Question 1

The export effect suggests that when the exchange rate falls, demand for Canadian exports increases.

Accepted Answer

A) True 
 B)False

Question 2

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is

Accepted Answer

A)  increased demand for Canadian dollars. 
B)  increased supply of Canadian dollars. 
C)  increased supply of U.S. dollars. 
D)  decreased supply of U.S. dollars. 
E)  decreased demand for U.S. dollars. 
A)  increased demand for Canadian dollars. 
B)  increased supply of Canadian dollars. 
C)  increased supply of U.S. dollars. 
D)  decreased supply of U.S. dollars. 
E)  decreased demand for U.S. dollars.

Question 3

The import effect suggests that when the exchange rate falls, Canadians buy more imported products.

Accepted Answer

A) True 
 B)False

Question 4

Despite its limitations, purchasing power parity is the best available standard for predicting where exchange rates are likely to settle.

Accepted Answer

A) True 
 B)False

Question 5

With rate of return parity, money flows to where rates of return are highest.

Accepted Answer

A) True 
 B)False

Question 6

Currency speculators sell Canadian dollars if they think that Canadian interest rates will fall.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A capital account surplus 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 surplus. 
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 surplus.

Question 9

If investors are confident that the Canadian economy will be strong, they sell Canadian assets to make profits, pushing down the value of the Canadian dollar.

Accepted Answer

A) True 
 B)False

Question 10

The economic force that reinforces the effect of other forces on value of the Canadian dollar is changes in

Accepted Answer

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

Question 11

Which activity is a negative entry on the Canadian current account?

Accepted Answer

A)  A Canadian tourist spends $2,000 at the SXSW Festival in Austin, Texas. 
B)  A U.S. tourist spends $3,000 at the Toronto International Film Festival. 
C)  A Canadian buys a German government bond. 
D)  A Canadian from Halifax invests in a hockey stick factory in Saskatchewan. 
E)  A French investor buys a winery in the Okanagan Valley in British Columbia. 
A)  A Canadian tourist spends $2,000 at the SXSW Festival in Austin, Texas. 
B)  A U.S. tourist spends $3,000 at the Toronto International Film Festival. 
C)  A Canadian buys a German government bond. 
D)  A Canadian from Halifax invests in a hockey stick factory in Saskatchewan. 
E)  A French investor buys a winery in the Okanagan Valley in British Columbia.

Question 12

A depreciating Canadian dollar causes inflation in Canada.

Accepted Answer

A) True 
 B)False

Question 13

The key to international transmission mechanisms is the impact of exchange rates on exports and imports.

Accepted Answer

A) True 
 B)False

Question 14

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, Ontario costs C$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, New York should be

Accepted Answer

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

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Rate of return parity is an example of the law of one price applied to investments.

Accepted Answer

A) True 
 B)False

Question 17

An appreciating Canadian dollar causes a

Accepted Answer

A)  negative demand shock. 
B)  positive demand shock. 
C)  positive supply shock. 
D)  negative supply shock. 
E)  stagflation. 
A)  negative demand shock. 
B)  positive demand shock. 
C)  positive supply shock. 
D)  negative supply shock. 
E)  stagflation.

Question 18

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

Accepted Answer

A)  rises, the quantity supplied of Canadian dollars decreases. 
B)  rises, the supply curve of Canadian dollars shifts leftward. 
C)  falls, the quantity supplied of Canadian dollars decreases. 
D)  falls, the supply curve of Canadian dollars shifts leftward. 
E)  rises or falls, none of above are true. 
A)  rises, the quantity supplied of Canadian dollars decreases. 
B)  rises, the supply curve of Canadian dollars shifts leftward. 
C)  falls, the quantity supplied of Canadian dollars decreases. 
D)  falls, the supply curve of Canadian dollars shifts leftward. 
E)  rises or falls, none of above are true.

Question 19

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

Question 20

A current account surplus 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

The export effect suggests that when the exchange rate falls, demand for Canadian exports increases.

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is

The import effect suggests that when the exchange rate falls, Canadians buy more imported products.

Despite its limitations, purchasing power parity is the best available standard for predicting where exchange rates are likely to settle.

With rate of return parity, money flows to where rates of return are highest.

Currency speculators sell Canadian dollars if they think that Canadian interest rates will fall.

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

A capital account surplus means

If investors are confident that the Canadian economy will be strong, they sell Canadian assets to make profits, pushing down the value of the Canadian dollar.

The economic force that reinforces the effect of other forces on value of the Canadian dollar is changes in

Which activity is a negative entry on the Canadian current account?

A depreciating Canadian dollar causes inflation in Canada.

The key to international transmission mechanisms is the impact of exchange rates on exports and imports.

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, Ontario costs C$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, New York should be

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

Rate of return parity is an example of the law of one price applied to investments.

An appreciating Canadian dollar causes a

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

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

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

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

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

The export effect suggests that when the exchange rate falls, demand for Canadian exports increases.

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is

The import effect suggests that when the exchange rate falls, Canadians buy more imported products.

Despite its limitations, purchasing power parity is the best available standard for predicting where exchange rates are likely to settle.

With rate of return parity, money flows to where rates of return are highest.

Currency speculators sell Canadian dollars if they think that Canadian interest rates will fall.

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

A capital account surplus means

If investors are confident that the Canadian economy will be strong, they sell Canadian assets to make profits, pushing down the value of the Canadian dollar.

The economic force that reinforces the effect of other forces on value of the Canadian dollar is changes in

Which activity is a negative entry on the Canadian current account?

A depreciating Canadian dollar causes inflation in Canada.

The key to international transmission mechanisms is the impact of exchange rates on exports and imports.

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, Ontario costs C$200. PPP suggests that the price of a room at the Weston Hotel in Niagara Falls, New York should be

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

Rate of return parity is an example of the law of one price applied to investments.

An appreciating Canadian dollar causes a

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

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

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

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