Transcript International Trade and Finance Practice Questions

International Trade and Finance
Practice Questions
AP Economics
Mr. Bordelon
When the dollar value of the euro is high:
a. Travel in the U.S. is less expensive for
Europeans.
b. Travel in the U.S. is more expensive for
Europeans.
c. The dollar has appreciated.
d. Travel in Europe is less expensive for
Americans.
e. The euro has depreciated.
When the dollar value of the euro is high:
a. Travel in the U.S. is less expensive for
Europeans.
b. Travel in the U.S. is more expensive for
Europeans.
c. The dollar has appreciated.
d. Travel in Europe is less expensive for
Americans.
e. The euro has depreciated.
When a Japanese investor buys stock in General
Motors, which of the following balance of
payments accounts is affected?
a. Current account
b. Financial account
c. Reserve account
d. Foreign exchange account
e. Balance of trade account
When a Japanese investor buys stock in General
Motors, which of the following balance of
payments accounts is affected?
a. Current account
b. Financial account
c. Reserve account
d. Foreign exchange account
e. Balance of trade account
If the United States exports $100 billion of goods
and services and imports $150 billion of goods
and services and there is no other factor income
or transfers, the balance on the current account
is:
a. $250 billion.
b. -$250 billion.
c. $50 billion.
d. -$50 billion.
e. $350 billion.
If the United States exports $100 billion of goods
and services and imports $150 billion of goods
and services and there is no other factor income
or transfers, the balance on the current account
is:
a. $250 billion.
b. -$250 billion.
c. $50 billion.
d. -$50 billion.
e. $350 billion.
Assume that Tom sells a crate of Florida-grown
oranges to a retailer in Canada and Susan sells a
U.S. bond to a customer in Britain. Which of the
following illustrates the difference and/or
similarities between these two transactions?
a. Only Tom will actually receive U.S. dollars as a
result of this transaction.
b. The sale of the bond to the customer in Britain
creates a liability, while the sale of the oranges
does not.
c. Both sales create an asset for the United States.
d. Both sales create a liability for the United States.
e. Tom’s transaction will appear in the financial
account and Sarah’s transaction will appear on
the current account.
Assume that Tom sells a crate of Florida-grown
oranges to a retailer in Canada and Susan sells a
U.S. bond to a customer in Britain. Which of the
following illustrates the difference and/or
similarities between these two transactions?
a. Only Tom will actually receive U.S. dollars as a
result of this transaction.
b. The sale of the bond to the customer in Britain
creates a liability, while the sale of the oranges
does not.
c. Both sales create an asset for the United States.
d. Both sales create a liability for the United States.
e. Tom’s transaction will appear in the financial
account and Sarah’s transaction will appear on
the current account.
Which of the following would be included in the
U.S. financial account?
a. A computer made in the U.S. exported to
Britain.
b. A computer made in Britain imported into the
United States.
c. Interest on a U.S. company’s bond sold to
someone living overseas.
d. The value of a bond of a company in the United
States sold to someone living in Britain.
e. Wages paid by a company in the United States
to an employee living in Britain.
Which of the following would be included in the
U.S. financial account?
a. A computer made in the U.S. exported to
Britain.
b. A computer made in Britain imported into the
United States.
c. Interest on a U.S. company’s bond sold to
someone living overseas.
d. The value of a bond of a company in the United
States sold to someone living in Britain.
e. Wages paid by a company in the United States
to an employee living in Britain.
This question refers to the accounting for U.S.
international transactions. Suppose that a family
from Peru eats in a restaurant in Salt Lake City,
Utah. Which of the following best indicates the
account which this transaction would appear and
how it would appear in that account?
a. Current account; payments from foreigners
b. Current account; payments to foreigners
c. Financial account; payments from foreigners
d. Financial account; payments to foreigners
e. Current account; payment to foreign
governments
This question refers to the accounting for U.S.
international transactions. Suppose that a family
from Peru eats in a restaurant in Salt Lake City,
Utah. Which of the following best indicates the
account which this transaction would appear and
how it would appear in that account?
a. Current account; payments from foreigners
b. Current account; payments to foreigners
c. Financial account; payments from foreigners
d. Financial account; payments to foreigners
e. Current account; payment to foreign
governments
American retailers import toys from China. In the
U.S. balance of payments account, this transaction
would be entered as:
a. A payment to foreigners in the financial account.
b. A payment from foreigners in the financial
account.
c. A payment to foreigners in the current account.
d. A payment from foreigners in the current
account.
e. A payment from foreigners in the net export
account.
American retailers import toys from China. In the
U.S. balance of payments account, this transaction
would be entered as:
a. A payment to foreigners in the financial account.
b. A payment from foreigners in the financial
account.
c. A payment to foreigners in the current account.
d. A payment from foreigners in the current
account.
e. A payment from foreigners in the net export
account.
A Brazilian bank buys shares of stock in Intel, an
American high-tech company. In the U.S.
balance of payments, this transaction would
cause the balance on the ____ account to ____.
a. Current; decrease
b. Current; increase
c. Financial; decrease
d. Financial; increase
e. Import/export account; decrease
A Brazilian bank buys shares of stock in Intel, an
American high-tech company. In the U.S.
balance of payments, this transaction would
cause the balance on the ____ account to ____.
a. Current; decrease
b. Current; increase
c. Financial; decrease
d. Financial; increase
e. Import/export account; decrease
At an interest rate of 4%, the quantity of loanable funds demanded by
American borrowers is _____ the quantity of loanable funds supplied by
American lenders.
a. Greater than
b. Less than
c. Equal to
d. Not related to
e. Rising to equal
At an interest rate of 4%, the quantity of loanable funds demanded by
American borrowers is _____ the quantity of loanable funds supplied by
American lenders.
a. Greater than
b. Less than
c. Equal to
d. Not related to
e. Rising to equal
At an interest rate of 4%, the quantity of loanable funds supplied by British
lenders is _____ the quantity of loanable funds demanded by British
borrowers.
a. Greater than
b. Less than
c. Equal to
d. Not related to
e. Rising to equal
At an interest rate of 4%, the quantity of loanable funds supplied by British
lenders is _____ the quantity of loanable funds demanded by British
borrowers.
a. Greater than
b. Less than
c. Equal to
d. Not related to
e. Rising to equal
At an interest rate of 4%, the excess of loanable funds supplied by _____
lenders will be exported to _____ borrowers.
a. American; British
b. British; American
c. American or British; British or American
d. American; worldwide
e. Worldwide; American
At an interest rate of 4%, the excess of loanable funds supplied by _____
lenders will be exported to _____ borrowers.
a. American; British
b. British; American
c. American or British; British or American
d. American; worldwide
e. Worldwide; American
Interest rates between two countries tend to
converge if:
a. Both countries have a financial account
surplus.
b. Both countries have a current account
surplus.
c. The residents of the two countries believe
that a foreign asset is as good as a domestic
one.
d. The residents of the two countries prefer
their assets to foreign assets.
e. The residents of the two countries prefer
foreign assets to their assets.
Interest rates between two countries tend to
converge if:
a. Both countries have a financial account
surplus.
b. Both countries have a current account
surplus.
c. The residents of the two countries believe
that a foreign asset is as good as a domestic
one.
d. The residents of the two countries prefer
their assets to foreign assets.
e. The residents of the two countries prefer
foreign assets to their assets.
If asset owners in Japan and the United States
consider Japanese and U.S. assets as good
substitutes for each other and the U.S. interest rate
is 5% and the Japanese interest rate is 2%, then all
of the following will occur EXCEPT:
a. Financial inflows will reduce the U.S. interest
rate.
b. Financial outflows will increase the Japanese
interest rate.
c. The interest rate gap between the United States
and Japan will be eliminated.
d. Loanable funds will be exported form the U.S. to
Japan.
e. The interest rate in the United States will equal
the interest rate in Japan.
If asset owners in Japan and the United States
consider Japanese and U.S. assets as good
substitutes for each other and the U.S. interest rate
is 5% and the Japanese interest rate is 2%, then all
of the following will occur EXCEPT:
a. Financial inflows will reduce the U.S. interest
rate.
b. Financial outflows will increase the Japanese
interest rate.
c. The interest rate gap between the United States
and Japan will be eliminated.
d. Loanable funds will be exported form the U.S. to
Japan.
e. The interest rate in the United States will equal
the interest rate in Japan.
Suppose that the value of the euro fell from $1.47
on January 1, 2009 to $1.40 on January 12, 2009.
This implies that:
a. The Euro depreciated and the dollar appreciated
during this period of time.
b. The dollar depreciated and the euro appreciated
during this period of time.
c. The euro depreciated and there is insufficient
information about the dollar’s value during this
period of time.
d. The euro appreciated and there is insufficient
information about the dollar’s value during this
period of time.
e. Both the euro and dollar appreciated during this
period of time.
Suppose that the value of the euro fell from $1.47
on January 1, 2009 to $1.40 on January 12, 2009.
This implies that:
a. The Euro depreciated and the dollar appreciated
during this period of time.
b. The dollar depreciated and the euro appreciated
during this period of time.
c. The euro depreciated and there is insufficient
information about the dollar’s value during this
period of time.
d. The euro appreciated and there is insufficient
information about the dollar’s value during this
period of time.
e. Both the euro and dollar appreciated during this
period of time.
If the rate of exchange is 1€ = US$2, then US$1 =
a. 0.50€
b. 2€
c. $0.50
d. $1.00
e. 1.50€
If the rate of exchange is 1€ = US$2, then US$1 =
a. 0.50€
b. 2€
c. $0.50
d. $1.00
e. 1.50€
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
The euro has:
a. Depreciated.
b. Appreciated.
c. Been devalued.
d. Not been affected for use in international
trade.
e. Fallen in value relative to the dollar.
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
The euro has:
a. Depreciated.
b. Appreciated.
c. Been devalued.
d. Not been affected for use in international
trade.
e. Fallen in value relative to the dollar.
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
The exchange rate for the dollar has changed
from:
a. 0.25€ to 0.50€.
b. 1.25€ to 1.50€.
c. 0.80€ to 0.67€.
d. 0.67€ to 0.80€.
e. 1€ to 2€.
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
The exchange rate for the dollar has changed
from:
a. 0.25€ to 0.50€.
b. 1.25€ to 1.50€.
c. 0.80€ to 0.67€.
d. 0.67€ to 0.80€.
e. 1€ to 2€.
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
In Germany, exports to the U.S.:
a. Will increase, and imports from the U.S. will
decrease.
b. And imports from the U.S. will increase.
c. Will decrease, and imports from the U.S. will
increase.
d. And imports form the U.S. will decrease.
e. Will be unaffected while imports from the
U.S. will fall.
The value of a euro, the currency for most of
Europe goes from 1€ = US$1.25 to 1€ = US$1.50.
In Germany, exports to the U.S.:
a. Will increase, and imports from the U.S. will
decrease.
b. And imports from the U.S. will increase.
c. Will decrease, and imports from the U.S. will
increase.
d. And imports form the U.S. will decrease.
e. Will be unaffected while imports from the
U.S. will fall.
If the value of a U.S. dollar changes from ¥120 to
¥110, it follows that:
a. The Japanese yen is depreciated , and the
U.S. dollar is appreciating.
b. U.S. goods become cheaper for Japanese
consumers to purchase.
c. Japanese goods become cheaper for U.S.
consumers to purchase.
d. U.S. services become more expensive for
Japanese firms to purchase.
e. U.S. exports to Japan will fall.
If the value of a U.S. dollar changes from ¥120 to
¥110, it follows that:
a. The Japanese yen is depreciated , and the
U.S. dollar is appreciating.
b. U.S. goods become cheaper for Japanese
consumers to purchase.
c. Japanese goods become cheaper for U.S.
consumers to purchase.
d. U.S. services become more expensive for
Japanese firms to purchase.
e. U.S. exports to Japan will fall.
If the U.S. dollar changes from $1 = ¥200 to $1 =
¥100, then:
a. The dollar has depreciated relative to the
yen.
b. The dollar has been fixed by the United
States and Japan.
c. The dollar has appreciated relative to the
yen.
d. U.S. goods are now more expensive in Japan.
e. Japanese goods are now less expensive in the
United States.
If the U.S. dollar changes from $1 = ¥200 to $1 =
¥100, then:
a. The dollar has depreciated relative to the
yen.
b. The dollar has been fixed by the United
States and Japan.
c. The dollar has appreciated relative to the
yen.
d. U.S. goods are now more expensive in Japan.
e. Japanese goods are now less expensive in the
United States.
If the U.S. dollar depreciates, all other things
being equal, then:
a. The U.S. financial account is in surplus.
b. The U.S. financial account is in deficit.
c. It falls in value compared to some other
currency.
d. The U.S. current account is in deficit.
e. Imports from other nations will fall.
If the U.S. dollar depreciates, all other things
being equal, then:
a. The U.S. financial account is in surplus.
b. The U.S. financial account is in deficit.
c. It falls in value compared to some other
currency.
d. The U.S. current account is in deficit.
e. Imports from other nations will fall.
The change from D1 to D2 would occur, all things being equal, if
the:
a. Supply of euros decreases.
b. Demand for euros increases.
c. Demand for euros decreases.
d. Demand for dollars increases.
e. Demand for dollars decreases.
The change from D1 to D2 would occur, all things being equal, if
the:
a. Supply of euros decreases.
b. Demand for euros increases.
c. Demand for euros decreases.
d. Demand for dollars increases.
e. Demand for dollars decreases.
A flow of capital from Europe to the United States would cause a
movement in this foreign exchange market that is best represented
by the shift from:
a. D2 to D1.
b. E2 to E1.
c. D1 to D2.
d. There would be no shift in the foreign exchange market.
e. X2 to X1.
A flow of capital from Europe to the United States would cause a
movement in this foreign exchange market that is best represented
by the shift from:
a. D2 to D1.
b. E2 to E1.
c. D1 to D2.
d. There would be no shift in the foreign exchange market.
e. X2 to X1.
Suppose that the U.S. and European Union (EU) are
the only trading partners in the world. If the EU
imposes some import tariffs on U.S. goods, we
would expect:
a. The supply of the euro to decrease, depreciating
the euro.
b. The demand for the dollar to decrease,
depreciating the dollar.
c. The demand for the dollar to increase,
appreciating the dollar.
d. The supply of the dollar to decrease,
depreciating the dollar.
e. The demand for the dollar to decrease,
appreciating the dollar.
Suppose that the U.S. and European Union (EU) are
the only trading partners in the world. If the EU
imposes some import tariffs on U.S. goods, we
would expect:
a. The supply of the euro to decrease, depreciating
the euro.
b. The demand for the dollar to decrease,
depreciating the dollar.
c. The demand for the dollar to increase,
appreciating the dollar.
d. The supply of the dollar to decrease,
depreciating the dollar.
e. The demand for the dollar to decrease,
appreciating the dollar.
If the U.S. dollar appreciates relative to
currencies in other countries, then U.S. imports:
a. And exports will both increase.
b. And exports will both decrease.
c. Will decrease and exports will increase.
d. Will increase and exports will decrease.
e. Will be unchanged, while exports will
decrease.
If the U.S. dollar appreciates relative to
currencies in other countries, then U.S. imports:
a. And exports will both increase.
b. And exports will both decrease.
c. Will decrease and exports will increase.
d. Will increase and exports will decrease.
e. Will be unchanged, while exports will
decrease.
In the United States-Mexican peso foreign exchange
market, the dollar market is initially in equilibrium.
Suppose there is a decrease in demand for U.S. dollars,
holding everything else constant, this will result in:
a. A movement along the supply of U.S. dollars and an
increase in the peso-U.S. dollar exchange rate.
b. A movement along the demand for U.S. dollars and an
increase in the peso-dollar exchange rate.
c. A movement along the supply of U.S. dollars and a
decrease in the peso-U.S. dollar exchange rate.
d. A movement along the demand for U.S. dollars and a
decrease in the peso-U.S. dollar exchange rate.
e. A movement along the demand for U.S. dollars and
no change in the peso-U.S. dollar exchange rate.
In the United States-Mexican peso foreign exchange
market, the dollar market is initially in equilibrium.
Suppose there is a decrease in demand for U.S. dollars,
holding everything else constant, this will result in:
a. A movement along the supply of U.S. dollars and an
increase in the peso-U.S. dollar exchange rate.
b. A movement along the demand for U.S. dollars and an
increase in the peso-dollar exchange rate.
c. A movement along the supply of U.S. dollars and a
decrease in the peso-U.S. dollar exchange rate.
d. A movement along the demand for U.S. dollars and a
decrease in the peso-U.S. dollar exchange rate.
e. A movement along the demand for U.S. dollars and
no change in the peso-U.S. dollar exchange rate.
Purchasing power parity refers to:
a. How many units of foreign currency a dollar will
buy.
b. How many foreign assets the United States is
buying.
c. How many foreign assets a foreign country is
buying.
d. The nominal exchange rate for which a market
basket would cost the same in each country.
e. How many dollars a unit of a foreign currency
will buy.
Purchasing power parity refers to:
a. How many units of foreign currency a dollar will
buy.
b. How many foreign assets the United States is
buying.
c. How many foreign assets a foreign country is
buying.
d. The nominal exchange rate for which a market
basket would cost the same in each country.
e. How many dollars a unit of a foreign currency
will buy.
Assume that the foreign exchange market is trading
the domestic currency at an exchange rate (U.S.
dollars per unit of the domestic currency) above the
exchange rate fixed by the government. To
maintain the fixed exchange rate, the government
must:
a. Decrease foreign exchange reserves.
b. Lower the domestic interest rate.
c. Facilitate the domestic purchase of foreign
financial assets.
d. Raise the domestic interest rate.
e. Petition the World Bank for permission.
Assume that the foreign exchange market is trading
the domestic currency at an exchange rate (U.S.
dollars per unit of the domestic currency) above the
exchange rate fixed by the government. To
maintain the fixed exchange rate, the government
must:
a. Decrease foreign exchange reserves.
b. Lower the domestic interest rate.
c. Facilitate the domestic purchase of foreign
financial assets.
d. Raise the domestic interest rate.
e. Petition the World Bank for permission.
Refer to panel (a). Which of the following approaches could the Genovian government
use to raise the value of the geno above its present equilibrium exchange rate and into
the target range?
a. Use its own currency to buy U.S. dollars.
b. Shift the demand for genos to the right by raising interest rates in Genovia.
c. Eliminate the exchange controls that presently limit the right of Genovian citizens
to buy U.S. dollars.
d. Tighten the exchange controls that limit purchases of U.S. dollars by Genovian
citizens.
e. Shift the demand for genos to the left by lowering interest rates in Genovia.
Refer to panel (a). Which of the following approaches could the Genovian government
use to raise the value of the geno above its present equilibrium exchange rate and into
the target range?
a. Use its own currency to buy U.S. dollars.
b. Shift the demand for genos to the right by raising interest rates in Genovia.
c. Eliminate the exchange controls that presently limit the right of Genovian citizens
to buy U.S. dollars.
d. Tighten the exchange controls that limit purchases of U.S. dollars by Genovian
citizens.
e. Shift the demand for genos to the left by lowering interest rates in Genovia.
Refer to panel (b). Which of the following approaches could the Genovian government
use to decrease the value of the geno below its present equilibrium exchange rate and
into the target range?
a. Use its own currency to buy U.S. dollars.
b. Shift the demand for genos to the right by raising interest rates in Genovia.
c. Eliminate the exchange controls that presently limit the right of Genovian citizens
to buy U.S. dollars.
d. Tighten the exchange controls that limit purchases of U.S. dollars by Genovian
citizens.
e. Shift the demand for genos to the left by lowering interest rates in Genovia.
Refer to panel (b). Which of the following approaches could the Genovian government
use to decrease the value of the geno below its present equilibrium exchange rate and
into the target range?
a. Use its own currency to buy U.S. dollars.
b. Shift the demand for genos to the right by raising interest rates in Genovia.
c. Eliminate the exchange controls that presently limit the right of Genovian citizens
to buy U.S. dollars.
d. Tighten the exchange controls that limit purchases of U.S. dollars by Genovian
citizens.
e. Shift the demand for genos to the left by lowering interest rates in Genovia.
Foreign exchange controls are:
a. Fixed exchange rates.
b. A government licensing system that limits the
amount of foreign currencies an individual
can buy.
c. Floating exchange rates.
d. International limits on exchange rates.
e. Treaties with the World Bank to fix the
exchange rate.
Foreign exchange controls are:
a. Fixed exchange rates.
b. A government licensing system that limits the
amount of foreign currencies an individual
can buy.
c. Floating exchange rates.
d. International limits on exchange rates.
e. Treaties with the World Bank to fix the
exchange rate.
In a fixed exchange rate situation, monetary
policy is:
a. Fully flexible.
b. Limited in its ability to shift aggregate
demand to the right.
c. Limited in its ability to shift aggregate supply
to the right.
d. Independent of exchange rate issues.
e. Made irrelevant as a policy tool.
In a fixed exchange rate situation, monetary
policy is:
a. Fully flexible.
b. Limited in its ability to shift aggregate
demand to the right.
c. Limited in its ability to shift aggregate supply
to the right.
d. Independent of exchange rate issues.
e. Made irrelevant as a policy tool.
If a government wants to increase the value of
its currency in foreign exchange markets, it can:
a. Use contractionary monetary policy.
b. Use expansionary monetary policy.
c. Decrease interest rates.
d. Sell its currency.
e. Allow the aggregate price level to rise.
If a government wants to increase the value of
its currency in foreign exchange markets, it can:
a. Use contractionary monetary policy.
b. Use expansionary monetary policy.
c. Decrease interest rates.
d. Sell its currency.
e. Allow the aggregate price level to rise.
A revaluation makes:
a. Domestic goods cheaper relative to foreign
goods.
b. Foreign goods more expensive.
c. Both domestic and foreign goods more
expensive.
d. Domestic goods more expensive relative to
foreign goods.
e. The trade deficit shrink.
A revaluation makes:
a. Domestic goods cheaper relative to foreign
goods.
b. Foreign goods more expensive.
c. Both domestic and foreign goods more
expensive.
d. Domestic goods more expensive relative to
foreign goods.
e. The trade deficit shrink.
When the Mexican government changes the
fixed exchange rate of the peso relative to the
U.S. dollar from 1.5 (pesos/U.S. dollar) to 3.0
(pesos/U.S. dollar), the peso is _____. When
the foreign exchange market changes the
equilibrium exchange rate of the euro relative to
the U.S. dollar from 1.15 (U.S. dollars/euro) to
1.30 (U.S. dollars/euro), the euro is _____.
a. Revaluated; appreciated
b. Appreciated; devaluated
c. Devaluated; depreciated
d. Appreciated; revaluated
e. Devaluated; appreciated
When the Mexican government changes the
fixed exchange rate of the peso relative to the
U.S. dollar from 1.5 (pesos/U.S. dollar) to 3.0
(pesos/U.S. dollar), the peso is _____. When
the foreign exchange market changes the
equilibrium exchange rate of the euro relative to
the U.S. dollar from 1.15 (U.S. dollars/euro) to
1.30 (U.S. dollars/euro), the euro is _____.
a. Revaluated; appreciated
b. Appreciated; devaluated
c. Devaluated; depreciated
d. Appreciated; revaluated
e. Devaluated; appreciated
A revaluation:
a. Increases exports and decreases imports.
b. Decreases exports and increases imports.
c. Increases imports and exports.
d. Decreases imports and exports.
e. Has no impact on imports or exports.
A revaluation:
a. Increases exports and decreases imports.
b. Decreases exports and increases imports.
c. Increases imports and exports.
d. Decreases imports and exports.
e. Has no impact on imports or exports.
An increase in U.S. interest rates causes a
decrease in aggregate demand by:
a. Increasing investment, appreciating the
dollar, and increasing imports.
b. Decreasing investment, appreciating the
dollar, and increasing imports.
c. Increasing investment, depreciating the
dollar, and increasing exports.
d. Decreasing investment, depreciating the
dollar, and decreasing exports.
e. Decreasing investment, depreciating the
dollar, and increasing exports.
An increase in U.S. interest rates causes a
decrease in aggregate demand by:
a. Increasing investment, appreciating the
dollar, and increasing imports.
b. Decreasing investment, appreciating the
dollar, and increasing imports.
c. Increasing investment, depreciating the
dollar, and increasing exports.
d. Decreasing investment, depreciating the
dollar, and decreasing exports.
e. Decreasing investment, depreciating the
dollar, and increasing exports.
Expansionary monetary policy in the United
States causes U.S. interest rates to _____ and
the dollar to _____.
a. Increase; appreciate
b. Increase; depreciate
c. Decrease; appreciate
d. Decrease; depreciate
e. Decrease; remain constant in value
Expansionary monetary policy in the United
States causes U.S. interest rates to _____ and
the dollar to _____.
a. Increase; appreciate
b. Increase; depreciate
c. Decrease; appreciate
d. Decrease; depreciate
e. Decrease; remain constant in value
Devaluation is the:
a. Reduction in the value of a currency due to
inflation.
b. Reduction in the value of a currency that is
determined in a floating exchange rate
system.
c. Reduction in the value of a currency due to
increased interest rates.
d. Reduction in the rate of inflation of a country.
e. Reduction in the value of a currency that is
set under a fixed exchange rate regime.
Devaluation is the:
a. Reduction in the value of a currency due to
inflation.
b. Reduction in the value of a currency that is
determined in a floating exchange rate
system.
c. Reduction in the value of a currency due to
increased interest rates.
d. Reduction in the rate of inflation of a country.
e. Reduction in the value of a currency that is
set under a fixed exchange rate regime.
The difference between a fixed exchange rate regime and a
floating exchange rate regime, is that:
a. Under a fixed exchange rate regime, the central bank
retains its ability to pursue independent monetary policy,
whereas under a floating exchange rate regime, it does
not.
b. Under a floating exchange rate regime, the central bank
retains its ability to pursue independent monetary policy,
whereas under a fixed exchange rate regime, it does not.
c. Under a fixed exchange rate regime, the government can
pursue independent fiscal policy, whereas under a floating
exchange rate regime, it does not.
d. Under a floating exchange rate regime, the government
can pursue independent fiscal policy, whereas under a
fixed exchange rate regime, it does not.
e. Under a floating exchange rate regime, the central bank
retains its ability to pursue independent fiscal policy,
whereas under a fixed exchange rate regime, it does not.
The difference between a fixed exchange rate regime and a
floating exchange rate regime, is that:
a. Under a fixed exchange rate regime, the central bank
retains its ability to pursue independent monetary policy,
whereas under a floating exchange rate regime, it does
not.
b. Under a floating exchange rate regime, the central bank
retains its ability to pursue independent monetary policy,
whereas under a fixed exchange rate regime, it does not.
c. Under a fixed exchange rate regime, the government can
pursue independent fiscal policy, whereas under a floating
exchange rate regime, it does not.
d. Under a floating exchange rate regime, the government
can pursue independent fiscal policy, whereas under a
fixed exchange rate regime, it does not.
e. Under a floating exchange rate regime, the central bank
retains its ability to pursue independent fiscal policy,
whereas under a fixed exchange rate regime, it does not.
Adopting a floating exchange rate regime:
a. Makes the domestic economy less
susceptible to business cycles abroad.
b. Limits the use of monetary policy for
economic stabilization purposes.
c. Makes the domestic economy more
susceptible to business cycles abroad.
d. Commits the country to maintaining low
inflation rates.
e. Makes fiscal policy obsolete for smoothing
the business cycle.
Adopting a floating exchange rate regime:
a. Makes the domestic economy less
susceptible to business cycles abroad.
b. Limits the use of monetary policy for
economic stabilization purposes.
c. Makes the domestic economy more
susceptible to business cycles abroad.
d. Commits the country to maintaining low
inflation rates.
e. Makes fiscal policy obsolete for smoothing
the business cycle.