Question 1

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.?Figure 21.1??In the figure:?D₁ and D₂: Demand for Brazilian reals?S₁ and S₂: Supply of Brazilian reals
 
-Refer to Figure 21.1. Determine the equilibrium exchange rate and equilibrium quantity of Brazilian reals, if D₁ and S₁ are the relevant demand and supply curves for Brazilian reals in this market.

Accepted Answer

A)  10 pesos per real and a quantity of 150 reals 
B)  6 pesos per real and a quantity of 250 reals 
C)  8 pesos per real and a quantity of 150 reals 
D)  8 pesos per real and a quantity of 250 reals 
E)  6 pesos per real and a quantity of 200 reals

Question 2

Other things equal, an appreciation of the Algerian dinar in relation to the euro will act to increase Algerian demand for European goods and to decrease European demand for Algerian goods.

Accepted Answer

A) True 
 B)False

Question 3

An increase in the demand for rubles causes the ruble to appreciate.

Accepted Answer

A) True 
 B)False

Question 4

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.?Figure 21.1??In the figure:?D₁ and D₂: Demand for Brazilian reals?S₁ and S₂: Supply of Brazilian reals
 
-Refer to Figure 21.1. Assume that the initial equilibrium exchange rate is 8 Mexican pesos per Brazilian real and 150 brazilian reals are traded in the market. Suppose, there is an increase in the Brazilian demand for Mexican exports. Other things remaining equal, which of the following can be concluded?

Accepted Answer

A)  The demand curve for Brazilian reals will shift to the the right. 
B)  The supply curve of Brazilian reals will shift to the the right. 
C)  The Mexican pesos will depreciate in value. 
D)  The Brazilian reals will appreciate in value. 
E)  Around 100 Brazilian reals will be traded in the forex market.

Question 5

Under the Bretton Woods system, international debts were settled in:

Accepted Answer

A)  gold. 
B)  U.S. dollars. 
C)  British pounds. 
D)  silver. 
E)  German marks.

Question 6

If the price of an ounce of gold is 200 ZARs in South Africa and $75 in Canada, what will be the South African Rand (ZAR) per Canadian dollar (C$) exchange rate?

Accepted Answer

A)  C$1 = 4.25 ZAR 
B)  C$1 = 1.75 ZAR 
C)  C$1 = 2 ZAR 
D)  C$1 = 2.67 ZAR 
E)  C$1 = 4 ZAR

Question 7

When a U.S. importer needs $20,000 to settle an invoice for 228,000 Uruguayan pesos, the price of 1 dollar is 11.4 Uruguayan pesos.

Accepted Answer

A) True 
 B)False

Question 8

When the exchange rate fluctuates around a fixed central target, allowing for a moderate amount of fluctuation, while tying the currency to the target central rate, the exchange rate is under:

Accepted Answer

A)  a horizontal band. 
B)  a crawling peg. 
C)  a managed float. 
D)  an independent float. 
E)  a currency board.

Question 9

The IMF comprises of 50 member countries including all developed countries, and a few countries of Asia and Latin America.

Accepted Answer

A) True 
 B)False

Question 10

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.?Figure 21.1??In the figure:?D₁ and D₂: Demand for Brazilian reals?S₁ and S₂: Supply of Brazilian reals
 
-Refer to Figure 21.1. Suppose the initial equilibrium exchange rate is 10 pesos per real. A decrease in the Mexican demand for Brazilian coffee, other things equal, is most likely to result in a new equilibrium exchange rate of:

Accepted Answer

A)  6 pesos per real and an equilibrium quantity of 200 Brazilian reals. 
B)  6 pesos per real and an equilibrium quantity of 250 Brazilian reals. 
C)  8 pesos per real and an equilibrium quantity of 150 Brazilian reals. 
D)  8 pesos per real and an equilibrium quantity of 100 Brazilian reals. 
E)  10 pesos per real and an equilibrium quantity of 200 Brazilian reals.

Question 11

The U.S. provides about _____ percent of the annual membership fees of IMF member countries.

Accepted Answer

A)  5.6 
B)  10.2 
C)  15.3 
D)  17.3 
E)  22.4

Question 12

Suppose a Japanese investor purchases a dollar deposit that yields 5 percent interest at the end of a year. What will be the approximate return in terms of yen at maturity if the exchange rate moves from $1 = ¥100 to $1 = ¥105 during the year?

Accepted Answer

A)  1 percent 
B)  5 percent 
C)  10 percent 
D)  20 percent 
E)  0 percent

Question 13

Purchasing power parity exists when domestic currency:

Accepted Answer

A)  maintains a fixed exchange rate with foreign currency. 
B)  is not convertible into foreign currency. 
C)  buys more goods at home than abroad. 
D)  buys as many goods at home as it does abroad. 
E)  appreciates in value against foreign currency.

Question 14

Fixed exchange rates allow countries to formulate their economic policies independently of other nations.

Accepted Answer

A) True 
 B)False

Question 15

Appreciation of the dollar means that now it takes more dollars to buy one unit of foreign currency.

Accepted Answer

A) True 
 B)False

Question 16

Fixed exchange rates require the economic policies of countries linked by the exchange rate to be:

Accepted Answer

A)  completely independent. 
B)  complementary to each other. 
C)  determined by the World Bank. 
D)  similar in nature. 
E)  determined by the International Monetary Fund.

Question 17

If $1 was equivalent to 120 Japanese yen in 2008 and 125 Japanese yen in 2010, it implies in 2010, there was:

Accepted Answer

A)  a depreciation of the dollar against the yen. 
B)  a depreciation of the yen against the dollar. 
C)  an appreciation of the yen against the dollar. 
D)  no change in the value of yen, but the dollar had weakened. 
E)  no change in the value of dollar, but the yen had strengthened.

Question 18

An appreciation of the Norwegian kroner in relation to the U.S. dollar is most likely to cause:

Accepted Answer

A)  an increase in the U.S. demand for Norwegian goods. 
B)  an increase in the Norwegian demand for U.S. goods. 
C)  an increase in the supply of U.S. goods to Norway. 
D)  a decrease in the supply of Norwegian goods to the United States. 
E)  no change in the demand or supply of goods for either country.

Question 19

The exchange-rate arrangement that emerged from the Bretton Woods conference is often referred to as the:

Accepted Answer

A)  dollar exchange standard. 
B)  euro exchange standard. 
C)  gold exchange standard. 
D)  silver exchange standard. 
E)  flexible exchange rate standard.

Question 20

No currency ever appreciated or depreciated under the Bretton Woods system as it was based on a system of fixed exchange rates.

Accepted Answer

A) True 
 B)False

Exam 21: Exchapterange Rates and Financial Links Between Countries

Other things equal, an appreciation of the Algerian dinar in relation to the euro will act to increase Algerian demand for European goods and to decrease European demand for Algerian goods.

An increase in the demand for rubles causes the ruble to appreciate.

Under the Bretton Woods system, international debts were settled in:

If the price of an ounce of gold is 200 ZARs in South Africa and $75 in Canada, what will be the South African Rand (ZAR) per Canadian dollar (C$) exchange rate?

When a U.S. importer needs $20,000 to settle an invoice for 228,000 Uruguayan pesos, the price of 1 dollar is 11.4 Uruguayan pesos.

When the exchange rate fluctuates around a fixed central target, allowing for a moderate amount of fluctuation, while tying the currency to the target central rate, the exchange rate is under:

The IMF comprises of 50 member countries including all developed countries, and a few countries of Asia and Latin America.

The U.S. provides about _____ percent of the annual membership fees of IMF member countries.

Suppose a Japanese investor purchases a dollar deposit that yields 5 percent interest at the end of a year. What will be the approximate return in terms of yen at maturity if the exchange rate moves from $1 = ¥100 to $1 = ¥105 during the year?

Purchasing power parity exists when domestic currency:

Fixed exchange rates allow countries to formulate their economic policies independently of other nations.

Appreciation of the dollar means that now it takes more dollars to buy one unit of foreign currency.

Fixed exchange rates require the economic policies of countries linked by the exchange rate to be:

If $1 was equivalent to 120 Japanese yen in 2008 and 125 Japanese yen in 2010, it implies in 2010, there was:

An appreciation of the Norwegian kroner in relation to the U.S. dollar is most likely to cause:

The exchange-rate arrangement that emerged from the Bretton Woods conference is often referred to as the:

No currency ever appreciated or depreciated under the Bretton Woods system as it was based on a system of fixed exchange rates.