Question 1

A financial account deficit means that Canadians invested more in R.O.W. than R.O.W. invested in Canada.

Accepted Answer

A) True 
 B)False

Question 2

According to the law of demand for Canadian dollars, as the exchange rate

Accepted Answer

A)  rises, the quantity demanded of Canadian dollars increases. 
B)  rises, the demand curve for Canadian dollars shifts rightward. 
C)  falls, the quantity demanded of Canadian dollars increases. 
D)  falls, the demand curve for Canadian dollars shifts rightward. 
E)  rises or falls, none of above are true. 
A)  rises, the quantity demanded of Canadian dollars increases. 
B)  rises, the demand curve for Canadian dollars shifts rightward. 
C)  falls, the quantity demanded of Canadian dollars increases. 
D)  falls, the demand curve for Canadian dollars shifts rightward. 
E)  rises or falls, none of above are true.

Question 3

With interest rate parity, money flows to where interest rates are lowest.

Accepted Answer

A) True 
 B)False

Question 4

When there is excess demand for Canadian dollars in the foreign exchange market,

Accepted Answer

A)  competition among sellers raises the exchange rate. 
B)  competition among buyers raises the exchange rate. 
C)  competition among sellers lowers the exchange rate. 
D)  competition among buyers lowers the exchange rate. 
E)  cooperation between buyers and sellers lowers the exchange rate. 
A)  competition among sellers raises the exchange rate. 
B)  competition among buyers raises the exchange rate. 
C)  competition among sellers lowers the exchange rate. 
D)  competition among buyers lowers the exchange rate. 
E)  cooperation between buyers and sellers lowers the exchange rate.

Question 5

When there is a current account surplus there is a capital account deficit.

Accepted Answer

A) True 
 B)False

Question 6

A current account surplus means that Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

Accepted Answer

A) True 
 B)False

Question 7

A depreciating Canadian dollar is a positive demand shock because

Accepted Answer

A)  government spending increases. 
B)  imports increase. 
C)  business investment spending increases. 
D)  consumer spending increases. 
E)  exports increase. 
A)  government spending increases. 
B)  imports increase. 
C)  business investment spending increases. 
D)  consumer spending increases. 
E)  exports increase.

Question 8

As the Canadian dollar strengthens, Canadian

Accepted Answer

A)  real GDP increases. 
B)  inflation increases. 
C)  exports increase. 
D)  imports increase. 
E)  unemployment decreases. 
A)  real GDP increases. 
B)  inflation increases. 
C)  exports increase. 
D)  imports increase. 
E)  unemployment decreases.

Question 9

When world prices for Canadian resource exports fall, demand for Canadian dollars in the FOREX market decreases.

Accepted Answer

A) True 
 B)False

Question 10

An exchange rate of C$1.00 = US$0.90 means it takes 90 cents U.S. to buy 1 Canadian dollar.

Accepted Answer

A) True 
 B)False

Question 11

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are US$2.00 in the U.S. PPP suggests that the price of a hamburger in Canada should be

Accepted Answer

A)  C$ 2.50. 
B)  C$ 2.00. 
C)  C$ 1.60. 
D)  C$ 1.25. 
E)  C$ 0.80. 
A)  C$ 2.50. 
B)  C$ 2.00. 
C)  C$ 1.60. 
D)  C$ 1.25. 
E)  C$ 0.80.

Question 12

Purchasing power parity states that

Accepted Answer

A)  exchange rates adjust to equalize prices across countries. 
B)  prices adjust to equalize rates of return across countries. 
C)  rates of return adjust to equalize expected exchange rate fluctuations. 
D)  exchange rates adjust to equalize the real purchasing power of money across countries. 
E)  purchasing power adjusts to reflect expected exchange rate fluctuations. 
A)  exchange rates adjust to equalize prices across countries. 
B)  prices adjust to equalize rates of return across countries. 
C)  rates of return adjust to equalize expected exchange rate fluctuations. 
D)  exchange rates adjust to equalize the real purchasing power of money across countries. 
E)  purchasing power adjusts to reflect expected exchange rate fluctuations.

Question 13

Currency speculators buy Canadian dollars if they think that world prices for Canadian resources will rise.

Accepted Answer

A) True 
 B)False

Question 14

When there is excess supply of Canadian dollars in the foreign exchange market,

Accepted Answer

A)  competition among sellers raises the exchange rate. 
B)  competition among buyers raises the exchange rate. 
C)  competition among sellers lowers the exchange rate. 
D)  competition among buyers lowers the exchange rate. 
E)  cooperation between buyers and sellers raises the exchange rate. 
A)  competition among sellers raises the exchange rate. 
B)  competition among buyers raises the exchange rate. 
C)  competition among sellers lowers the exchange rate. 
D)  competition among buyers lowers the exchange rate. 
E)  cooperation between buyers and sellers raises the exchange rate.

Question 15

The Canadian dollar depreciates against the Japanese yen if there is a(n)

Accepted Answer

A)  rise in the Canadian interest rate. 
B)  fall in the Canadian interest rate. 
C)  fall in the Japanese interest rate. 
D)  increase in the expected future value of the Canadian dollar. 
E)  increase in the Canadian interest rate differential. 
A)  rise in the Canadian interest rate. 
B)  fall in the Canadian interest rate. 
C)  fall in the Japanese interest rate. 
D)  increase in the expected future value of the Canadian dollar. 
E)  increase in the Canadian interest rate differential.

Question 16

A decreasing Canadian inflation rate differential causes the Canadian dollar to depreciate because our exports become relatively more expensive in international markets.

Accepted Answer

A) True 
 B)False

Question 17

The quantity of Canadian dollars demanded depends on all of the following except the

Accepted Answer

A)  exchange rate. 
B)  Canadian demand for imports from R.O.W. 
C)  interest rates in Canada. 
D)  interest rates in R.O.W. 
E)  expected future exchange rate. 
A)  exchange rate. 
B)  Canadian demand for imports from R.O.W. 
C)  interest rates in Canada. 
D)  interest rates in R.O.W. 
E)  expected future exchange rate.

Question 18

A current account deficit means that R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

Accepted Answer

A) True 
 B)False

Question 19

If the rate of return is 8 percent in Mexico and 3 percent in Canada, the

Accepted Answer

A)  law of one price predicts a single international rate of return between 8 percent and 3 percent. 
B)  Mexican peso is expected to depreciate against the Canadian dollar by 5 percent. 
C)  Mexican peso is expected to appreciate against the Canadian dollar by 5 percent. 
D)  rate of return in Mexico is expected to fall to 3 percent. 
E)  rate of return in Canada is expected to rise to 8 percent. 
A)  law of one price predicts a single international rate of return between 8 percent and 3 percent. 
B)  Mexican peso is expected to depreciate against the Canadian dollar by 5 percent. 
C)  Mexican peso is expected to appreciate against the Canadian dollar by 5 percent. 
D)  rate of return in Mexico is expected to fall to 3 percent. 
E)  rate of return in Canada is expected to rise to 8 percent.

Question 20

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.70 and hamburger prices are C$2.00 in Canada and US$1.50 in the U.S. PPP suggests that the

Accepted Answer

A)  supply of Canadian dollars will increase. 
B)  Canadian dollar is overvalued. 
C)  demand for Canadian dollars will decrease. 
D)  Canadian dollar is undervalued. 
E)  supply of U.S. dollars will increase. 
A)  supply of Canadian dollars will increase. 
B)  Canadian dollar is overvalued. 
C)  demand for Canadian dollars will decrease. 
D)  Canadian dollar is undervalued. 
E)  supply of U.S. dollars will increase.

A financial account deficit means that Canadians invested more in R.O.W. than R.O.W. invested in Canada.

According to the law of demand for Canadian dollars, as the exchange rate

With interest rate parity, money flows to where interest rates are lowest.

When there is excess demand for Canadian dollars in the foreign exchange market,

When there is a current account surplus there is a capital account deficit.

A current account surplus means that Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

A depreciating Canadian dollar is a positive demand shock because

As the Canadian dollar strengthens, Canadian

When world prices for Canadian resource exports fall, demand for Canadian dollars in the FOREX market decreases.

An exchange rate of C$1.00 = US$0.90 means it takes 90 cents U.S. to buy 1 Canadian dollar.

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are US$2.00 in the U.S. PPP suggests that the price of a hamburger in Canada should be

Purchasing power parity states that

Currency speculators buy Canadian dollars if they think that world prices for Canadian resources will rise.

When there is excess supply of Canadian dollars in the foreign exchange market,

The Canadian dollar depreciates against the Japanese yen if there is a(n)

A decreasing Canadian inflation rate differential causes the Canadian dollar to depreciate because our exports become relatively more expensive in international markets.

The quantity of Canadian dollars demanded depends on all of the following except the

A current account deficit means that R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

If the rate of return is 8 percent in Mexico and 3 percent in Canada, the

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.70 and hamburger prices are C$2.00 in Canada and US$1.50 in the U.S. PPP suggests that the

Whats in Economics for You Scarcity, Opportunity Cost, Trade, and Models

Making Smart Choices: the Law of Demand

Show Me the Money: the Law of Supply

Coordinating Smart Choices: Demand and Supply

Are Your Smart Choices Smart for All Macroeconomics and Microeconomics

Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Costs of Not Working and Living: Unemployment and Inflation

Skating to Where the Puck Is Going: Aggregate Supply and Aggregate Demand

Money Is for Lunatics: Demanders and Suppliers of Money

Steering Blindly Monetary Policy and the Bank of Canada

Spending Others Money: Fiscal Policy, Deficits, and National Debt

Are Sweatshops All Bad Globalization and Trade Policy

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Exam 10: Trading Dollars for Dollars Exchange Rates and Payments With the Rest of the World

A financial account deficit means that Canadians invested more in R.O.W. than R.O.W. invested in Canada.

According to the law of demand for Canadian dollars, as the exchange rate

With interest rate parity, money flows to where interest rates are lowest.

When there is excess demand for Canadian dollars in the foreign exchange market,

When there is a current account surplus there is a capital account deficit.

A current account surplus means that Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports.

A depreciating Canadian dollar is a positive demand shock because

As the Canadian dollar strengthens, Canadian

When world prices for Canadian resource exports fall, demand for Canadian dollars in the FOREX market decreases.

An exchange rate of C$1.00 = US$0.90 means it takes 90 cents U.S. to buy 1 Canadian dollar.

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are US$2.00 in the U.S. PPP suggests that the price of a hamburger in Canada should be

Purchasing power parity states that

Currency speculators buy Canadian dollars if they think that world prices for Canadian resources will rise.

When there is excess supply of Canadian dollars in the foreign exchange market,

The Canadian dollar depreciates against the Japanese yen if there is a(n)

A decreasing Canadian inflation rate differential causes the Canadian dollar to depreciate because our exports become relatively more expensive in international markets.

The quantity of Canadian dollars demanded depends on all of the following except the

A current account deficit means that R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W.

If the rate of return is 8 percent in Mexico and 3 percent in Canada, the

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.70 and hamburger prices are C$2.00 in Canada and US$1.50 in the U.S. PPP suggests that the

Whats in Economics for You Scarcity, Opportunity Cost, Trade, and Models

Making Smart Choices: the Law of Demand

Show Me the Money: the Law of Supply

Coordinating Smart Choices: Demand and Supply

Are Your Smart Choices Smart for All Macroeconomics and Microeconomics

Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Costs of Not Working and Living: Unemployment and Inflation

Skating to Where the Puck Is Going: Aggregate Supply and Aggregate Demand

Money Is for Lunatics: Demanders and Suppliers of Money

Steering Blindly Monetary Policy and the Bank of Canada

Spending Others Money: Fiscal Policy, Deficits, and National Debt

Are Sweatshops All Bad Globalization and Trade Policy

Filters