Deck 11: Foreign Exchange, trade, and Bubbles

Question 1

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

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

Answer 1

A

Question 2

Holding other things constant,a decrease in the inflation rate in the US compared to the Canadian economy 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

Answer 2

A

Question 3

An increase in the US demand for pound causes

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

Answer 3

D

Question 4

All these factors affect a country's exchange rates,except

A)Inflation
B)Interest rates
C)Employment
D)Price levels

Question 5

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

A)Cause the dollar to gain value
B)Cause the dollar to lose value
C)Does not affect the dollar value
D)None of the above

Question 6

The purchasing power parity predicts that if US price level rises relative to the Mexico price level,then

A)Dollar value will rise relative to the peso
B)Dollar value will fall relative to the peso
C)There is no effect on either currency
D)PPP predicts price level will normalize in the long-run

Question 7

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

A)Dollar value will rise relative to the peso
B)Dollar value will fall relative to the peso
C)There is no effect on either currency
D)PPP predicts price level will normalize in the long-run

Question 8

If the US interest rate is 4% per year and the Mexico interest rate is 9% per year,which of the following is true:

A)The dollar will depreciate 5% in one year.
B)The peso will appreciate 9% in one year.
C)The peso will depreciate 5% in one year.
D)The dollar will appreciate 9% in one year.

Question 9

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

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

Question 10

Holding other things constant,an increase in the inflation rate in US compared to the Chinese economy 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

US are experiencing a productivity growth.When comparing to other countries with lower productivity growth,we expect to see

A)Its exchange rate appreciating
B)Its exchange rate depreciating
C)It has no effect on the US exchange rate
D)None of the above

Question 12

An individual in the US wants to buy office equipment from England which costs 2,800 pounds.If the exchange rate is $1.92/pound,how much will it cost him in dollar terms?

A)$2,800
B)$5,376
C)$1,458
D)Need more information

Question 13

An individual in the US wants to buy a car from England which costs 12,000 pounds.If the exchange rate is $1.75/pound,how much will it cost him in dollar terms?

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

Question 14

A term to describe one currency in terms of another is

A)Interest rates
B)Market price
C)Inflation rate
D)Exchange rate

Question 15

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 16

The demand for dollars is downward sloping because when dollar value rises,

A)Foreigners demand more of US goods and services
B)Foreigners demand less of US goods and services
C)Foreigners demand more dollars
D)It does not depend on the dollar value

Question 17

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

A)Cause the dollar to gain value
B)Cause the dollar to lose value
C)Does not affect the dollar value
D)None of the above

Question 18

If the Chinese currency devalues compared to the US dollar,then

A)US producers will benefit;Chinese consumers will benefit
B)US producers will benefit;Chinese consumers will hurt
C)US producers will hurt;Chinese consumers will benefit
D)US producers will hurt;Chinese consumers will hurt

Question 19

Currency devaluations hurt

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

Question 20

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 21

If Chinese consumers want to buy US goods,they will

A)buy Yuans to sell US Dollars
B)Sell Yuans to buy US Dollars
C)Demand Yuan
D)Both b and c

Question 22

Borrowing in foreign currency to buy imports or invest in foreign currency,

A)decreases demand for the domestic currency,appreciating the domestic currency
B)increases demand for the domestic currency,depreciating the domestic currency
C)increases demand for the domestic currency,appreciating the domestic currency
D)does not affect the exchange rates

Question 23

If buyers expect future price increase,they will ___________ their purchases to avoid it.Similarly,sellers will __________ selling to take advantage of it.

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

Question 24

Borrowing in foreign currencies to spend or invest domestically,

A)decreases demand for the domestic currency,appreciating the domestic currency
B)increases demand for the domestic currency,depreciating the domestic currency
C)increases demand for the domestic currency,appreciating the domestic currency
D)does not affect the exchange rates

Question 25

Currency devaluations hurt consumers because they make imports ________ expensive in the _____________ currency.

A)Less;domestic
B)Less;foreign
C)More;domestic
D)More;foreign

Question 26

The intersection between demand of US dollar and the supply of US dollar is known as

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

Question 27

All of the following are true,except

A)Bubbles are prices that cannot be explained by normal economic forces
B)Many economists don't think bubbles exist
C)Many economists have a clear idea about how to model bubbles
D)All of the above are true

Question 28

Currency devaluations help suppliers because they make exports ________ expensive in the _____________ currency.

A)Less;domestic
B)Less;foreign
C)More;domestic
D)More;foreign

Question 29

If buyers expect prices to ________ faster than the interest rate,it makes sense to _____ as much money as possible to _____ now in order to ______ in the future.

A)Increase;borrow;buy;sell
B)increase;save;buy;sell
C)decrease;save;buy;sell
D)decrease;borrow;sell;buy

Question 30

If US consumers want to buy Chinese goods,they will

A)buy Yuans to sell US Dollars
B)Sell Yuans to buy US Dollars
C)Demand Yuan
D)Both a and c