Deck 10: Foreign Exchange, Trade, and Bubbles

Question 1

​Holding other things constant,a decrease in the inflation rate in the US compared to the Canadian economy may cause the demand for the US dollar to _____________ and the supply to __________.

A)​Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)​Decrease;Decrease

Answer 1

A

Question 2

​In the market for Canadian dollars measured in US dollars,if the price of a Canadian dollar is 0.90 cents US,a US dollar is

A)​0.90 cents Canadian
B)1 Canadian dollar
C)1.11 Canadian dollars
D)​1.05 Canadian dollars

Answer 2

C

Question 3

An individual in the England wants to buy office equipment from England which costs $2,000.If the exchange rate is 1pound=$1.9,how much will the office equipment cost him in pounds?​

A)​2,000 pounds
B)1,800 pounds
C)3,800 pounds
D)​1,053 pounds

Answer 3

D

Question 4

The equilibrium price in the market for foreign currencies is called​

A)​The price
B)The market price
C)The exchange rate
D)​The going rate

Question 5

When interest rates fall,people are​

A)​More likely to borrow
B)Less likely to borrow
C)Not likely to change borrowing patterns
D)​None of the above

Question 6

​In the market for Canadian dollars measured in US dollars,the supply of US dollars is

A)​The supply of Canadian dollars
B)The demand for Canadian Dollars
C)The demand for US dollars
D)​None of the above

Question 7

​In the market for Canadian dollars measured in US dollars,the supply of Canadian dollars is

A)​The demand for Canadian dollars
B)The demand for US Dollars
C)The supply of US dollars
D)​None of the above

Question 8

​In the market for Canadian dollars measured in US dollars,the demand for US dollars is

A)​The supply of Canadian dollars
B)The demand for Canadian Dollars
C)The supply of US dollars
D)​None of the above

Question 9

​An individual in the US wants to buy office equipment from England which costs 2,000 pounds.If the exchange rate is 1pound=$1.9,how much will the office equipment cost him in dollar terms?

A)​$2,000
B)$2,800
C)$3,800
D)​$1052

Question 10

​Holding other things constant,an increase in the inflation rate in the US compared to China may cause the demand for dollar to _____________ and the supply for dollar to __________.

A)​Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)​Decrease;Decrease

Question 11

​The demand for dollars is downward sloping because when dollar appreciates,

A)​Foreigners demand more US goods and services
B)Foreigners demand fewer US goods and services
C)Foreigners demand more dollars
D)​Foreigners do not change their demand for US goods and services

Question 12

​When interest rates go down,people are

A)​more likely to borrow
B)less likely to borrow
C)does not affect a person's consumption
D)​None of the above

Question 13

​Holding other things constant,an appreciation of the US Dollar relative to the Chinese Yuan causes the demand for the Yuan to _____________ and the supply for Yuan to __________.

A)​Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)​Decrease;Decrease

Question 14

​When interest rates go up,people are

A)​More likely to borrow
B)Less likely to borrow
C)Does not affect a person's consumption
D)​None of the above

Question 15

Holding other things constant,a decrease in the inflation rate in the US compared to the Canadian economy will cause the demand for the Canadian dollar to _____________ and the supply to __________.​

A)​Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)​Decrease;Decrease

Question 16

​In the market for Canadian dollars measured in US dollars,the demand for Canadian dollars is

A)​The supply of Canadian dollars
B)The demand for US Dollars
C)The supply of US dollars
D)​None of the above

Question 17

The term to describe one currency in terms of another is called​

A)​The interest rates
B)The market price
C)The inflation rate
D)​The exchange rate

Question 18

​In the market for Canadian dollars measured in US dollars,if the price of a US dollar is 1.10 Canadian dollars,a Canadian dollar is

A)​1.10 US dollars
B)1 US dollar
C)0.91 cents US
D)​0.99 cents US

Question 19

Holding other things constant,a depreciation of the US Dollar relative to the Kenyan Shilling would cause the demand for the Shilling to _____________ and the supply for Shilling to __________.​

A)​Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)​Decrease;Decrease

Question 20

​An individual in the US wants to buy a car from England which costs 12,000 pounds.If the exchange rate is 1 pound = $1.75,how much would the car cost him in dollars?

A)​$21,000
B)$6,800
C)$12,000
D)​Need more information

Question 21

​If a panic causes Indian depositors to withdraw their money from Japanese banks,it would cause the Japanese Yen to ___________,since the supply of Yen has__________

A)​Appreciate;Decrease
B)Depreciate;Decrease
C)Appreciate,Increase
D)​Depreciate;Increase

Question 22

​In the case where interest rates are lower in Japan,which of the following is an example of a "carry trade"

A)​Increase borrowing in the US,convert to Yuan and invest in financial assets in Japan
B)Increase borrowing in Japan and invest in Japan
C)Increase borrowing in Japan,convert to Dollars and invest in the US
D)​Increase borrowing in the US and invest in the US

Question 23

​Holding other things constant,if the Japanese Yen,depreciates,it makes the imports to Japan

A)​More expensive for Japanese customer
B)Less expensive for Japanese customers
C)Neither more or less expensive for importers
D)​None of the above

Question 24

​For foreigners,the intersection of the demand for US dollars and the supply of US dollar is known as the

A)​Inflation rate
B)Exchange rate
C)Price
D)​Quantity

Question 25

​A Swiss consumer wants to buy an American laptop.The exchange rate is 1USD=0.89CHF (Swiss Francs).The laptop costs $800.How much would the laptop cost him in Swiss Francs?

A)​1200 Francs
B)1160Francs
C)890Francs
D)​712 Francs

Question 26

​Holding other things constant,if the Japanese Yen,depreciates,it makes the Japanese products

A)​Less attractive to US customers
B)More attractive to US customers         
C)Neither more nor less attractive to US customers
D)​None of the above

Question 27

An American consumer wants to buy a Swiss watch.The exchange rate is 1USD=0.89 CHF(Swiss Francs).The watch costs 100 Swiss Francs.How much would it cost him in dollars?​

A)​$89
B)$112.36
C)$100
D)​$160.82

Question 28

​Holding other things constant,if the Japanese Yen,appreciates,it makes the imports to Japan

A)​More expensive for Japanese customer
B)Less expensive for Japanese customers
C)Neither more or less expensive for importers
D)​None of the above

Question 29

If the Canadian dollar appreciates,holding other things constant,it makes Canadian imports​

A)​More expensive for Canadian customers
B)Less expensive for Canadian customers
C)Neither more or less expensive for importers
D)​None of the above

Question 30

​Holding other things constant,decreases in the price level in the US will

A)​Cause the dollar to appreciate
B)Cause the dollar to depreciate
C)Cause no change in dollar value
D)​None of the above

Question 31

​Holding other things constant,if the Japanese Yen,appreciates,it makes the Japanese products

A)​Less attractive to US customers
B)More attractive to US customers
C)Neither more nor less attractive to US customers
D)​None of the above

Question 32

​Holding other things constant,if the US dollar depreciates,it makes the US exports

A)​Less attractive to foreigners
B)More attractive to foreigners
C)Neither more nor less attractive to foreigners
D)​None of the above

Question 33

​Holding other things constant,if the US dollar appreciates,it makes the US exports

A)​Less attractive to foreigners
B)More attractive to foreigners
C)Neither more nor less attractive to foreigners
D)​None of the above

Question 34

​In the case where interest rates are higher in Canada,which of the following is an example of a "carry trade"

A)​Increase borrowing in the US,convert to Canadian dollars and invest in Canada
B)Increase borrowing in the US and invest in the US
C)Increase borrowing in Canada,convert to dollars and invest in the US
D)​Increase borrowing in Canada and invest in Canada

Question 35

If Chinese consumers want to buy US goods,they will​

A)​Buy Yuan and sell US Dollars
B)Sell Yuan and buy US Dollars
C)Neither buy nor sell Yuan
D)​Neither buy nor sell dollars

Question 36

​If the Canadian dollar depreciates,holding other things constant,it makes Canadian imports

A)​More expensive for Canadian customers
B)Less expensive for Canadian customers
C)Neither more or less expensive for importers
D)​None of the above

Question 37

​If a panic causes Indian depositors to withdraw their money from Japanese banks,it would cause the Japanese Yen to depreciate,since the supply of Yen has________

A)​Not changed
B)Decreased
C)Increased
D)​None of the above

Question 38

​A Swiss consumer wants to buy an American car.The exchange rate is 1USD=0.89CHF (Swiss Francs).The car costs $10,000.How much would the car cost him in Swiss Francs?

A)​12,000 Francs
B)11,600Francs
C)8,900 Francs
D)​7,500 Francs

Question 39

​If US consumers want to buy Chinese goods,they will

A)​Buy Yuan and sell US Dollars
B)Sell Yuan and buy US Dollars
C)Neither buy nor sell Yuan
D)​Neither buy nor sell dollars

Question 40

​If a panic causes Indian depositors to withdraw their money from Japanese banks,it would cause the Japanese Yen to ___________,since the supply of Yen has increased

A)​Appreciate
B)Depreciate
C)Not change in value
D)​None of the above

Question 41

​Currency devaluations hurt consumers because they make imports ________ expensive

A)​Less
B)More
C)All of the above
D)​None of the above

Question 42

A weaker peso,relative to the US dollar,causes the demand for US imports from Mexico to _____ and the demand for US exports to Mexico to_______​

A)​Increase;Decrease
B)Decrease;Increase
C)Increase;Increase
D)​Decrease;Decrease

Question 43

​Holding other things constant,decreases in the price level in the US will

A)​Cause the dollar to appreciate
B)Cause the dollar to depreciate
C)Does not affect the dollar value
D)​None of the above

Question 44

​Currency devaluations help suppliers because they make exports ________ expensive

A)​Less
B)More
C)All of the above
D)​None of the above

Question 45

​If the price of a Canadian dollar went from 0.95 US dollars to 0.98 US dollars,we would say that the US dollar has

A)​Appreciated
B)Depreciated
C)Not changed in value
D)​None of the above

Question 46

​If the Chinese Yuan devalues against the US dollar,then

A)​Both the US importers and Chinese importers would benefit
B)The US importers would benefit while the Chinese importers would be hurt
C)The US importers would be hurt while the Chinese importers would benefit
D)​Both the US importers and Chinese importers would be hurt

Question 47

If the Chinese Yuan devalues against the US dollar,then​

A)​Both the US exporters and Chinese importers would benefit
B)The US exporters would benefit while the Chinese importers would be hurt
C)The US exporters would be hurt while the Chinese consumers would benefit
D)​Both the US exporters and Chinese importers would be hurt

Question 48

​Holding other things constant,increases in the price level in the US will

A)​Cause the dollar to appreciate
B)Cause the dollar to depreciate
C)Does not affect the dollar value
D)​None of the above

Question 49

​A weaker peso,relative to the US dollar,causes the demand for US exports to Mexico to______ and the demand for US imports from Mexico to______

A)​Increase;Decrease
B)Decrease;Increase
C)Increase;Increase
D)​Decrease;Decrease

Question 50

​A weaker peso,relative to the US dollar,causes the demand for Mexican exports to_______ and US imports to ________

A)​Increase;Decrease
B)Decrease;Increase
C)Increase;Increase
D)​Decrease;Decrease

Question 51

A financial market panic that causes US depositors to withdraw their funds from Chinese banks,would cause a(n)________ in the demand of US dollars and a(n)_________in the supply of the Chinese Yuan.

A)​Increase;Increase
B)Increase;Decrease
C)Decrease;Increase
D)​Decrease;Decrease

Question 52

​Currency devaluation _______import consumers because______

A)​Helps;imports are more expensive
B)Hurts;imports are more expensive
C)Helps;imports are less expensive
D)​Hurts;imports are less expensive

Question 53

​A weaker peso,relative to the US dollar,causes the demand for US exports to ______ and the demand of Mexican imports to______

A)​Increase;Decrease
B)Decrease;Increase
C)Increase;Increase
D)​Decrease;Decrease

Question 54

​Currency devaluations hurt

A)​Consumers but help suppliers
B)Suppliers
C)Suppliers but help consumers
D)​None of the above

Question 55

The US is experiencing a technological boom.Relative to the other countries with lower technological growth,we expect to see the dollar​

A)​Appreciate
B)Depreciate
C)Stay constant in value
D)​None of the above

Question 56

Currency devaluation ______export producers because_______​

A)​Helps;exports are more expensive
B)Hurts;exports are more expensive
C)Helps;exports are less expensive
D)​Hurts;exports are less expensive

Question 57

According to the purchasing power parity,if the price level in the US rises relative to Mexico​

A)​The dollar will appreciate relative to the peso
B)The dollar will depreciate relative to the peso
C)There is no effect on either currency
D)​None of the above

Question 58

​If the price of a Canadian dollar went from 0.95 US dollars to 0.98 US dollars,we would say that the Canadian dollar has

A)​Appreciated
B)Depreciated
C)Not changed in value
D)​None of the above

Question 59

​An increase in the US demand for British pounds causes

A)​An appreciation of the pound
B)Depreciation of the dollar
C)None of the above
D)​Both a and b

Question 60

If the Chinese Yuan devalues against the US dollar,then​

A)​Both the US exporters and Chinese exporters would benefit
B)The US exporters would benefit while the Chinese exporters would be hurt
C)The US exporters would be hurt while the Chinese exporters would benefit
D)​Both the US exporters and Chinese exporters would be hurt

Question 61

A financial market panic that causes US depositors to withdraw their funds from Chinese banks,would cause a(n)________ in the demand of US dollars and a(n)_________in the demand of the Chinese Yuan.​

A)​Increase;Increase
B)Increase;Decrease
C)Decrease;Increase
D)​Decrease;Decrease

Question 62

​Due to a recession in the US,the average rate of return on investments is likely to fall causing the US dollar to

A)​Appreciate
B)Depreciate
C)Not change in value
D)​None of the above

Question 63

​A widget costs $50 in the US and CAD$53 in Canada.The current exchange rate is 1USD=1.09CAD.At this rate,

A)​The good costs more in the US
B)The good costs more in Canada
C)The good costs the same across the two countries
D)​None of the above

Question 64

John wants to buy a new lawn mower.He can either buy it in the US and pay $500 or buy it in Mexico and pay 6188 Mexican Pesos.At the exchange rate of 1 Mexican Peso=0.771US$,ignoring any other costs,he would​

A)​Prefer buying in the US
B)Prefer buying in Mexico
C)Be indifferent about where he buys his television
D)​None of the above

Question 65

If buyers expect future price increase,they will ___________ their purchases while sellers will __________ production​

A)​Accelerate;accelerate
B)Accelerate;delay
C)Delay;accelerate
D)​Delay;delay

Question 66

​A lawn mower costs $500 in the US and 5188 Mexican Pesos in Mexico.The current exchange rate is 1USD=12.97MXN.At this rate,

A)​The good costs more in the US
B)The good costs more in Mexico
C)The good costs the same across the two countries
D)​None of the above

Question 67

Due to a boom in the US,the average rate of return on investments is likely to rise causing the demand for US dollar to ​

A)​Increase
B)Decrease
C)Not change
D)​None of the above

Question 68

​A widget costs $1000 in the US and CAD$1200 in Canada.The current exchange rate is 1USD=1.09CAD.At this rate,

A)​The good costs more in the US
B)The good costs more in Canada
C)The good costs the same across the two countries
D)​None of the above

Question 69

​A lawn mower costs $500 in the US and 8188 Mexican Pesos in Mexico.The current exchange rate is 1USD=12.97MXN.At this rate,

A)​The good costs more in the US
B)The good costs more in Mexico
C)The good costs the same across the two countries
D)​None of the above

Question 70

In order for bubbles to occur,expectations of a price increase usually_______demand and ______supply​

A)​Increases;Increases
B)Increases;Decreases
C)Decreases;Increases
D)​Decreases;Decreases

Question 71

​Purchasing power parity suggests that

A)​Given fixed prices,interest rates adjust so that a good costs the same across two countries
B)Given fixed exchange rates,prices adjust such that a good costs the same across two countries
C)All of the above
D)​None of the above

Question 72

​The purchasing power parity predicts that if the price level in the US falls relative to Mexico,

A)​The dollar will appreciate relative to the peso
B)The dollar will depreciate relative to the peso
C)There is no effect on either currency
D)​PPP predicts price level will normalize in the long-run

Question 73

Due to a recession in the US,the average rate of return on investments is likely to fall causing the demand for US dollar to ​

A)​Increase
B)Decrease
C)Not change
D)​None of the above

Question 74

​A widget costs $50 in the US and CAD$53 in Canada.The current exchange rate is 1USD=1.09CAD.Given purchasing power parity,the Canadian dollar would_______to equilibrate prices

A)​Appreciate
B)Depreciate
C)Not change
D)​None of the above

Question 75

​John wants to buy a new television set.He can either buy it in the US and pay $1200 or buy it in Canada and pay CAD$1300.At the exchange rate of 1CA$=US$0.92,ignoring any other costs,he would

A)​Prefer buying in the US
B)Prefer buying in Canada
C)Be indifferent about where he buys his television
D)​None of the above

Question 76

​Which of the following is(are)the characteristics of a bubble

A)​Bubbles emerge when investors disagree about the particular economic importance of an event
B)Bubbles involve very large increases in trading volume
C)Bubbles may continue even when many expect a bubble and doesn't pop until a sufficient number of skeptical investors act simultaneously
D)​All of the above

Question 77

Due to a boom in the US,the average rate of return on investments is likely to rise causing the US dollar to​

A)​Appreciate
B)Depreciate
C)Not change in value
D)​None of the above

Question 78

​John wants to buy a new lawn mower.He can either buy it in the US and pay $500 or buy it in Mexico and pay 8188 Mexican Pesos.At the exchange rate of 1 Mexican Peso=0.771US$,ignoring any other costs,he would

A)​Prefer buying in the US
B)Prefer buying in Mexico
C)Be indifferent about where he buys his television
D)​None of the above

Question 79

​An expectation of a price increase in the future would cause consumers to______ and producers to_____

A)​Delay consumption;delay production
B)Delay production;accelerate production
C)Accelerate consumption;delay production
D)​Accelerate consumption;accelerate production

Question 80

​A widget costs $1000 in the US and CAD$1200 in Canada.The current exchange rate is 1USD=1.09CAD.Given purchasing power parity,the Canadian dollar would_______to equilibrate prices

A)​Appreciate
B)Depreciate
C)Not change
D)​None of the above