Deck 19: International Finance and the Foreign Exchange Market

Question 1

Under a flexible exchange rate system, which of the following will be most likely to cause an appreciation in the exchange rate of the dollar relative to the English pound?

A) an economic boom in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products
B) higher real interest rates in England
C) inflation in the United States while prices are stable in England
D) attractive investment opportunities in England, inducing U.S. investors to buy stock in English firms

Answer 1

an economic boom in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products

Question 2

Which one of the following would supply dollars to the foreign exchange market?

A) the spending of U.S. tourists in Europe
B) the purchase of U.S. automobiles by Japanese consumers
C) the sale of U.S. automobiles to European consumers
D) the purchase of an American electronics factory by a Japanese investor

Answer 2

the spending of U.S. tourists in Europe

Question 3

With time, an appreciation in the value of the nation's currency in the foreign exchange market would cause

A) the nation's imports to increase and exports to decline.
B) the nation's exports to increase and imports to decline.
C) both imports and exports to decline.
D) both imports and exports to rise.

Answer 3

the nation's imports to increase and exports to decline.

Question 4

If the United States experiences an economic boom, how will this affect the foreign exchange value of the U.S. dollar?

A) It will fall because other nations would be forced to raise their interest rates.
B) It will fall because the United States will import more goods and services, leading to an increased demand for foreign currencies.
C) It will rise because U.S. GDP would be rising faster than other countries.
D) It will rise because the Fed will have to lower U.S. interest rates.
E) It will rise because the United States will import more goods and services, leading to an increased demand for foreign currencies.

Question 5

An appreciation in the value of the dollar would

A) make U.S. goods less expensive to foreigners.
B) encourage U.S. consumers to buy more foreign goods.
C) increase the number of dollars that could be purchased with a Mexican peso.
D) discourage U.S. consumers from traveling abroad.

Question 6

If Australian tourists visit Grand Canyon National Park, what is the effect in the foreign exchange market?

A) It will increase demand for U.S. dollars.
B) It will decrease demand for U.S. dollars.
C) It will increase supply of U.S. dollars.
D) It will decrease supply of U.S. dollars.

Question 7

Figure 18-3 Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (B) is comprised of

A) U.S. citizens attempting to purchase Japanese-made goods.
B) Japanese attempting to purchase U.S.-made goods.
C) U.S. businesses attempting to sell to the Japanese.
D) Japanese businesses attempting to sell to the U.S.
E) the U.S. government attempting to unload dollars to the international market.

Question 8

The prospect of a recession in the United States would probably cause the dollar to

A) depreciate because interest rates would be expected to rise.
B) depreciate because imports would be expected to rise.
C) appreciate because imports would be expected to fall.
D) appreciate because interest rates would be expected to decrease.

Question 9

An appreciation of the U.S. dollar

A) is the same thing as a decrease in the consumer price level.
B) increases the purchasing power of the U.S. dollar in foreign markets for goods and services.
C) decreases the purchasing power of the U.S. dollar in foreign markets for goods and services.
D) is the same thing as an increase in the consumer price level.

Question 10

Figure 18-3 Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph (A) is comprised of

A) U.S. citizens attempting to purchase Japanese-made goods.
B) Japanese attempting to purchase U.S.-made goods.
C) U.S. businesses attempting to sell to the Japanese.
D) Japanese businesses attempting to sell to the U.S.
E) the U.S. government attempting to unload dollars to the international market.

Question 11

Use the figure below to answer the following question(s). Figure 18-1
Figure 18-1 illustrates supply and demand for U.S. dollars and British pounds in the foreign exchange market. If the dollar price of pounds is $1.20, which of the following is true?

A) There is an excess supply of pounds, and the dollar price of pounds will rise.
B) There is an excess demand for pounds, and the dollar price of pounds will rise.
C) There is an excess supply of pounds, and the dollar price of pounds will fall.
D) There is an excess demand for pounds, and the dollar price of pounds will fall.

Question 12

If the U.S. exports passenger jet aircraft, what is the effect in the foreign exchange market?

A) It will create demand for U.S. dollars.
B) It will reduce demand for U.S. dollars.
C) It will increase supply of U.S. dollars.
D) It will decrease supply of U.S. dollars.

Question 13

Figure 18-3 Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (A) is comprised of

A) U.S. citizens attempting to purchase Japanese-made goods.
B) Japanese attempting to purchase U.S.-made goods.
C) U.S. businesses attempting to sell to the Japanese.
D) Japanese businesses attempting to sell to the U.S.
E) the U.S. government attempting to unload dollars to the international market.

Question 14

Over time, which of the following will most likely result from a depreciation in the exchange rate of the dollar?

A) Inflation will decline.
B) Foreign goods will cost Americans less, and therefore, the imports of Americans will rise.
C) U.S. goods exported abroad will cost less in foreign countries, so foreigners will buy more of them.
D) U.S. goods exported abroad will cost more in foreign countries, so foreigners will buy fewer of them.

Question 15

Use the figure below to answer the following question(s). Figure 18-1
Figure 18-1 illustrates supply and demand for U.S. dollars and British pounds in the foreign exchange market. If the dollar price of pounds is $1.80, which of the following is true?

A) There is an excess supply of pounds, and the dollar price of pounds will rise.
B) There is an excess demand for pounds, and the dollar price of pounds will rise.
C) There is an excess supply of pounds, and the dollar price of pounds will fall.
D) There is an excess demand for pounds, and the dollar price of pounds will fall.

Question 16

Under a system of flexible exchange rates, an increase in the supply of foreign exchange (an increase in the demand for the dollar) will cause the

A) dollar to appreciate.
B) dollar to depreciate.
C) U.S. trade deficit to decrease.
D) U.S. inflation rate to increase.

Question 17

If a German pension fund decides to purchase U.S. government bonds, what is the effect in the foreign exchange market?

A) It will increase demand for U.S. dollars.
B) It will decrease demand for U.S. dollars.
C) It will increase supply of U.S. dollars.
D) It will decrease supply of U.S. dollars.

Question 18

If Japanese tourists visit Disney World, what is the effect in the foreign exchange market?

A) It will increase demand for Japanese yen.
B) It will decrease demand for Japanese yen.
C) It will increase supply of Japanese yen.
D) It will decrease supply of Japanese yen.

Question 19

If the U.S. purchases oil from Nigeria, what is the effect in the foreign exchange market?

A) It will increase demand for U.S. dollars.
B) It will decrease demand for U.S. dollars.
C) It will increase supply of U.S. dollars.
D) It will decrease supply of U.S. dollars.

Question 20

A depreciation of the U.S. dollar on the foreign exchange market will

A) make U.S. exports cheaper to foreigners.
B) make imports less expensive for U.S. consumers.
C) make U.S. exports more expensive for foreign consumers.
D) probably cause the United States to run a capital account surplus in the long run.

Question 21

With time, a depreciation in the value of a nation's currency in the foreign market will cause the nation's

A) imports to increase and exports to decline.
B) exports to increase and imports to decline.
C) imports and exports to decline.
D) imports and exports to rise.

Question 22

Under a system of flexible exchange rates, which of the following would be most likely to cause a nation's currency to appreciate on the foreign exchange market?

A) stable domestic prices while the nation's trading partners are experiencing inflation
B) a decrease in domestic interest rates
C) an increase in foreign interest rates
D) a domestic inflation rate of 10 percent while the nation's trading partners are experiencing stable prices

Question 23

Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

A) currency to depreciate in value.
B) currency to appreciate in value.
C) trade deficit to increase.
D) products to become more expensive to foreigners.

Question 24

Under a system of flexible exchange rates, which of the following will cause the nation's currency to depreciate in the exchange market?

A) an increase in foreign incomes
B) a domestic inflation rate of 10 percent while the nation's trading partners are experiencing stable prices
C) an increase in domestic interest rates
D) a reduction in interest rates abroad

Question 25

If restrictive monetary policy results in a slowdown in the domestic inflation rate and higher real interest rates, other things constant, the

A) nation's currency will appreciate.
B) nation's currency will depreciate.
C) nation will run a balance of trade surplus.
D) nation will run a capital account deficit.

Question 26

If a German student pays her way to attend Harvard University, her actions will

A) create a supply of dollars and a demand for Euros in the foreign currency market.
B) create a supply of Euros and a demand for dollars in the foreign currency market.
C) cause the German Euro to appreciate.
D) cause the U.S. dollar to depreciate.

Question 27

If the exchange rate between the U.S. dollar and the Japanese yen were such that one U.S. dollar equals 100 yen, what would be the price in dollars of a Japanese automobile that cost 2,000,000 yen?

A) $100
B) $20,000
C) $120,000
D) $2,000,000

Question 28

Suppose the dollar rises from 100 to 125 yen. As a result,

A) imports from Japan will likely increase.
B) exports to Japan will likely increase.
C) Japanese tourists will be more likely to visit the United States.
D) U.S. businesses will less likely use Japanese shipping lines to transport their products.

Question 29

Suppose a student group from your university tours the United Kingdom. As they purchase English goods, their actions will

A) create a demand for dollars and a supply of English pounds in the foreign exchange market.
B) create a demand for English pounds and a supply of dollars in the foreign exchange market.
C) cause the U.S. dollar to appreciate.
D) cause the English pound to depreciate.

Question 30

Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?

A) higher domestic interest rates
B) a reduction in the rate of inflation abroad
C) a shift to a more expansionary monetary policy
D) rapid growth of income in the United States

Question 31

Which of the following would most likely cause a nation's currency to depreciate?

A) an increase in the nation's domestic inflation rate
B) an increase in inflation of the nation's trading partners
C) a decrease in the nation's domestic inflation rate
D) an increase in domestic real interest rates

Question 32

Other things constant, which of the following will most likely cause the dollar to appreciate on the exchange rate market?

A) higher interest rates in the United States
B) a relatively low rate of inflation in the United States
C) high rates of income growth in Europe
D) all of the above

Question 33

Under a flexible exchange system, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

A) an acceleration in the nation's inflation rate
B) a balance of trade deficit
C) a current account deficit
D) a decline in the domestic inflation rate

Question 34

Which of the following would most likely cause a nation's currency to depreciate?

A) an increase in domestic real interest rates
B) an increase in exports coupled with a decline in imports
C) an increase in the nation's inflation rate
D) a balance of trade surplus

Question 35

Use the figure below to answer the following question(s). Figure 18-2
In Figure 18-2, which of the following would cause the American demand for foreign exchange (pounds) to shift from D₁ to D₂?

A) an increase in the U.S. real interest rate
B) higher inflation in Britain than in the United States
C) higher income growth in Britain than in the United States
D) an increased level of vacation travel to Britain by Americans

Question 36

If income in the United States increases more rapidly than the income of our trading partners, other things constant, the dollar will

A) appreciate, imports will become less expensive, and domestic exports will become more expensive to foreigners.
B) depreciate, imports will become less expensive, and domestic exports will become more expensive to foreigners.
C) appreciate, imports will become more expensive, and domestic exports will become less expensive to foreigners.
D) depreciate, imports will become more expensive, and domestic exports will become less expensive to foreigners.

Question 37

Which of the following would be likely to cause a nation's currency to depreciate?

A) an increase in foreign demand for the nation's products
B) a lower domestic rate of inflation than that of the nation's trading partners
C) higher domestic interest rates
D) higher foreign interest rates

Question 38

Use the figure below to answer the following question(s). Figure 18-2
Figure 18-2 illustrates supply and demand for U.S. dollars and British pounds in the foreign exchange market. Which of the following would cause the demand for foreign exchange (pounds) to shift from D₁ to D₂?

A) an increase in the real interest rate in Britain relative to the United States
B) higher inflation in Britain than in the United States
C) higher income growth in Britain than in the United States
D) an increase in the number of British citizens vacationing in the United States

Question 39

Which of the following would most likely cause a nation's currency to appreciate?

A) an increase in inflation of the nation's trading partners
B) an increase in the nation's domestic inflation rate
C) a decrease in domestic real interest rates
D) an increase in real interest rates abroad

Question 40

Under a flexible exchange rate system, which of the following will be most likely to cause a depreciation in the exchange rate value of the dollar (relative to the English pound)?

A) An economic boom occurs in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products.
B) Real interest rates in the United States fall lower than real interest rates in England.
C) Restrictive monetary policy in the United States causes inflation to be lower than in England.
D) Attractive investment opportunities in the United States induce English investors to buy stock in U.S. firms.

Question 41

If the exchange rate has been $2.00 per British pound but now falls to $1.60 per British pound, there will be

A) more U.S. imports from Great Britain because the price of pounds has fallen.
B) more exports to Great Britain because the price of pounds has risen.
C) fewer exports to Great Britain because the price of the pound has risen.
D) more U.S. exports to Great Britain since the price of the dollar has fallen.
E) no change in either exports or imports.

Question 42

If the exchange rate changes from 1 euro per U.S. dollar to 1.2 euros per U.S. dollar, the Euro has

A) appreciated, since its value has increased.
B) appreciated, since the price of U.S. dollars has increased.
C) appreciated, making U.S. goods cheaper in Euros.
D) depreciated, since its value has declined.
E) depreciated, since its value has increased.

Question 43

If the U.S. dollar depreciates, it means that

A) the value of the U.S. dollar has increased.
B) the value of foreign exchange has decreased.
C) fewer U.S. dollars are required to purchase foreign exchange.
D) more U.S. dollars are required to purchase foreign exchange.
E) exports will immediately fall.

Question 44

The U.S. dollar will appreciate if

A) the U.S. demand for foreign exchange decreases.
B) the U.S. demand for foreign exchange increases.
C) the U.S. supply of foreign exchange decreases.
D) Americans want to buy more foreign goods.
E) foreigners want fewer American goods.

Question 45

An increase in incomes in other countries, other things equal, would tend to cause U.S.

A) exports to decrease and imports to increase.
B) exports to increase and imports to increase.
C) imports to decrease and exports to decrease.
D) imports to increase and exports would remain unchanged.
E) imports to remain unchanged and exports to increase.

Question 46

A depreciation of one's currency means that

A) the country's exports will become more expensive.
B) the country's imports will become more expensive.
C) the country's imports will become less expensive.
D) it now requires less of this currency in exchange for one unit of another currency.
E) it now requires more units of other currencies in exchange for one unit of this currency.

Question 47

Suppose U.S.-produced wheat costs $5 per bushel and the exchange rate is 100 yen = $1. If the exchange rate changes to 90 yen = $1, the

A) wheat would now cost more dollars.
B) wheat would now cost the Japanese citizen less yen.
C) wheat would now cost less dollars.
D) wheat would now cost the Japanese citizen more yen.
E) yen has depreciated in value.

Question 48

If the U.S. dollar appreciates, it means that

A) the domestic price level has declined.
B) the domestic purchasing power of the dollar has decreased.
C) fewer U.S. dollars are required to purchase foreign currencies.
D) more U.S. dollars are required to purchase foreign currencies.

Question 49

Which of the following is most likely to happen as the result of lower real interest rates in the United States?

A) the dollar will depreciate on the foreign exchange market and imports will grow relative to exports.
B) the dollar will appreciate on the foreign exchange market, and exports will grow relative to imports.
C) the dollar will depreciate on the foreign exchange market, and exports will grow relative to imports.
D) the dollar will appreciate on the foreign exchange market, and imports will grow relative to exports.

Question 50

If the exchange rate between the U.S. dollar and the Russian ruble was 0.04 ($0.04 = one ruble), what would be the price in dollars of a bottle of Russian wine selling for 2,000 ruble?

A) $50
B) $80
C) $100
D) $500

Question 51

An appreciation of one's currency means that

A) the country's exports will become less expensive.
B) the country's imports will become more expensive.
C) the country's imports will become less expensive.
D) it now requires more of this currency in exchange for one unit of another currency.
E) it now requires less units of other currencies in exchange for one unit of this currency.

Question 52

If the exchange rate between the U.S. dollar and the euro was 1.20 ($1.20 = one euro), what would be the price in dollars of a bottle of French wine selling for 40 euro?

A) $33.33
B) $40
C) $48
D) $120

Question 53

If the dollar appreciates,

A) imports to the United States become more expensive for foreigners.
B) exports from the United States become more expensive for foreigners.
C) imports become more expensive for U.S. citizens.
D) exports from the United States become cheaper.
E) the dollar will exchange for fewer units of a foreign currency.

Question 54

If a U.S. dollar exchanges for 0.6 English pounds, the dollar price of a pound is

A) $0.60.
B) $1.50.
C) $1.67.
D) $1.75.

Question 55

An appreciation in the U.S. dollar benefits which of the following groups of people?

A) All people living in the United States.
B) U.S. producers who export farm equipment to other countries.
C) U.S. consumers who buy imported automobiles.
D) Foreigners who wish to travel to the United States.
E) U.S. consumers who buy only goods made entirely in the United States.

Question 56

As domestic income rises, net exports will tend to

A) fall, since exports remain the same but imports increase.
B) rise, since exports remain the same but imports fall.
C) fall, since exports are lower and imports remain the same.
D) rise, since exports are higher and imports remain the same.
E) may either rise or fall, since exports and imports change in opposite directions.

Question 57

If the U.S. dollar appreciates in the foreign exchange market,

A) American goods will become more expensive for foreign buyers and foreign goods will be cheaper for Americans.
B) American goods will become less expensive for foreign buyers and foreign goods will be more expensive for Americans.
C) American goods will become more expensive for foreign buyers and foreign goods will be more expensive for Americans.
D) American goods will become cheaper for foreign buyers and foreign goods will be cheaper for Americans.
E) neither the price of U.S. exports nor the price of U.S. imports will change.

Question 58

An increase in the U.S. demand for foreign exchange will cause

A) an increase in the price of foreign exchange, which is a depreciation of the U.S. dollar, making foreign goods cheaper to U.S. residents.
B) an increase in the price of foreign exchange, which is a depreciation of the U.S. dollar, making foreign goods more expensive to U.S. residents.
C) a decrease in the price of the U.S. dollar, which is an appreciation of the U.S. dollar.
D) an increase in the price of foreign exchange, which is an appreciation of the U.S. dollar.
E) a decrease in the price of foreign exchange, which is an appreciation of the U.S. dollar.

Question 59

Which of the following would most likely cause a nation's currency to depreciate?

A) an increase in exports coupled with a decline in imports
B) a slower inflation rate than those of its trading partners
C) lower domestic real interest rates
D) lower real interest rates abroad

Question 60

If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,

A) both the U.S. dollar and the yen have appreciated.
B) both the U.S. dollar and the yen have depreciated.
C) the U.S. dollar has appreciated and the yen has depreciated.
D) the U.S. dollar has depreciated and the yen has appreciated.

Question 61

If the exchange rate between the U.S. dollar and the Euro were 1.50 ($1.50 = one Euro), what would be the price in dollars of a German automobile that cost 40,000 Euros?

A) $10,000
B) $20,000
C) $60,000
D) $200,000

Question 62

Other things constant, if Americans suddenly increased their desire to vacation in Mexico, the dollar price of the Mexican peso would

A) increase, which is an appreciation of the Mexican peso.
B) increase, which is a depreciation of the Mexican peso.
C) decrease, which is an appreciation of the Mexican peso.
D) decrease, which is a depreciation of the Mexican peso.

Question 63

If the exchange rate between the U.S. dollar and the European euro went from $1.20 US = 1 euro to $1.10 US = 1 euro, then

A) European goods have become less expensive for Americans.
B) American goods have become less expensive for Europeans.
C) American exports to Europe are likely to increase.
D) American imports from Europe are likely to decrease.

Question 64

When a group of nations adhere to a strict fixed exchange rate system, then

A) no country will experience inflation or recession.
B) each nation loses some control of its monetary policy and its domestic economy.
C) each nation is able to exercise more control of its fiscal policy and aggregate demand.
D) each nation is able to exercise more control of its monetary policy and its domestic economy.

Question 65

If the exchange rate value of one U.S. dollar changes from 120 Japanese yen to 140 yen,

A) the U.S. dollar has appreciated relative to the yen.
B) the Japanese yen has depreciated relative to the dollar.
C) the U.S. dollar has depreciated relative to the yen.
D) both a and b have occurred.

Question 66

If the exchange rate between the U.S. dollar and the Mexican peso went from $1 US = 9 peso to $1 US = 10 peso, then

A) American goods have become less expensive for Mexicans.
B) Mexican goods have become more expensive for Americans.
C) American goods have become more expensive for Mexicans.
D) American exports to Mexico are likely to increase.

Question 67

A Japanese automobile manufacturer building an auto plant in the United States creates a

A) supply of dollars and demand for yen in the foreign exchange market.
B) demand for dollars and a supply of yen in the foreign exchange market.
C) demand for both dollars and yen in the foreign exchange market.
D) supply of both dollars and yen in the foreign exchange market.

Question 68

Under a currency board regime, if domestic citizens are buying more (imports) from foreigners than they are selling to them (exports),

A) the amount of the domestic currency exchanged for the foreign currency will decrease and, thus, increase the domestic money supply.
B) the amount of the domestic currency exchanged for the foreign currency will decrease and, thus, decrease the domestic money supply.
C) the amount of the domestic currency exchanged for the foreign currency will increase and, thus, increase the domestic money supply.
D) the amount of the domestic currency exchanged for the foreign currency will increase and, thus, decrease the domestic money supply.

Question 69

An American investor purchasing a Japanese government bond

A) creates a demand for dollars and a supply of yen in the foreign exchange market.
B) creates a demand for yen and a supply of dollars in the foreign exchange market.
C) causes the yen to depreciate.
D) causes the dollar to appreciate.

Question 70

If the exchange rate of the English pound goes from $1.80 to $1.60, the pound has

A) appreciated, and the English will find U.S. goods cheaper.
B) appreciated, and the English will find U.S. goods more expensive.
C) depreciated, and the English will find U.S. goods more expensive.
D) depreciated, and the English will find U.S. goods cheaper.

Question 71

If the dollar-yen exchange rate changes from $1 = 125 yen to $1 = 100 yen, then

A) exports to Japan will likely decrease.
B) Japanese tourists will be more likely to visit the United States.
C) U.S. businesses will be more likely to use Japanese shipping lines to transport their products.
D) U.S. consumers will be more likely to buy Japanese-made automobiles.

Question 72

An increase in the dollar price of the Mexican peso (an appreciation of the peso) would cause

A) Mexico's imports to increase and exports to decline.
B) Mexico's exports to increase and imports to decline.
C) both Mexico's imports and exports to decline.
D) both Mexico's imports and exports to rise.

Question 73

An appreciation in the value of the U.S. dollar would

A) encourage foreigners to make more investments in the United States.
B) encourage U.S. consumers to purchase more foreign-produced goods.
C) increase the number of dollars that could be purchased with the euro.
D) discourage U.S. consumers from traveling abroad.

Question 74

Under a fixed-rate unified currency regime, each country belonging to the system

A) may pursue an independent monetary policy.
B) gives up its monetary policy independence to one central bank with the power to expand and contract the money supply.
C) is committed to conducting highly expansionary monetary policy in order to maintain the convertibility of its currency.
D) must fix its domestic interest rates in order to maintain the convertibility of its currency.

Question 75

If the dollar price of the English pound increases from $1.50 to $1.75, the dollar has

A) appreciated relative to the pound, and English goods have become less expensive to U.S. consumers.
B) depreciated relative to the pound, and English goods have become less expensive to U.S. consumers.
C) appreciated relative to the pound, and English goods have become more expensive to U.S. consumers.
D) depreciated relative to the pound, and English goods have become more expensive to U.S. consumers.

Question 76

An institution that issues a currency at a fixed rate in exchange for an equivalent amount of another designated currency and invests the funds in bonds and liquid assets that provide 100 percent backing for the currency units issued is called

A) a central bank.
B) the International Monetary Fund.
C) the World Trade Organization.
D) a currency board.

Question 77

If the exchange rate of the English pound goes from $1.50 to $2.00, the pound has

A) appreciated, and the English will find U.S. goods cheaper.
B) appreciated, and the English will find U.S. goods more expensive.
C) depreciated, and the English will find U.S. goods cheaper.
D) depreciated, and the English will find U.S. goods more expensive.

Question 78

Other things constant, if Americans suddenly decreased their desire for Mexican tequila, the exchange rate value of the Mexican peso would

A) increase, which is an appreciation of the Mexican peso.
B) increase, which is a depreciation of the Mexican peso.
C) decrease, which is an appreciation of the Mexican peso.
D) decrease, which is a depreciation of the Mexican peso.

Question 79

If the U.S. dollar depreciates, then U.S. exports become ____ expensive to foreigners and foreign goods become ____ expensive to U.S. citizens.

A) less; less
B) less; more
C) more; less
D) more; more

Question 80

A currency board

A) issues domestic currency in exchange for foreign currency at an exchange rate of its choosing.
B) is responsible for the conduct of the nation's monetary policy.
C) promises to continue redeeming the issued currency at a fixed rate.
D) does all of the above.