Deck 10: Trading Dollars for Dollars Exchange Rates and Payments With the Rest of the World

Question 1

According to the law of demand for Canadian dollars, as the exchange rate

A) rises, the quantity demanded of Canadian dollars increases.
B) rises, the demand curve for Canadian dollars shifts rightward.
C) falls, the quantity demanded of Canadian dollars increases.
D) falls, the demand curve for Canadian dollars shifts rightward.
E) rises or falls, none of above are true.

Answer 1

falls, the quantity demanded of Canadian dollars increases.

Question 2

When there is a shortage of Canadian dollars in the foreign exchange market,

A) competition among sellers raises the exchange rate.
B) competition among buyers raises the exchange rate.
C) competition among sellers lowers the exchange rate.
D) competition among buyers lowers the exchange rate.
E) cooperation between buyers and sellers lowers the exchange rate.

Answer 2

competition among buyers raises the exchange rate.

Question 3

When there is excess supply of Canadian dollars in the foreign exchange market,

A) competition among sellers raises the exchange rate.
B) competition among buyers raises the exchange rate.
C) competition among sellers lowers the exchange rate.
D) competition among buyers lowers the exchange rate.
E) cooperation between buyers and sellers raises the exchange rate.

Answer 3

competition among sellers lowers the exchange rate.

Question 4

When there is excess demand for Canadian dollars in the foreign exchange market,

A) competition among sellers raises the exchange rate.
B) competition among buyers raises the exchange rate.
C) competition among sellers lowers the exchange rate.
D) competition among buyers lowers the exchange rate.
E) cooperation between buyers and sellers lowers the exchange rate.

Question 5

According to the law of supply for Canadian dollars, as the exchange rate

A) rises, the quantity supplied of Canadian dollars decreases.
B) rises, the supply of Canadian dollars decreases.
C) falls, the quantity supplied of Canadian dollars decreases.
D) falls, the supply of Canadian dollars decreases.
E) rises or falls, none of above are true.

Question 6

According to the law of supply for Canadian dollars, as the exchange rate

A) rises, the quantity supplied of Canadian dollars decreases.
B) rises, the supply curve of Canadian dollars shifts leftward.
C) falls, the quantity supplied of Canadian dollars decreases.
D) falls, the supply curve of Canadian dollars shifts leftward.
E) rises or falls, none of above are true.

Question 7

If C$1.00 = US$0.80, what is the reciprocal exchange rate?

A) C$0.80 = US$1.00
B) C$0.80 = US$1.25
C) US$1.00 = C$1.25
D) US$1.00 = C$0.80
E) US$1.00 = C$8.00

Question 8

Which statements are true? A higher value of the Canadian dollar makes:
1) R.O.W. imports and assets more expensive for Canadians.
2) R.O.W. imports and assets less expensive for Canadians.
3) Canadian exports and assets more expensive for non-Canadians.
4) Canadian exports and assets less expensive for non-Canadians.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 2 only

Question 9

All of the following create a demand for Canadian dollars in the foreign exchange market except

A) Susan from Manitoba goes shopping in New York.
B) Richard from New York buys a Government of Canada bond.
C) Samantha from France buys a bottle of Canadian wine.
D) Alexandra from Mexico pays tuition to the University of Montreal.
E) Rachel from New Jersey goes on a shopping trip in Toronto.

Question 10

When there is a surplus of Canadian dollars in the foreign exchange market,

A) competition among sellers raises the exchange rate.
B) competition among buyers raises the exchange rate.
C) competition among sellers lowers the exchange rate.
D) competition among buyers lowers the exchange rate.
E) cooperation between buyers and sellers raises the exchange rate.

Question 11

Which statements are true? If the exchange rate changes from C$1 = US$0.90 to C$1 = US$1.10, then the:
1) Canadian dollar depreciated against the U.S. dollar.
2) Canadian dollar appreciated against the U.S. dollar.
3) U.S. dollar depreciated against the Canadian dollar.
4) U.S. dollar appreciated against the Canadian dollar.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 2 only

Question 12

According to the law of supply for Canadian dollars, as the exchange rate

A) rises, the quantity supplied of Canadian dollars increases.
B) rises, the supply curve of Canadian dollars shifts rightward.
C) falls, the quantity supplied of Canadian dollars increases.
D) falls, the supply curve of Canadian dollars shifts rightward.
E) rises or falls, none of above are true.

Question 13

According to the law of demand for Canadian dollars, as the exchange rate

A) rises, the quantity demanded of Canadian dollars decreases.
B) rises, the demand curve for Canadian dollars shifts leftward.
C) falls, the quantity demanded of Canadian dollars decreases.
D) falls, the demand curve for Canadian dollars shifts leftward.
E) rises or falls, none of above are true.

Question 14

According to the law of demand for Canadian dollars, as the exchange rate

A) rises, the quantity demanded of Canadian dollars decreases.
B) rises, the demand for Canadian dollars decreases.
C) falls, the quantity demanded of Canadian dollars decreases.
D) falls, the demand for Canadian dollars decreases.
E) rises or falls, none of above are true.

Question 15

Which statements are true? If the exchange rate changes from US$1 = C$1.10 to US$1 = C$0.90, then the:
1) Canadian dollar depreciated against the U.S. dollar.
2) Canadian dollar appreciated against the U.S. dollar.
3) U.S. dollar depreciated against the Canadian dollar.
4) U.S. dollar appreciated against the Canadian dollar.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 3 only

Question 16

According to the law of supply for Canadian dollars, as the exchange rate

A) rises, the quantity supplied of Canadian dollars increases.
B) rises, the supply of Canadian dollars increases.
C) falls, the quantity supplied of Canadian dollars increases.
D) falls, the supply of Canadian dollars increases.
E) rises or falls, none of above are true.

Question 17

Which statements are true? A lower value of the Canadian dollar makes:
1) R.O.W. imports and assets more expensive for Canadians.
2) R.O.W. imports and assets less expensive for Canadians.
3) Canadian exports and assets more expensive for non-Canadians.
4) Canadian exports and assets less expensive for non-Canadians.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 1 only

Question 18

Which statements are true? If the exchange rate changes from US$1 = C$0.90 to US$1 = C$1.10, then the:
1) Canadian dollar appreciated against the U.S. dollar.
2) Canadian dollar depreciated against the U.S. dollar.
3) U.S. dollar appreciated against the Canadian dollar.
4) U.S. dollar depreciated against the Canadian dollar.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 3 only

Question 19

Which statements are true? If the exchange rate changes from C$1 = US$1.10 to C$1 = US$0.90, then the:
1) Canadian dollar depreciated against the U.S. dollar.
2) Canadian dollar appreciated against the U.S. dollar.
3) U.S. dollar depreciated against the Canadian dollar.
4) U.S. dollar appreciated against the Canadian dollar.

A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 1 only

Question 20

According to the law of demand for Canadian dollars, as the exchange rate

A) rises, the quantity demanded of Canadian dollars increases.
B) rises, the demand for Canadian dollars increases.
C) falls, the quantity demanded of Canadian dollars increases.
D) falls, the demand for Canadian dollars increases.
E) rises or falls, none of above are true.

Question 21

When Michael from Ontario buys hockey tickets in Michigan to watch the Maple Leafs crush the Red Wings, the effect on the foreign exchange market is a(n)

A) increased supply of U.S. dollars.
B) increased demand for Canadian dollars.
C) increased supply of Canadian dollars.
D) decreased supply of U.S. dollars.
E) decreased demand for U.S. dollars.

Question 22

Excess supply of Canadian dollars in the FOREX market causes the Canadian dollar to depreciate.

Question 23

An excess demand for Canadian dollars in the foreign exchange market causes the Canadian dollar to

A) appreciate, increasing imports.
B) appreciate, increasing exports.
C) depreciate, increasing exports.
D) depreciate, decreasing imports.
E) depreciate, decreasing exports.

Question 24

When a student from Toronto pays her tuition to a American university, the demand for U.S. dollars increases in the foreign exchange market.

Question 25

A big wheat harvest that results in record Canadian export sales increases the demand for Canadian dollars in the foreign exchange market.

Question 26

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is

A) increased demand for Canadian dollars.
B) increased supply of Canadian dollars.
C) increased supply of U.S. dollars.
D) decreased supply of U.S. dollars.
E) decreased demand for U.S. dollars.

Question 27

The market in which the currency of one country exchanges for the currency of another country is the

A) money market.
B) capital market.
C) foreign exchange market.
D) forward exchange market.
E) international trading market.

Question 28

When Richard from New York buys a Government of Canada bond, the effect on the foreign exchange market is a

A) rightward shift of the demand curve for U.S. dollars.
B) leftward shift of the demand curve for Canadian dollars.
C) rightward shift of the supply curve of Canadian dollars.
D) rightward shift of the demand curve for Canadian dollars.
E) leftward shift of the supply curve of U.S. dollars.

Question 29

If the Canadian dollar exchanges for 0.90 U.S. dollars and also for 0.65 Euros, then a U.S. dollar exchanges for

A) 1.00 Euros.
B) 1.55 Euros.
C) 0.25 Euros.
D) 1.39 Euros.
E) 0.72 Euros.

Question 30

As the value of the Canadian dollar rises in the foreign exchange market, the

A) import effect increases the quantity of Canadian dollars supplied.
B) import effect increases the quantity of Canadian dollars demanded.
C) import effect causes a decrease in imports.
D) export effect causes an increase in exports.
E) export effect increases the quantity of Canadian dollars demanded.

Question 31

When Michael from Ontario buys hockey tickets in Michigan to watch the Maple Leafs crush the Red Wings, the effect on the foreign exchange market is a

A) rightward shift of the supply curve of U.S. dollars.
B) rightward shift of the demand curve for Canadian dollars.
C) rightward shift of the supply curve of Canadian dollars.
D) leftward shift of the supply curve of U.S. dollars.
E) leftward shift of the demand curve for U.S. dollars.

Question 32

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is a

A) rightward shift of the demand curve for Canadian dollars.
B) rightward shift of the supply curve of Canadian dollars.
C) rightward shift of the supply curve of U.S. dollars.
D) leftward shift of the supply curve of U.S. dollars.
E) leftward shift of the demand curve for U.S. dollars.

Question 33

Excess demand for Canadian dollars in the FOREX market causes the Canadian dollar to depreciate.

Question 34

An American investor who buys a Government of Canada bond increases the supply of Canadian dollars in the foreign exchange market.

Question 35

When a student from Toronto pays her tuition to a American university, the supply of Canadian dollars decreases in the foreign exchange market.

Question 36

When Richard from New York buys a Government of Canada bond, the effect on the foreign exchange market is

A) increased demand for U.S. dollars.
B) decreased demand for Canadian dollars.
C) increased supply of Canadian dollars.
D) increased demand for Canadian dollars.
E) decreased supply of U.S. dollars.

Question 37

The quantity of Canadian dollars demanded depends on all of the following except the

A) exchange rate.
B) Canadian demand for imports from R.O.W.
C) interest rates in Canada.
D) interest rates in R.O.W.
E) expected future exchange rate.

Question 38

The exchange rate between the Canadian dollar and the British pound is 0.5 pounds per dollar. If a radio sells for 38 pounds in Britain, what is the dollar price of the radio?

A) $19
B) $25
C) $38
D) $57
E) $76

Question 39

An excess supply of Canadian dollars in the foreign exchange market causes the Canadian dollar to

A) depreciate, increasing imports.
B) depreciate, decreasing exports.
C) appreciate, increasing exports.
D) appreciate, decreasing exports.
E) depreciate, increasing exports.

Question 40

The import effect suggests that when the exchange rate rises, Canadians buy more imported products.

Question 41

The import effect suggests that when the exchange rate falls, Canadians buy more imported products.

Question 42

The export effect suggests that when the exchange rate rises, demand for Canadian exports increases.

Question 43

Canadians' supply of Canadian dollars is a supply of exports and assets to R.O.W.

Question 44

The Canadian dollar appreciated against the U.S. dollar between 1991 and 2002.

Question 45

Canadians' supply of Canadian dollars is a demand for imports and assets from R.O.W.

Question 46

A rise in the exchange rate is called a currency depreciation.

Question 47

An exchange rate of C$1.00 = US$0.90 means it takes 90 cents U.S. to buy 1 Canadian dollar.

Question 48

When Canadian interest rates fall the

A) demand for Canadian dollars in the foreign exchange market increases.
B) Canadian inflation rate falls.
C) demand for Canadian exports decreases.
D) supply of Canadian dollars in the foreign exchange market decreases.
E) Canadian dollar depreciates.

Question 49

The Canadian dollar appreciates if

A) Canadian real GDP decreases.
B) world prices for Canadian resources fall.
C) Canadian interest rates fall relative to other countries.
D) the Canadian inflation rate rises relative to other countries.
E) speculators believe the Canadian dollar will appreciate in the future.

Question 50

A fall in the exchange rate is called a currency depreciation.

Question 51

When Canadian interest rates fall the

A) demand curve for Canadian dollars in the foreign exchange market shifts rightward.
B) Canadian inflation rate falls.
C) demand for Canadian exports decreases.
D) supply curve of Canadian dollars in the foreign exchange market shifts leftward.
E) Canadian dollar depreciates.

Question 52

The Canadian dollar appreciated against the U.S. dollar between 2002 and 2007.

Question 53

The Canadian dollar depreciates if

A) Canadian interest rates fall relative to other countries.
B) the Canadian inflation rate falls relative to other countries.
C) Canadian real GDP increases.
D) R.O.W. demand for Canadian exports increases.
E) world prices for Canadian resources rise.

Question 54

The Canadian dollar appreciates against the U.S. dollar if

A) Canadian interest rates fall relative to U.S. interest rates.
B) U.S. interest rates rise relative to Canadian interest rates.
C) U.S. demand for Canadian exports decreases.
D) prices rise in the U.S. but remain constant in Canada.
E) speculators believe the Canadian dollar will depreciate in the future.

Question 55

In the foreign exchange market, the demand for one currency is the supply of another currency.

Question 56

A lower inflation rate in Canada relative to other countries causes the Canadian dollar to appreciate because

A) Canadian real interest rates fall.
B) prices of Canadian resources fall in international markets.
C) speculators anticipate depreciation of the Canadian dollar.
D) Canadian products and services are relatively cheaper so exports to R.O.W. increase.
E) Canadian products and services are relatively cheaper so imports from R.O.W. increase.

Question 57

The export effect suggests that when the exchange rate falls, demand for Canadian exports increases.

Question 58

Non-Canadians' demand for Canadian dollars is a demand for Canadian exports and assets.

Question 59

An exchange rate of C$1.00 = US$0.90 means it takes 90 cents Canadian to buy 1 U.S. dollar.

Question 60

A negative demand shock causes the Canadian dollar to depreciate because

A) the Canadian interest rate differential increases.
B) import spending is reduced.
C) investor confidence in Canada is reduced.
D) negative demand shocks cause inflation.
E) Canadian resources will be less valuable in international markets.

Question 61

When the Canadian money supply increases, the

A) demand for Canadian dollars decreases.
B) supply of Canadian dollars decreases.
C) Canadian dollar appreciates in value.
D) Canadian interest rates rise.
E) velocity of money decreases.

Question 62

The economic force that causes opposite effect on the value of the Canadian dollar is changes in

A) interest rate differentials.
B) inflation rate differentials.
C) Canadian real GDP.
D) R.O.W. demand for Canadian exports.
E) expectations.

Question 63

When R.O.W. demand for Canadian exports decreases, the

A) Canadian dollar is not affected.
B) demand for Canadian dollars increases.
C) supply of Canadian dollars decreases.
D) Canadian dollar appreciates.
E) Canadian dollar depreciates.

Question 64

What increases the supply of Canadian dollars in the foreign exchange market?

A) An increase in demand for imports from R.O.W. by Canadians.
B) A decrease in demand for Canadian exports by non-Canadians.
C) The Canadian dollar is expected to appreciate next year.
D) U.S. interest rates fall.
E) None of the above.

Question 65

When most currency speculators expect the Canadian dollar to depreciate, the

A) Canadian dollar depreciates.
B) Canadian dollar appreciates.
C) demand for Canadian dollars increases.
D) supply of Canadian dollars decreases.
E) Canadian interest rate differential increases.

Question 66

When the Canadian money supply decreases, the

A) demand for Canadian dollars decreases.
B) supply of Canadian dollars increases.
C) Canadian dollar appreciates in value.
D) Canadian interest rates fall.
E) value of the Canadian dollar does not change.

Question 67

Currency speculators sell Canadian dollars whenever they think that the

A) Canadian real interest rates are rising.
B) Canadian inflation rate is falling.
C) Canadian real GDP is increasing.
D) world prices for Canadian resources are falling.
E) demand for Canadian dollars is increasing.

Question 68

What increases the demand for Canadian dollars in the foreign exchange market?

A) An increase in demand for imports from R.O.W. by Canadians.
B) A decrease in demand for Canadian exports by non-Canadians.
C) The Canadian dollar is expected to appreciate next year.
D) U.S. interest rates rise.
E) The Canadian dollar is expected to depreciate next year.

Question 69

The economic force that causes opposite effects on the value of the Canadian dollar is changes in

A) interest rate differentials.
B) inflation rate differentials.
C) world prices for Canadian resource exports.
D) Canadian real GDP.
E) expectations.

Question 70

When most currency speculators expect the Canadian dollar to depreciate, the

A) Canadian dollar depreciates.
B) Canadian dollar appreciates.
C) demand curve for Canadian dollars shifts rightward.
D) supply curve of Canadian dollars shifts leftward.
E) Canadian interest rate differential increases.

Question 71

The economic force that reinforces the effect of other forces on value of the Canadian dollar is changes in

A) interest rate differentials.
B) expectations.
C) world prices for Canadian resource exports.
D) Canadian real GDP.
E) inflation rate differentials.

Question 72

The economic force that reinforces the effect of other forces on the value of the Canadian dollar is changes in

A) interest rate differentials.
B) inflation rate differentials.
C) Canadian real GDP.
D) R.O.W. demand for Canadian exports.
E) expectations.

Question 73

When R.O.W. demand for Canadian exports decreases, the

A) Canadian dollar is not affected.
B) demand curve for Canadian dollars shifts rightward.
C) supply curve of Canadian dollars shifts leftward.
D) Canadian dollar appreciates.
E) Canadian dollar depreciates.

Question 74

When most currency speculators expect the Canadian dollar to appreciate, the

A) demand curve for Canadian dollars shifts leftward.
B) supply curve of Canadian dollars shifts rightward.
C) demand curve for Canadian dollars shifts rightward.
D) demand curve for Canadian dollars does not shift.
E) supply curve of Canadian dollars does not shift.

Question 75

The Canadian dollar depreciates against the Japanese yen if there is a(n)

A) rise in the Canadian interest rate.
B) fall in the Canadian interest rate.
C) fall in the Japanese interest rate.
D) increase in the expected future value of the Canadian dollar.
E) increase in the Canadian interest rate differential.

Question 76

If you think the Canadian dollar will depreciate, you can expect to make money by

A) only buying Canadian dollars.
B) only buying U.S. dollars.
C) only selling Canadian dollars.
D) only selling U.S. dollars.
E) both buying U.S. dollars and selling Canadian dollars.

Question 77

When most currency speculators expect the Canadian dollar to appreciate, the

A) demand for Canadian dollars decreases.
B) supply of Canadian dollars increases.
C) demand for Canadian dollars increases.
D) demand for Canadian dollars does not change.
E) supply of Canadian dollars does not change.

Question 78

A decreasing Canadian inflation rate differential causes the Canadian dollar to appreciate because our exports become relatively cheaper in international markets.

Question 79

When the Canadian money supply decreases, the

A) demand curve for Canadian dollars shifts leftward.
B) supply curve of Canadian dollars shifts rightward.
C) Canadian dollar appreciates in value.
D) Canadian interest rates fall.
E) value of the Canadian dollar does not change.

Question 80

When the Canadian money supply increases, the

A) demand curve for Canadian dollars shifts leftward.
B) supply curve of Canadian dollars shifts leftward.
C) Canadian dollar appreciates in value.
D) Canadian interest rates rise.
E) velocity of money decreases.