Question 1

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

Accepted Answer

An increase in the real rate of interest in the U.S. makes U.S. investments more attractive, leading to higher demand for dollars, which increases the price of the dollar in Indian rupees.

Question 2

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

Accepted Answer

The answer of An increase in the equilibrium price of...

Question 3

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds 
-Exhibit 15-7 shows a situation in which:

Accepted Answer

The exchange rate has moved from 1.50 USD/GBP to 1.57 USD/GBP, indicating that the pound has appreciated relative to the dollar. The chart also shows that the demand for pounds has increased while the demand for dollars has decreased, which further supports the idea that the pound has appreciated and the dollar has depreciated.

Question 4

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds 
-Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

Accepted Answer

The answer of Exhibit 15-7 Foreign exchange market for U.S....

Question 5

A depreciation of one's currency means that:

Accepted Answer

A depreciation of a currency means that it is now worth less compared to other currencies. Therefore, it would require more units of this currency to purchase one unit of another currency, which means it requires more of this currency in exchange for one unit of another currency. This would result in the country's exports becoming cheaper and more attractive to foreign buyers, while the imports become more expensive for the country.

Question 6

If the dollar appreciates (becomes stronger) this causes:

Accepted Answer

When the dollar appreciates, U.S. goods become more expensive for foreigners, leading to a decrease in exports. Simultaneously, foreign goods become cheaper for Americans, increasing imports. This can result in a trade deficit.

Question 7

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

Accepted Answer

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called a floating exchange rate. This means that the value of the currency will fluctuate based on market forces such as trade flows, investment flows, and economic indicators. Unlike a fixed exchange rate, which is set by the government, a floating exchange rate can adjust over time to reflect changes in the economy.

Question 8

If the Japanese price level falls relative to the price level in the United States, then:

Accepted Answer

The correct answer is E because if the Japanese price level falls relative to the price level in the United States, then Japanese goods will become cheaper relative to US goods, and US goods will become more expensive relative to Japanese goods. This will lead to a decrease in demand for US exports by Japanese consumers, a decrease in the demand for dollars by Japanese importers, and an increase in the supply of dollars by Japanese exporters. As a result, the value of the dollar will fall.

Question 9

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Accepted Answer

If Japanese imports become more popular, then there will be an increase in the demand for dollars to purchase those imports. This increase in demand will cause the supply of dollars curve to shift to the right, as there will be an increase in the supply of dollars available in response to the increased demand.

Question 10

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

Accepted Answer

A) An increase in the U.S. inflation rate compared to the rate in Japan would lead to a decrease in the value of the U.S. dollar relative to the Japanese yen, making Japanese goods relatively cheaper for U.S. consumers, which would increase the demand for yen.
B) A higher real rate of interest on investments in Japan than on investments in the United States would increase the demand for yen as investors would try to invest in Japan to receive higher returns.
C) The popularity of Japanese products increases in the United States may not necessarily affect the demand for yen as it does not directly impact the exchange rate between the two currencies. 
Thus, all of these factors - A, B, and C - would cause the U.S. demand curve for Japanese yen to shift to the right.

Question 11

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

Accepted Answer

A shift in consumer preferences away from Mexican products would decrease the demand for pesos, leading to a leftward shift in the demand curve and a decrease in the peso's price per dollar.

Question 12

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

Accepted Answer

The answer of If real interest rates in the United...

Question 13

An increase in inflation in the United States relative to the rate in France would make:

Accepted Answer

An increase in inflation in the United States relative to the rate in France would lead to a decrease in the value of the U.S. dollar relative to the euro. As a result, French goods would become relatively cheaper in the United States, while U.S. goods would become relatively more expensive in France, making choice B the correct answer.

Question 14

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Accepted Answer

Higher incomes in the United States can lead to increased demand for imports, including those from Japan, which would increase the supply of dollars in the foreign exchange market, causing the dollar to depreciate against the yen.

Question 15

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Accepted Answer

The answer of Which of the following changes in the...

Question 16

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Accepted Answer

A decrease in the supply of dollars would cause the value of the dollar to increase relative to the Mexican peso. This would make it more expensive for holders of pesos to purchase dollars, which would decrease the equilibrium quantity of dollars.

Question 17

Suppose the exchange rate changes so that more Japanese yen are required to buy a dollar. We could conclude that:

Accepted Answer

When more yen are required to buy a dollar, the yen has depreciated, making Japanese goods cheaper for U.S. citizens, leading them to buy more Japanese imports.

Question 18

A depreciation in the value of the U.S. dollar would:

Accepted Answer

The answer of A depreciation in the value of the...

Question 19

Which of the following changes in the exchange rate represents an appreciation of the dollar?

Accepted Answer

The answer of Which of the following changes in the...

Question 20

A depreciation of one's currency means that:

Accepted Answer

The answer of A depreciation of one's currency means that:
...

Quiz 15: International Trade and Finance

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n) :

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds -Exhibit 15-7 shows a situation in which:

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds -Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

A depreciation of one's currency means that:

If the dollar appreciates (becomes stronger) this causes:

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

If the Japanese price level falls relative to the price level in the United States, then:

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

An increase in inflation in the United States relative to the rate in France would make:

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Which of the following changes in the exchange rate represents a depreciation of the dollar?

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Suppose the exchange rate changes so that more Japanese yen are required to buy a dollar. We could conclude that:

A depreciation in the value of the U.S. dollar would:

Which of the following changes in the exchange rate represents an appreciation of the dollar?

A depreciation of one's currency means that: