Question 1

As the dollar weakens, unemployment increases.

Accepted Answer

A) True 
 B)False

Question 2

A depreciating Canadian dollar causes stagflation.

Accepted Answer

A) True 
 B)False

Question 3

The two main items on the financial account are exports and imports.

Accepted Answer

A) True 
 B)False

Question 4

Purchasing power parity suggests that exchange rates adjust to equalize the purchasing power of money across countries.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The Canadian dollar appreciated against the U.S. dollar between 2002 and 2007.

Accepted Answer

A) True 
 B)False

Question 7

Which statements are true? If the exchange rate changes from US$1 = C$1.10 to US$1 = C$0.90, then the:
1) Canadian dollar depreciated against the U.S. dollar.
2) Canadian dollar appreciated against the U.S. dollar.
3) U.S. dollar depreciated against the Canadian dollar.
4) U.S. dollar appreciated against the Canadian dollar.

Accepted Answer

A)  1 and 3 
B)  1 and 4 
C)  2 and 3 
D)  2 and 4 
E)  3 only 
A)  1 and 3 
B)  1 and 4 
C)  2 and 3 
D)  2 and 4 
E)  3 only

Question 8

A capital account deficit means

Accepted Answer

A)  Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports. 
B)  R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W. 
C)  Canadian investments in R.O.W. are greater than R.O.W. investments in Canada. 
D)  R.O.W. investments in Canada are greater than Canadian investments in R.O.W. 
E)  there is also a current account deficit. 
A)  Canadian spending on imports from R.O.W. is greater than R.O.W. spending on Canadian exports. 
B)  R.O.W. spending on Canadian exports is greater than Canadian spending on imports from R.O.W. 
C)  Canadian investments in R.O.W. are greater than R.O.W. investments in Canada. 
D)  R.O.W. investments in Canada are greater than Canadian investments in R.O.W. 
E)  there is also a current account deficit.

Question 9

If C$1.00 = US$0.80, what is the reciprocal exchange rate?

Accepted Answer

A)  C$0.80 = US$1.00 
B)  C$0.80 = US$1.25 
C)  US$1.00 = C$1.25 
D)  US$1.00 = C$0.80 
E)  US$1.00 = C$8.00 
A)  C$0.80 = US$1.00 
B)  C$0.80 = US$1.25 
C)  US$1.00 = C$1.25 
D)  US$1.00 = C$0.80 
E)  US$1.00 = C$8.00

Question 10

As the Canadian dollar weakens, Canadian

Accepted Answer

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

Question 11

If you think the Canadian dollar will depreciate, you can expect to make money by

Accepted Answer

A)  only buying Canadian dollars. 
B)  only buying U.S. dollars. 
C)  only selling Canadian dollars. 
D)  only selling U.S. dollars. 
E)  both buying U.S. dollars and selling Canadian dollars. 
A)  only buying Canadian dollars. 
B)  only buying U.S. dollars. 
C)  only selling Canadian dollars. 
D)  only selling U.S. dollars. 
E)  both buying U.S. dollars and selling Canadian dollars.

Question 12

Imports into Canada are positive numbers on Canada's balance of payments accounts.

Accepted Answer

A) True 
 B)False

Question 13

As the Canadian dollar strengthens, Canadian

Accepted Answer

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

Question 14

When Canadian GDP increases, the growth effect usually dominates the import effect on the value of the Canadian dollar.

Accepted Answer

A) True 
 B)False

Question 15

The economic force that causes opposite effects on the value of the Canadian dollar is changes in

Accepted Answer

A)  interest rate differentials. 
B)  inflation rate differentials. 
C)  world prices for Canadian resource exports. 
D)  Canadian real GDP. 
E)  expectations. 
A)  interest rate differentials. 
B)  inflation rate differentials. 
C)  world prices for Canadian resource exports. 
D)  Canadian real GDP. 
E)  expectations.

Question 16

In the foreign exchange market, the demand for one currency is the supply of another currency.

Accepted Answer

A) True 
 B)False

Question 17

The Canadian dollar depreciates if

Accepted Answer

A)  Canadian interest rates fall relative to other countries. 
B)  the Canadian inflation rate falls relative to other countries. 
C)  Canadian real GDP increases. 
D)  R.O.W. demand for Canadian exports increases. 
E)  world prices for Canadian resources rise. 
A)  Canadian interest rates fall relative to other countries. 
B)  the Canadian inflation rate falls relative to other countries. 
C)  Canadian real GDP increases. 
D)  R.O.W. demand for Canadian exports increases. 
E)  world prices for Canadian resources rise.

Question 18

A stronger Canadian dollar hurts

Accepted Answer

A)  importers. 
B)  exporters. 
C)  Canadians who shop in the U.S. 
D)  Canadian students who attend U.S. universities. 
E)  Americans only. 
A)  importers. 
B)  exporters. 
C)  Canadians who shop in the U.S. 
D)  Canadian students who attend U.S. universities. 
E)  Americans only.

Question 19

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are C$2.00 in Canada and US$1.80 in the U.S. PPP suggests that the

Accepted Answer

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

Question 20

Suppose purchasing power parity (PPP) depends only on hotel rooms. The exchange rate is C$1.00 = US$0.80 and a room at the Weston Hotel in Niagara Falls, New York costs US$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, Ontario should be

Accepted Answer

A)  C$ 200. 
B)  C$ 250. 
C)  C$ 160. 
D)  C$ 125. 
E)  C$ 80. 
A)  C$ 200. 
B)  C$ 250. 
C)  C$ 160. 
D)  C$ 125. 
E)  C$ 80.

As the dollar weakens, unemployment increases.

A depreciating Canadian dollar causes stagflation.

The two main items on the financial account are exports and imports.

Purchasing power parity suggests that exchange rates adjust to equalize the purchasing power of money across countries.

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

The Canadian dollar appreciated against the U.S. dollar between 2002 and 2007.

A capital account deficit means

If C$1.00 = US$0.80, what is the reciprocal exchange rate?

As the Canadian dollar weakens, Canadian

If you think the Canadian dollar will depreciate, you can expect to make money by

Imports into Canada are positive numbers on Canada's balance of payments accounts.

As the Canadian dollar strengthens, Canadian

When Canadian GDP increases, the growth effect usually dominates the import effect on the value of the Canadian dollar.

The economic force that causes opposite effects on the value of the Canadian dollar is changes in

In the foreign exchange market, the demand for one currency is the supply of another currency.

The Canadian dollar depreciates if

A stronger Canadian dollar hurts

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are C$2.00 in Canada and US$1.80 in the U.S. PPP suggests that the

Suppose purchasing power parity (PPP) depends only on hotel rooms. The exchange rate is C$1.00 = US$0.80 and a room at the Weston Hotel in Niagara Falls, New York costs US$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, Ontario should be

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

As the dollar weakens, unemployment increases.

A depreciating Canadian dollar causes stagflation.

The two main items on the financial account are exports and imports.

Purchasing power parity suggests that exchange rates adjust to equalize the purchasing power of money across countries.

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

The Canadian dollar appreciated against the U.S. dollar between 2002 and 2007.

A capital account deficit means

If C$1.00 = US$0.80, what is the reciprocal exchange rate?

As the Canadian dollar weakens, Canadian

If you think the Canadian dollar will depreciate, you can expect to make money by

Imports into Canada are positive numbers on Canada's balance of payments accounts.

As the Canadian dollar strengthens, Canadian

When Canadian GDP increases, the growth effect usually dominates the import effect on the value of the Canadian dollar.

The economic force that causes opposite effects on the value of the Canadian dollar is changes in

In the foreign exchange market, the demand for one currency is the supply of another currency.

The Canadian dollar depreciates if

A stronger Canadian dollar hurts

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are C$2.00 in Canada and US$1.80 in the U.S. PPP suggests that the

Suppose purchasing power parity (PPP) depends only on hotel rooms. The exchange rate is C$1.00 = US$0.80 and a room at the Weston Hotel in Niagara Falls, New York costs US$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, Ontario should be

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