas 
D)  Rising inflation overseas

Question 6

What is an SDR?

Accepted Answer

The SDR is a currency basket composed of

Question 7

Pegging to a single currency is generally done by developing nations whose trade and financial relationships are mainly with a single industrial-country partner.

Accepted Answer

A) True 
 B)False

Question 8

To keep the pound's exchange value from depreciating against the franc,the British exchange stabilization fund would sell pounds for francs on the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 9

The special drawing right is a currency basket of five major industrial country currencies.

Accepted Answer

A) True 
 B)False

Question 10

Assume that interest rates in London rise relative to those in Switzerland.Under a floating exchange-rate system,one would expect the pound (relative to the franc)to:

Accepted Answer

A)  Depreciate due to the increased demand for pounds 
B)  Depreciate due to the increased demand for francs 
C)  Appreciate due to the increased demand for francs 
D)  Appreciate due to the increased demand for pounds 
A)  Depreciate due to the increased demand for pounds 
B)  Depreciate due to the increased demand for francs 
C)  Appreciate due to the increased demand for francs 
D)  Appreciate due to the increased demand for pounds

Question 11

As a policy instrument,currency devaluation may be controversial since it:

Accepted Answer

A)  Imposes hardships on the exporters of foreign countries 
B)  Imposes hardships on exporters of the devaluing country 
C)  Is generally followed by unemployment in the devaluing country 
D)  Is generally followed by price deflation in the devaluing country 
A)  Imposes hardships on the exporters of foreign countries 
B)  Imposes hardships on exporters of the devaluing country 
C)  Is generally followed by unemployment in the devaluing country 
D)  Is generally followed by price deflation in the devaluing country

Question 12

Under a floating exchange-rate system,if the U.S.dollar depreciates against the Swiss franc:

Accepted Answer

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

Question 13

If the Japanese yen 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 14

A potential 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 15

Most nations currently allow their currencies' exchange values to be determined solely by the forces of supply and demand in a free market.

Accepted Answer

A) True 
 B)False

Question 16

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

Accepted Answer

A)  Sell dollars on the foreign exchange market and lower domestic interest rates 
B)  Sell dollars on the foreign exchange market and raise domestic interest rates 
C)  Buy dollars on the foreign exchange market and lower domestic interest rates 
D)  Buy dollars on the foreign exchange market and raise domestic interest rates 
A)  Sell dollars on the foreign exchange market and lower domestic interest rates 
B)  Sell dollars on the foreign exchange market and raise domestic interest rates 
C)  Buy dollars on the foreign exchange market and lower domestic interest rates 
D)  Buy dollars on the foreign exchange market and raise domestic interest rates

Question 17

The crawling peg is a

Accepted Answer

A)  Fixed exchange rate system 
B)  Floating exchange rate system 
C)  Compromise between fixed and floating exchange rates 
D)  Exchange rate system used by nations experiencing no inflation 
A)  Fixed exchange rate system 
B)  Floating exchange rate system 
C)  Compromise between fixed and floating exchange rates 
D)  Exchange rate system used by nations experiencing no inflation

Question 18

To help insulate their economies from inflation,currency depreciation,and capital flight,developing countries have implemented:

Accepted Answer

A)  Regional trading blocs 
B)  Currency boards 
C)  Central banks 
D)  Regional fiscal policies 
A)  Regional trading blocs 
B)  Currency boards 
C)  Central banks 
D)  Regional fiscal policies

Question 19

Proponents of freely floating exchange rates maintain that:

Accepted Answer

A)  Central banks can easily modify fluctuations in exchange rates 
B)  The system allows policy makers freedom in pursuing domestic economic goals 
C)  Inelastic demand schedules prevent large fluctuations in exchange rates 
D)  Inelastic supply schedules prevent large fluctuations in exchange rates 
A)  Central banks can easily modify fluctuations in exchange rates 
B)  The system allows policy makers freedom in pursuing domestic economic goals 
C)  Inelastic demand schedules prevent large fluctuations in exchange rates 
D)  Inelastic supply schedules prevent large fluctuations in exchange rates

Question 20

Table 15.1.The Market for Francs
  
-Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

Accepted Answer

A)  $0.15 per franc 
B)  $0.20 per franc 
C)  $0.25 per franc 
D)  $0.30 per franc 
A)  $0.15 per franc 
B)  $0.20 per franc 
C)  $0.25 per franc 
D)  $0.30 per franc

Given a two-country world,suppose Japan devalues the yen by 20 percent and South Korea devalues the won by 15 percent.This results in:

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

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

Under a floating exchange-rate system,which of the following best leads to a depreciation in the value of the Canadian dollar?

What is an SDR?

Pegging to a single currency is generally done by developing nations whose trade and financial relationships are mainly with a single industrial-country partner.

To keep the pound's exchange value from depreciating against the franc,the British exchange stabilization fund would sell pounds for francs on the foreign exchange market.

The special drawing right is a currency basket of five major industrial country currencies.

Assume that interest rates in London rise relative to those in Switzerland.Under a floating exchange-rate system,one would expect the pound (relative to the franc)to:

As a policy instrument,currency devaluation may be controversial since it:

Under a floating exchange-rate system,if the U.S.dollar depreciates against the Swiss franc:

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

A potential limitation of freely floating exchange rates is that:

Most nations currently allow their currencies' exchange values to be determined solely by the forces of supply and demand in a free market.

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

The crawling peg is a

To help insulate their economies from inflation,currency depreciation,and capital flight,developing countries have implemented:

Proponents of freely floating exchange rates maintain that:

Table 15.1.The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

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

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Exam 15: Exchange-Rate Systems and Currency Crises

Given a two-country world,suppose Japan devalues the yen by 20 percent and South Korea devalues the won by 15 percent.This results in:

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

A "key currency" is one that is widely traded on world money markets,has demonstrated relative stable values over time,and has widely been accepted as a means of international settlement.

Under a floating exchange-rate system,which of the following best leads to a depreciation in the value of the Canadian dollar?

What is an SDR?

Pegging to a single currency is generally done by developing nations whose trade and financial relationships are mainly with a single industrial-country partner.

To keep the pound's exchange value from depreciating against the franc,the British exchange stabilization fund would sell pounds for francs on the foreign exchange market.

The special drawing right is a currency basket of five major industrial country currencies.

Assume that interest rates in London rise relative to those in Switzerland.Under a floating exchange-rate system,one would expect the pound (relative to the franc)to:

As a policy instrument,currency devaluation may be controversial since it:

Under a floating exchange-rate system,if the U.S.dollar depreciates against the Swiss franc:

If the Japanese yen depreciates against other currencies in the exchange markets,this will:

A potential limitation of freely floating exchange rates is that:

Most nations currently allow their currencies' exchange values to be determined solely by the forces of supply and demand in a free market.

To offset an appreciation of the dollar against the yen,the Federal Reserve would:

The crawling peg is a

To help insulate their economies from inflation,currency depreciation,and capital flight,developing countries have implemented:

Proponents of freely floating exchange rates maintain that:

Table 15.1.The Market for Francs -Refer to Table 15.1.Under a system of floating exchange rates,the equilibrium exchange rate equals:

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