Question 1

Why did the British authorities continue to defend the pound despite its overvaluation?

Accepted Answer

The British authorities thought the over...

Question 2

The Fed can ________ net exports by ________ domestic interest rates.

Accepted Answer

A)   increase; raising
B)   increase; lowering
C)   decrease; lowering
D)   decrease; keeping constantE) A) and B)
F) All of the above

Question 3

An increase in the value of the domestic currency in terms of the foreign currency means that ________.

Accepted Answer

A)   the domestic currency has appreciated and the nominal exchange rate has risen
B)   the domestic currency has depreciated and the nominal exchange rate has fallen
C)   the domestic currency has appreciated and the nominal exchange rate has fallen
D)   the domestic currency has depreciated and the nominal exchange rate has risenE) A) and C)
F) A) and D)

Question 4

In a flexible exchange rate system,the government ________.

Accepted Answer

A)   does not actively intervene to influence the exchange rate
B)   has to intervene occasionally, but less than it would in a managed exchange rate system
C)   intervenes often to influence the exchange rate, but less than it would in a managed exchange rate system
D)   intervenes often to influence the exchange rateE) A) and B)
F) A) and C)

Question 5

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan.
 
-Refer to the figure above.If the government of China wants to keep the exchange rate below E yuan per dollar,________.

Accepted Answer

A)   it will have to sell both dollars and yuan
B)   it will have to buy both dollars and yuan
C)   it will have to buy dollars and sell yuan
D)   it will have to buy yuan and sell dollarsE) B) and C)
F) A) and D)

Question 6

One dollar could be exchanged for 55 rupees in 2013 and for 60 rupees in 2014.This implies that the ________.

Accepted Answer

A)   dollar appreciated in 2014
B)   rupee appreciated in 2014
C)   nominal exchange rate did not change in 2014
D)   real exchange rate did not change in 2014E) All of the above
F) C) and D)

Question 7

The exchange rate of a currency in a black market will be ________ than the official exchange rate.

Accepted Answer

A)   less favorable to the sellers of domestic currency
B)   more favorable to the sellers of domestic currency
C)   less favorable to both the sellers and the buyers of domestic currency
D)   more favorable to both the sellers and the buyers of domestic currencyE) None of the above
F) C) and D)

Question 8

Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar.
-Refer to the scenario above.If the government of India wants to repay a lower sum of money to the United States,it should ________ in the foreign exchange market.

Accepted Answer

A)   buy both dollars and rupees
B)   buy dollars in exchange for rupees
C)   buy rupees in exchange for dollars
D)   sell both dollars and rupeesE) All of the above
F) A) and B)

Question 9

One of the reasons the pound depreciated in 1992 was because ________.

Accepted Answer

A)   Britain started importing more than it exported
B)   Britain was running out of foreign currency reserves
C)   Britain started exporting more than it imported
D)   speculative trading had decreased in foreign exchange marketsE) A) and B)
F) C) and D)

Question 10

If 60 pesos can be exchanged for $5 in the foreign exchange market,which of the following represents the nominal exchange rate between the two currencies?

Accepted Answer

A)   12 dollars for 1 peso
B)   1 dollar for 12 pesos
C)   5 pesos for 1 dollar
D)   1 dollar for 60 pesosE) A) and D)
F) B) and C)

Question 11

The government of country A has decided to maintain an exchange rate of 1 unit of its currency for 6 U.S.dollars in the long run.Country A can be said to have a ________.

Accepted Answer

A)   nominal exchange rate system
B)   fully flexible exchange rate system
C)   fixed exchange rate system
D)   managed exchange rate systemE) B) and C)
F) C) and D)

Question 12

When the ratio of domestic prices to foreign prices rises,________.

Accepted Answer

A)   the real exchange rate appreciates only when the nominal exchange rate appreciates
B)   the real exchange rate appreciates only when the nominal exchange rate depreciates
C)   the real exchange rate appreciates even when the nominal exchange rate is constant
D)   the real exchange rate depreciatesE) B) and C)
F) None of the above

Question 13

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is less than 1,U.S.toys are ________ than Chinese toys and retailers in the United States should ________.

Accepted Answer

A)   cheaper; buy the toys from American suppliers
B)   cheaper; buy the toys from Chinese suppliers
C)   more expensive; buy the toys from American suppliers
D)   more expensive; buy the toys from Chinese suppliersE) All of the above
F) C) and D)

Question 14

Differentiate between a managed exchange rate and a fixed exchange rate.

Accepted Answer

If the government of a country sets a lo...

Question 15

How does an overvalued yuan-per-dollar exchange rate distort U.S.economic activity?

Accepted Answer

An overvalued yuan-per-dollar exchange r...

Question 16

What are net exports? How will an appreciation of the peso affect Mexico's net exports?

Accepted Answer

The net exports of a country refer to th...

Question 17

What led to Black Wednesday in the 1990s?

Accepted Answer

Black Wednesday refers to an event durin...

Question 18

If a firm in the United States wants to purchase 50,000 yuan worth of raw materials from a Chinese firm,how many dollars would it have to transfer to the firm? Assume that 1 dollar exchanges for 6 yuan in the foreign exchange market.

Accepted Answer

A)   $6,773.21
B)   $7,500
C)   $8,333.33
D)   $9,663.22E) B) and C)
F) All of the above

Question 19

If the euro was exchanging for 1.09 U.S.dollars and now it is exchanging for 1.11 U.S.dollars,we can say that ________.

Accepted Answer

A)   the U.S. dollar has depreciated against the euro
B)   the U.S. dollar has appreciated against the euro
C)   the euro has depreciated against the U.S. dollar
D)   both answers B and C are correctE) C) and D)
F) B) and D)

Question 20

If a Japanese toy costs 20 yen and the yen per dollar exchange rate is 5,what is the dollar price of the Japanese toy?

Accepted Answer

A)   $4
B)   $5
C)   $40
D)   $100E) B) and D)
F) None of the above

Exam 15: Open Economy Macroeconomics

The government of country A has decided to maintain an exchange rate of 1 unit of its currency for 6 U.S.dollars in the long run.Country A can be said to have a ________.

Correct Answer
verified

In a flexible exchange rate system,the government ________.

Correct Answer
verified

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is less than 1,U.S.toys are than Chinese toys and retailers in the United States should .

Correct Answer
verified

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the government of China wants to keep the exchange rate below E yuan per dollar,________.

Correct Answer
verified

What led to Black Wednesday in the 1990s?

Correct Answer
verified
Black Wednesday refers to an event durin...
View Answer

Why did the British authorities continue to defend the pound despite its overvaluation?

Correct Answer
verified
The British authorities thought the over...
View Answer

One dollar could be exchanged for 55 rupees in 2013 and for 60 rupees in 2014.This implies that the ________.

Correct Answer
verified

If a Japanese toy costs 20 yen and the yen per dollar exchange rate is 5,what is the dollar price of the Japanese toy?

Correct Answer
verified

The exchange rate of a currency in a black market will be ________ than the official exchange rate.

Correct Answer
verified

One of the reasons the pound depreciated in 1992 was because ________.

Correct Answer
verified

What are net exports? How will an appreciation of the peso affect Mexico's net exports?

Correct Answer
verified
The net exports of a country refer to th...
View Answer

If a firm in the United States wants to purchase 50,000 yuan worth of raw materials from a Chinese firm,how many dollars would it have to transfer to the firm? Assume that 1 dollar exchanges for 6 yuan in the foreign exchange market.

Correct Answer
verified

An increase in the value of the domestic currency in terms of the foreign currency means that ________.

Correct Answer
verified

If the euro was exchanging for 1.09 U.S.dollars and now it is exchanging for 1.11 U.S.dollars,we can say that ________.

Correct Answer
verified

The Fed can net exports by domestic interest rates.

Correct Answer
verified

Correct Answer
verified

How does an overvalued yuan-per-dollar exchange rate distort U.S.economic activity?

Correct Answer
verified
An overvalued yuan-per-dollar exchange r...
View Answer

If 60 pesos can be exchanged for $5 in the foreign exchange market,which of the following represents the nominal exchange rate between the two currencies?

Correct Answer
verified

Differentiate between a managed exchange rate and a fixed exchange rate.

Correct Answer
verified
If the government of a country sets a lo...
View Answer

When the ratio of domestic prices to foreign prices rises,________.

Correct Answer
verified

Exam 15: Open Economy Macroeconomics

The government of country A has decided to maintain an exchange rate of 1 unit of its currency for 6 U.S.dollars in the long run.Country A can be said to have a ________.

Correct AnswerverifiedShow Answer

In a flexible exchange rate system,the government ________.

Correct AnswerverifiedShow Answer

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is less than 1,U.S.toys are ________ than Chinese toys and retailers in the United States should ________.

Correct AnswerverifiedShow Answer

The following figure shows the equilibrium in the foreign exchange market where dollars are exchanged for yuan. -Refer to the figure above.If the government of China wants to keep the exchange rate below E yuan per dollar,________.

Correct AnswerverifiedShow Answer

What led to Black Wednesday in the 1990s?

Correct AnswerverifiedBlack Wednesday refers to an event durin...View AnswerShow Answer

Why did the British authorities continue to defend the pound despite its overvaluation?

Correct AnswerverifiedThe British authorities thought the over...View AnswerShow Answer

One dollar could be exchanged for 55 rupees in 2013 and for 60 rupees in 2014.This implies that the ________.

Correct AnswerverifiedShow Answer

If a Japanese toy costs 20 yen and the yen per dollar exchange rate is 5,what is the dollar price of the Japanese toy?

Correct AnswerverifiedShow Answer

The exchange rate of a currency in a black market will be ________ than the official exchange rate.

Correct AnswerverifiedShow Answer

One of the reasons the pound depreciated in 1992 was because ________.

Correct AnswerverifiedShow Answer

What are net exports? How will an appreciation of the peso affect Mexico's net exports?

Correct AnswerverifiedThe net exports of a country refer to th...View AnswerShow Answer

If a firm in the United States wants to purchase 50,000 yuan worth of raw materials from a Chinese firm,how many dollars would it have to transfer to the firm? Assume that 1 dollar exchanges for 6 yuan in the foreign exchange market.

Correct AnswerverifiedShow Answer

An increase in the value of the domestic currency in terms of the foreign currency means that ________.

Correct AnswerverifiedShow Answer

If the euro was exchanging for 1.09 U.S.dollars and now it is exchanging for 1.11 U.S.dollars,we can say that ________.

Correct AnswerverifiedShow Answer

The Fed can ________ net exports by ________ domestic interest rates.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How does an overvalued yuan-per-dollar exchange rate distort U.S.economic activity?

Correct AnswerverifiedAn overvalued yuan-per-dollar exchange r...View AnswerShow Answer

If 60 pesos can be exchanged for $5 in the foreign exchange market,which of the following represents the nominal exchange rate between the two currencies?

Correct AnswerverifiedShow Answer

Differentiate between a managed exchange rate and a fixed exchange rate.

Correct AnswerverifiedIf the government of a country sets a lo...View AnswerShow Answer

When the ratio of domestic prices to foreign prices rises,________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

If the ratio of the dollar price of a U.S.toy to the dollar price of the same toy sold in China is less than 1,U.S.toys are than Chinese toys and retailers in the United States should .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Black Wednesday refers to an event durin...
View Answer

Correct Answer
verified
The British authorities thought the over...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The net exports of a country refer to th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The Fed can net exports by domestic interest rates.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An overvalued yuan-per-dollar exchange r...
View Answer

Correct Answer
verified

Correct Answer
verified
If the government of a country sets a lo...
View Answer

Correct Answer
verified