Question 1

Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Accepted Answer

A) True 
 B)False

Question 2

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is

Accepted Answer

A)  $0.005.
B)  $0.05.
C)  $0.50.
D)  $5.

Question 3

All of the following would add to the demand for U.S.dollars except

Accepted Answer

A)  long-term capital inflows.
B)  foreign travel by United States citizens.
C)  exports of commodities from the United States.
D)  travel by foreigners on United States airlines.

Question 4

The Bretton Woods system of exchange rates relied on

Accepted Answer

A)  freely floating exchange rates.
B)  fixed exchange rates with no mechanism for changing them.
C)  fixed or pegged exchange rates, with occasional orderly adjustments to the rates.
D)  the United States to set and periodically review worldwide exchange rates.

Question 5

Which of the following would call for inpayments to the United States?

Accepted Answer

A)  Gold flows into the United States.
B)  U.S.firms sell insurance to Brazilian shippers.
C)  The United States sends foreign aid to developing countries.
D)  The United States imports German automobiles.

Question 6

Assume that Switzerland and Britain have floating exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland,

Accepted Answer

A)  gold bullion will flow into Switzerland.
B)  the Swiss franc will depreciate.
C)  the pound will depreciate.
D)  the Swiss franc will appreciate.

Question 7

The basis for the Bretton Woods international monetary system was

Accepted Answer

A)  a completely fixed system of exchange rates.
B)  an adjustable peg system of exchange rates.
C)  the gold standard.
D)  a freely flexible system of exchange rates.

Question 8

A currency depreciation in the foreign exchange market will

Accepted Answer

A)  encourage imports into the country whose currency has depreciated.
B)  discourage imports into the country whose currency has depreciated.
C)  discourage exports from the country whose currency has depreciated.
D)  encourage foreign travel by the citizens of the country whose currency has depreciated.

Question 9

The exchange-rate system that we now have for major currencies like the U.S.dollar, yen, and euro is a "managed-floating" system.

Accepted Answer

A) True 
 B)False

Question 10

Foreign exchange rates refer to the

Accepted Answer

A)  price at which purchases and sales of foreign goods take place.
B)  rate of exchange of goods and services between two trading nations.
C)  price of one nation's currency in terms of another nation's currency.
D)  difference between exports and imports of a particular nation with another.

Question 11

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

Accepted Answer

A)  It requires less world liquidity or reserves.
B)  It creates less confidence about future values of currencies.
C)  It facilitates the transmission of shifts in economic conditions between countries.
D)  It increases the role of the central banks in foreign exchange markets.

Question 12

U.S.imports

Accepted Answer

A)  increase the foreign demand for foreign currencies.
B)  increase the domestic demand for foreign currencies.
C)  decrease the foreign supply of foreign currencies.
D)  increase the domestic supply of foreign currencies.

Question 13

The basic type of intervention by central banks under the managed floating exchange rate system is to

Accepted Answer

A)  readjust the peg for exchange rates.
B)  buy and sell currencies to influence supply and demand for foreign exchange.
C)  renegotiate the rate at which foreign currencies can be converted into gold.
D)  make pronouncements but then do nothing and let the market set the exchange rate.

Question 14

Consider the currency market for British pounds and U.S.dollars.An increase in the supply of British pounds

Accepted Answer

A)  results in an appreciation of the pound and a depreciation of the dollar.
B)  results in a depreciation of the pound and a depreciation of the dollar.
C)  is equivalent to an increase in the demand for the U.S.dollar.
D)  Is equivalent to a decrease in the demand for the U.S.dollar.

Question 15

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $0.10.We can conclude that

Accepted Answer

A)  1 yen = 280 Swiss francs.
B)  1 yen = 14 Swiss francs.
C)  1 Swiss franc = 28 yen.
D)  1 Swiss franc = 14 yen.

Question 16

U.S.businesses are demanders of foreign currencies because they need them to

Accepted Answer

A)  sell goods and services exported to foreign countries.
B)  pay for goods and services imported from foreign countries.
C)  receive interest payments from foreign governments.
D)  receive interest payments from foreign businesses.

Question 17

As a result of the 2007-2009 recession,

Accepted Answer

A)  declining imports created a trade surplus for the United States.
B)  the U.S.trade deficit grew significantly.
C)  declining imports reduced the size of the U.S.trade deficit.
D)  roughly equivalent declines in both exports and imports left the U.S.trade balance unchanged.

Question 18

The purchase of a British Rolls-Royce by a U.S.citizen would result in all of the following except a(n)

Accepted Answer

A)  supply of payments to England.
B)  sale of dollars and the purchase of British pounds.
C)  increase in imports to the United States.
D)  gain of foreign exchange for the United States.

Question 19

In the balance of payments of the United States, U.S.goods imports are recorded as a

Accepted Answer

A)  positive entry.
B)  capital account entry.
C)  current account entry.
D)  financial account entry.

Question 20

If the U.S.dollar depreciates relative to the Russian ruble, the ruble

Accepted Answer

A)  will be less expensive to Americans.
B)  mayeither appreciate or depreciate relative to the dollar.
C)  will appreciate relative to the dollar.
D)  will depreciate relative to the dollar.

Exam 41: The Balance of Payments, Exchange Rates, and Trade Deficits

Consider the currency market for British pounds and U.S.dollars.An increase in the supply of British pounds

Correct AnswerverifiedShow Answer

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

Correct AnswerverifiedShow Answer

The basis for the Bretton Woods international monetary system was

Correct AnswerverifiedShow Answer

Foreign exchange rates refer to the

Correct AnswerverifiedShow Answer

As a result of the 2007-2009 recession,

Correct AnswerverifiedShow Answer

A currency depreciation in the foreign exchange market will

Correct AnswerverifiedShow Answer

If the U.S.dollar depreciates relative to the Russian ruble, the ruble

Correct AnswerverifiedShow Answer

Assume that Switzerland and Britain have floating exchange rates.Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland,

Correct AnswerverifiedShow Answer

The exchange-rate system that we now have for major currencies like the U.S.dollar, yen, and euro is a "managed-floating" system.

Correct AnswerverifiedShow Answer

The purchase of a British Rolls-Royce by a U.S.citizen would result in all of the following except a(n)

Correct AnswerverifiedShow Answer

Which of the following would call for inpayments to the United States?

Correct AnswerverifiedShow Answer

In the balance of payments of the United States, U.S.goods imports are recorded as a

Correct AnswerverifiedShow Answer

U.S.businesses are demanders of foreign currencies because they need them to

Correct AnswerverifiedShow Answer

U.S.imports

Correct AnswerverifiedShow Answer

The following are hypothetical exchange rates: $1 = 140 yen; 1 Swiss franc = $0.10.We can conclude that

Correct AnswerverifiedShow Answer

All of the following would add to the demand for U.S.dollars except

Correct AnswerverifiedShow Answer

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is

Correct AnswerverifiedShow Answer

The basic type of intervention by central banks under the managed floating exchange rate system is to

Correct AnswerverifiedShow Answer

Under freely flexible (floating) exchange rates, if the dollar price of pounds rises, the pound price of dollars will fall.

Correct AnswerverifiedShow Answer

The Bretton Woods system of exchange rates relied on

Correct AnswerverifiedShow Answer

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