Question 1

If the U.S. Federal Reserve increases interest rates, ceteris paribus,

Accepted Answer

The answer of If the U.S. Federal Reserve increases interest...

Question 2

Suppose $1 will buy 150 yen in January and 200 yen in December. This change could have occurred if the

Accepted Answer

The answer of Suppose $1 will buy 150 yen in...

Question 3

The U.S. dollar will depreciate in value if

Accepted Answer

The U.S. dollar will depreciate in value if there is either a decrease in demand for U.S. dollars (demand curve shifts leftward) or an increase in the supply of U.S. dollars (supply curve shifts rightward). Both scenarios lead to a lower value of the dollar.

Question 4

The U.S. dollar will appreciate in value if

Accepted Answer

When the demand curve for U.S. dollars shifts rightward, it means that more people want to buy U.S. dollars, increasing the demand for the currency. This increased demand causes the value of the U.S. dollar to appreciate. Therefore, an increase in demand for U.S. dollars will lead to an appreciation of the currency.

Question 5

If the U.S. Federal Reserve increases interest rates,

Accepted Answer

When the U.S. Federal Reserve increases interest rates, U.S. assets become more attractive to investors, increasing the demand for U.S. dollars. Simultaneously, fewer dollars are supplied as investors hold onto U.S. assets, shifting the supply curve leftward.

Question 6

An increase in the U.S. demand for imports will the supply of dollars and lead the dollar to .

Accepted Answer

An increase in U.S. demand for imports increases the supply of dollars in the foreign exchange market as more dollars are exchanged for foreign currencies, leading to a depreciation of the dollar.

Question 7

An increase in U.S. exports will the demand for dollars and lead the dollar to .

Accepted Answer

When there is an increase in U.S. exports, it means that there will be an increase in the demand for dollars as foreign countries will need to purchase more dollars to pay for the exported goods. This increase in demand for dollars will lead to an appreciation in the value of the dollar, making it stronger against other currencies. Therefore, the correct choice is D, increase in demand for dollars will lead to an appreciation of the dollar.

Question 8

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars _ and the supply of U.S. dollars .

Accepted Answer

When the U.S. interest rate rises relative to other countries, investors will demand more U.S. dollars to earn the higher interest rate. This increased demand for U.S. dollars will cause the value of the dollar to rise, resulting in a decrease in the supply of U.S. dollars in the market. Therefore, the demand for U.S. dollars increases, and the supply of U.S. dollars decreases.

Question 9

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve
For U.S. dollars shifts and the supply curve of U.S. dollars shifts .

Accepted Answer

With an increase in the U.S. interest rate differential, there will be a higher demand for U.S. dollars as investors seek to take advantage of the higher interest rate. This will cause the demand curve for U.S. dollars to shift rightward. At the same time, the supply of U.S. dollars will decrease as investors hold onto their dollars to take advantage of the higher interest rate, causing the supply curve to shift leftward. Therefore, the correct choice is C, as there will be a rightward shift in the demand curve and a leftward shift in the supply curve.

Question 10

If the European Central Bank increases interest rates,

Accepted Answer

If the European Central Bank increases interest rates, it would make European euros more attractive to investors because they can get a higher return on their investment. As a result, the demand curve for European euros would shift rightward. On the other hand, the British sterling pound would become relatively less attractive because investors can get a higher return in euros, so the demand curve for sterling pounds would shift leftward. Therefore, the best choice is B, as it correctly explains the direction of the shifts in both demand curves.

Question 11

The exchange rate definitely rises if the

Accepted Answer

When the demand for dollars increases and the supply of dollars decreases, there will be a scarcity of dollars which can cause an increase in its exchange rate. This is because people would be willing to pay more for dollars to get hold of them, leading to an appreciation in its value.

Question 12

Other things remaining the same, if the expected future exchange rate rises, the demand curve for
u.S. dollars shifts and the supply curve of U.S. dollars shifts .

Accepted Answer

If the expected future exchange rate rises, it means that foreign currency will be expected to become more expensive in the future, hence causing an increase in demand for U.S. dollars in the present. This will shift the demand curve for U.S. dollars rightward. In response to the higher demand for U.S. dollars, sellers of foreign currency will need to supply more U.S. dollars in the foreign exchange market. Thus, the supply curve for U.S. dollars will shift leftward.

Question 13

If England's Central Bank decreases interest rates,

Accepted Answer

The answer of If England's Central Bank decreases interest rates,
...

Question 14

If the demand for a country's currency increases, the currency

Accepted Answer

If the demand for a country's currency increases, it means that there are more buyers for that currency, which creates upward pressure on the value of the currency. As a result, the currency appreciates.

Question 15

The U.S. dollar will depreciate in value if

Accepted Answer

A decrease in demand for the dollar means that people and institutions are not as interested in holding or acquiring U.S. dollars. This lack of demand means that the value of the dollar will fall.

Question 16

Assume that there is an increased demand in the United States for European wines. If all other factors are held constant, this change will result in

Accepted Answer

An increased demand for European wines will result in an increase in the demand for euros, causing an increase in the exchange rate for euros. This will make European wine more expensive for Americans, which may lead to a decrease in demand over time as substitution effects take place.

Question 17

If the European Central Bank increases interest rates,

Accepted Answer

When the European Central Bank increases interest rates, European assets become more attractive, increasing demand for euros and decreasing their supply as investors convert other currencies to euros.

Question 18

Which of the following will lead to an appreciation of the U.S. dollar against the British pound?

Accepted Answer

An increase in British demand for U.S. imports means more pounds are exchanged for dollars, increasing the demand for dollars and leading to its appreciation against the pound.

Question 19

Suppose that U.S. interest rates rise relative to foreign interest rates. Within the foreign exchange market, there is a shift in the demand curve for dollars and a shift in the supply curve of dollars.

Accepted Answer

When U.S. interest rates rise relative to foreign rates, foreign investors demand more dollars to invest in U.S. assets, shifting the demand curve for dollars rightward. Simultaneously, U.S. investors are less inclined to invest abroad, reducing the supply of dollars in the foreign exchange market, shifting the supply curve leftward.

Question 20

If the interest rates in the United States increases, then the demand for U.S. dollars the supply of U.S. dollars .

Accepted Answer

If interest rates in the United States increase, it becomes more attractive for foreign investors to save in U.S. dollars due to higher returns on their investments. Therefore, the demand for U.S. dollars increases. At the same time, this can lead to inflation due to the increased demand for goods and services. To reduce the inflation, the Federal Reserve may increase interest rates further, which can decrease the supply of U.S. dollars by making U.S. investments less attractive. Thus, the correct answer is that the demand for U.S. dollars increases but the supply of U.S. dollars decreases.

Quiz 9: The Exchange Rate and the Balance of Payments

If the U.S. Federal Reserve increases interest rates, ceteris paribus,

Suppose $1 will buy 150 yen in January and 200 yen in December. This change could have occurred if the

The U.S. dollar will depreciate in value if

The U.S. dollar will appreciate in value if

If the U.S. Federal Reserve increases interest rates,

An increase in the U.S. demand for imports will the supply of dollars and lead the dollar to .

An increase in U.S. exports will the demand for dollars and lead the dollar to .

When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars _ and the supply of U.S. dollars .

Other things remaining the same, if the U.S. interest rate differential increases, the demand curve For U.S. dollars shifts and the supply curve of U.S. dollars shifts .

If the European Central Bank increases interest rates,

The exchange rate definitely rises if the

Other things remaining the same, if the expected future exchange rate rises, the demand curve for u.S. dollars shifts and the supply curve of U.S. dollars shifts .

If England's Central Bank decreases interest rates,

If the demand for a country's currency increases, the currency

The U.S. dollar will depreciate in value if

Assume that there is an increased demand in the United States for European wines. If all other factors are held constant, this change will result in

If the European Central Bank increases interest rates,

Which of the following will lead to an appreciation of the U.S. dollar against the British pound?

Suppose that U.S. interest rates rise relative to foreign interest rates. Within the foreign exchange market, there is a shift in the demand curve for dollars and a shift in the supply curve of dollars.

If the interest rates in the United States increases, then the demand for U.S. dollars the supply of U.S. dollars .