Question 1

Assume that Switzerland and Britain have flexible exchange rates. Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Accepted Answer

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

Question 2

According to the purchasing power parity theory of exchange rates:

Accepted Answer

A)   a dollar, when converted to other currencies at the prevailing flexible exchange rate, has the same purchasing power in various countries.
B)   in equilibrium, national currencies have equal value in terms of gold.
C)   the higher a nation's price level in terms of its own currency, the greater is the amount of foreign exchange it can obtain for a unit of its currency.
D)   all of the above are true.E) A) and D)
F) C) and D)

Question 3

Proponents of the managed floating exchange rate system argue that it has:

Accepted Answer

A)   added the volatility needed by the exchange rate market.
B)   been effective because it is a "non-system" without fixed rules.
C)   been sufficiently flexible to weather major economic turbulence.
D)   resolved major problems in balance of payments surpluses and deficits.E) A) and B)
F) None of the above

Question 4

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Accepted Answer

A)   both our imports and our exports to rise.
B)   both our imports and our exports to fall.
C)   our exports to fall and our imports to increase.
D)   inflation to occur.E) A) and B)
F) None of the above

Question 5

There must always be a balance of a nation's:

Accepted Answer

A)   merchandise exports and gold imports.
B)   total international payments.
C)   imports and exports of goods and services.
D)   merchandise imports and exports.E) None of the above
F) A) and D)

Question 6

If in a system of fixed exchange rates the dollar price of pounds is above the market equilibrium

Accepted Answer

A)   gold will flow from Canada to Great Britain.
B)   there will be a surplus of pounds.
C)   the Canadian government will have to ration pounds to Canadian importers.
D)   there will be a shortage of pounds.E) B) and C)
F) C) and D)

Question 7

Appreciation of the Swiss franc will:

Accepted Answer

A)   intensify an existing disequilibrium in France's balance of payments.
B)   make France's exports less expensive and its imports more expensive.
C)   make France's exports more expensive and its imports less expensive.
D)   make France's exports and imports both more expensive.E) A) and B)
F) All of the above

Question 8

In equilibrium, if $1 = .5 pounds sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollars and Swiss francs will be:

Accepted Answer

A)   1 Swiss franc = $.10.
B)   1 Swiss franc = $.20.
C)   $1 = 80 Swiss francs.
D)   $1 = 20 Swiss francs.E) A) and B)
F) A) and C)

Question 9

Which of the following have substantially equivalent effects insofar as a nation's volume of exports and imports is concerned?

Accepted Answer

A)   exchange rate appreciation and a decrease in the domestic supply of money
B)   exchange rate appreciation and domestic deflation
C)   exchange rate depreciation and domestic deflation
D)   exchange rate depreciation and domestic inflationE) None of the above
F) C) and D)

Question 10

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Accepted Answer

A)   Canadians will buy fewer British goods and services.
B)   the pound has appreciated in value.
C)   fewer Canadian goods and services will be demanded by the British.
D)   the dollar has depreciated in value.E) A) and B)
F) All of the above

Question 11

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Accepted Answer

A)   $.005
B)   $.05.
C)   $.50.
D)   $5.E) A) and C)
F) None of the above

Question 12

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

Accepted Answer

A)   the Canadian dollar has appreciated in value to the United States dollar.
B)   both countries are on the international gold standard.
C)   the American dollar has depreciated in value relative to the Canadian dollar.
D)   the Canadian dollar has depreciated in value relative to the United States dollar.E) A) and C)
F) None of the above

Question 13

If a nation's balance on current account is a negative $20 billion, while its balance on capital account is a positive $16.5 billion, we can conclude with certainty that this nation is experiencing:

Accepted Answer

A)   a merchandise trade deficit.
B)   a merchandise trade surplus.
C)   a reduction in its stock of foreign currency.
D)   a balance of payments surplus.E) All of the above
F) A) and B)

Question 14

The following are hypothetical exchange rates: 2 Swiss francs = 1 British pound and $1 = 2 British pound. We can conclude that:

Accepted Answer

A)   $1 = 4 Swiss francs.
B)   $1 = .5 Swiss francs.
C)   1 Swiss franc = $.50.
D)   1 Swiss franc = $2.E) A) and B)
F) B) and C)

Question 15

The following table shows the 2008 balance of payments statement for Transylvania. All figures are in billions of dollars.
 
-Refer to the above data. If Transylvania was on a system of flexible exchange rates, its balance of payments position would cause the international value of its currency to depreciate.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not included in the current account of a nation's balance of payments?

Accepted Answer

A)   its merchandise exports
B)   its merchandise imports
C)   its net investment income
D)   its capital inflowsE) A) and D)
F) A) and C)

Question 17

In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

Accepted Answer

A)   the pound rate of exchange for the dollar will fall.
B)   the pound rate of exchange for the dollar will also rise.
C)   the pound rate of exchange for the dollar may either fall or rise.
D)   Canadian net exports to Britain will tend to fall.E) B) and D)
F) All of the above

Question 18

If a British importer can purchase 12,000 Canadian Dollar for 8,000 British Pound, the rate of exchange between the two currencies:

Accepted Answer

A)   is $.5 = 1 pound.
B)   is $2 = 1 pound.
C)   is $1 = 2 pounds.
D)   is $1.5 = 1 Pound.E) A) and D)
F) A) and B)

Question 19

Which of the following countries is a G-8 nation?

Accepted Answer

A)   India
B)   France
C)   Mexico
D)   Saudi ArabiaE) None of the above
F) A) and B)

Question 20

The Canadian demand for Swiss francs is:

Accepted Answer

A)   downward sloping because, at lower dollar prices for francs, Canadians will want to buy more Swiss goods and services.
B)   downward sloping because, at higher dollar prices for francs, Canadians will want to buy more Swiss goods and services.
C)   downward sloping because the dollar price of francs and the franc price of dollars are directly related.
D)   upward sloping because a higher dollar price of Swiss francs makes Swiss goods and services more attractive to Canadians.E) All of the above
F) None of the above

Exam 17: Exchange Rates and the Balance of Payments

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Correct Answer
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If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Correct Answer
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The Canadian demand for Swiss francs is:

Correct Answer
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The following are hypothetical exchange rates: 2 Swiss francs = 1 British pound and $1 = 2 British pound. We can conclude that:

Correct Answer
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Correct Answer
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If a British importer can purchase 12,000 Canadian Dollar for 8,000 British Pound, the rate of exchange between the two currencies:

Correct Answer
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Appreciation of the Swiss franc will:

Correct Answer
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If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Correct Answer
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Which of the following have substantially equivalent effects insofar as a nation's volume of exports and imports is concerned?

Correct Answer
verified

In equilibrium, if $1 = .5 pounds sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollars and Swiss francs will be:

Correct Answer
verified

If a nation's balance on current account is a negative $20 billion, while its balance on capital account is a positive $16.5 billion, we can conclude with certainty that this nation is experiencing:

Correct Answer
verified

Which of the following is not included in the current account of a nation's balance of payments?

Correct Answer
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If in a system of fixed exchange rates the dollar price of pounds is above the market equilibrium

Correct Answer
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Which of the following countries is a G-8 nation?

Correct Answer
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In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

Correct Answer
verified

According to the purchasing power parity theory of exchange rates:

Correct Answer
verified

There must always be a balance of a nation's:

Correct Answer
verified

Assume that Switzerland and Britain have flexible exchange rates. Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Correct Answer
verified

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

Correct Answer
verified

Proponents of the managed floating exchange rate system argue that it has:

Correct Answer
verified

Exam 17: Exchange Rates and the Balance of Payments

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

Correct AnswerverifiedShow Answer

If the exchange rate between the Canadian dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is:

Correct AnswerverifiedShow Answer

The Canadian demand for Swiss francs is:

Correct AnswerverifiedShow Answer

The following are hypothetical exchange rates: 2 Swiss francs = 1 British pound and $1 = 2 British pound. We can conclude that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a British importer can purchase 12,000 Canadian Dollar for 8,000 British Pound, the rate of exchange between the two currencies:

Correct AnswerverifiedShow Answer

Appreciation of the Swiss franc will:

Correct AnswerverifiedShow Answer

If Canada has full employment and the dollar dramatically depreciates in value, we can expect:

Correct AnswerverifiedShow Answer

Which of the following have substantially equivalent effects insofar as a nation's volume of exports and imports is concerned?

Correct AnswerverifiedShow Answer

In equilibrium, if $1 = .5 pounds sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollars and Swiss francs will be:

Correct AnswerverifiedShow Answer

If a nation's balance on current account is a negative $20 billion, while its balance on capital account is a positive $16.5 billion, we can conclude with certainty that this nation is experiencing:

Correct AnswerverifiedShow Answer

Which of the following is not included in the current account of a nation's balance of payments?

Correct AnswerverifiedShow Answer

If in a system of fixed exchange rates the dollar price of pounds is above the market equilibrium

Correct AnswerverifiedShow Answer

Which of the following countries is a G-8 nation?

Correct AnswerverifiedShow Answer

In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

Correct AnswerverifiedShow Answer

According to the purchasing power parity theory of exchange rates:

Correct AnswerverifiedShow Answer

There must always be a balance of a nation's:

Correct AnswerverifiedShow Answer

Assume that Switzerland and Britain have flexible exchange rates. Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

Correct AnswerverifiedShow Answer

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

Correct AnswerverifiedShow Answer

Proponents of the managed floating exchange rate system argue that it has:

Correct AnswerverifiedShow Answer

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