Question 1

The law of supply of foreign exchange tells us that, other things remaining the same,

Accepted Answer

The law of supply of foreign exchange states that, keeping all other factors constant, the higher the exchange rate, the greater the quantity of a currency that is supplied. This is because a higher exchange rate means that exporters receive more units of their domestic currency for each unit of foreign currency they earn, making it more profitable for them to sell goods and services abroad. Therefore, they will be willing to supply more of their currency to the foreign exchange market to take advantage of the higher exchange rate.

Question 2

Foreign currency is

Accepted Answer

Foreign currency refers to foreign notes, coins, and bank deposits.

Question 3

The law of demand for foreign exchange tells us that other things remaining the same,

Accepted Answer

The law of demand for foreign exchange states that as the exchange rate (price of foreign currency in terms of domestic currency) increases, the quantity of domestic currency demanded for exchange into foreign currency decreases. Therefore, the higher the exchange rate, the smaller is the quantity of Canadian dollars demanded. Option D correctly represents this relationship.

Question 4

If the exchange rate is too high in the foreign exchange market,

Accepted Answer

If the exchange rate is too high, it means the currency is overvalued, leading to a surplus of the currency as supply exceeds demand. This surplus will cause the exchange rate to fall as the market seeks equilibrium.

Question 5

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S, and 1 Canadian dollar buys 8.6 Chinese yuan. How many yuan will $1 U.S. buy?

Accepted Answer

First, we need to find the exchange rate between the U.S. dollar and the Canadian dollar, which is the reciprocal of 1.05, or approximately 0.9524 Canadian dollars per U.S. dollar. 
Next, we can use the exchange rate between the Canadian dollar and the Chinese yuan to find the exchange rate between the U.S. dollar and the Chinese yuan. 
To do this, we can divide the exchange rate between the Canadian dollar and the Chinese yuan (8.6) by the exchange rate between the Canadian dollar and the U.S. dollar (0.9524). 
This gives us: 8.6/0.9524 = 9.03
Therefore, $1 U.S. will buy approximately 9.03 Chinese yuan. 
The closest answer choice is C, 8.2 yuan, but this is not the exact answer.

Question 6

Appreciation of a currency means

Accepted Answer

Appreciation of a currency means that it can buy more foreign currency. When a currency appreciates, its exchange rate increases, meaning that more foreign currency can be purchased with each unit of the appreciating currency. This can result in a lower cost of imports and can make traveling abroad less expensive.

Question 7

Between 2009 and 2011, the Canadian dollar

Accepted Answer

Between 2009 and 2011, the Canadian dollar appreciated against the U.S. dollar, reaching parity and even surpassing it at times due to strong commodity prices and economic conditions.

Question 8

Currency depreciation is a reduction in the

Accepted Answer

Currency depreciation refers to a decrease in the value of a currency in terms of how much foreign currency it can buy.

Question 9

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

Accepted Answer

The foreign exchange market is the market where the currency of one country is exchanged for the currency of another country. The money market is a market for short-term loans and investments, while the capital market is a market for long-term investments. The forward exchange market is a market for the future exchange of currencies, and the international trading market is an ambiguous term that can refer to any market for international trade.

Question 10

Table 25.1.1
 
-Refer to Table 25.1.1. Between 2009 and 2010, the Canadian dollar ________ versus the euro and ________ versus the yen.

Accepted Answer

The Canadian dollar appreciated against the euro because the value of the Canadian dollar increased relative to the euro. The Canadian dollar depreciated against the yen because the value of the Canadian dollar decreased relative to the yen.

Question 11

The exchange rate is the

Accepted Answer

The exchange rate is the price at which one currency can be exchanged for another currency. It determines the value of one currency in relation to another currency.

Question 12

Table 25.1.1
 
-Refer to Table 25.1.1. Between 2009 and 2010, the yen

Accepted Answer

The answer of Table 25.1.1
 
-Refer to Table 25.1.1. Between...

Question 13

If the exchange rate is 97 U.S. cents per Canadian dollar, then

Accepted Answer

One U.S. dollar will buy 1.03 Canadian dollars.

Question 14

The lower the exchange rate, the

Accepted Answer

A lower exchange rate makes Canadian goods and services cheaper for foreign buyers, increasing the demand for Canadian dollars. Simultaneously, it discourages Canadians from exchanging their dollars for foreign currency, reducing the supply of Canadian dollars.

Question 15

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand. How many yuan will one rand buy?

Accepted Answer

The answer of Suppose that the following situation exists in...

Question 16

Which of the following factors influence the demand for Canadian dollars?

Accepted Answer

The demand for Canadian dollars is influenced by both the exchange rate and the world demand for Canadian exports (option A), as well as by interest rates in Canada and other countries, and the expected future exchange rate (option B). Therefore, choices A and B are correct, making option D the best answer. Option C is incorrect, as it only includes the demand for Canadian exports but does not account for interest rates or expected future exchange rates. Option E is also incorrect, as it includes Canadian demand for imports, which is not a factor that affects the demand for Canadian dollars.

Question 17

If the Canadian dollar depreciates, it means that

Accepted Answer

When the Canadian dollar depreciates, it means that it has lost value compared to foreign currencies. This means that one Canadian dollar will buy less foreign currency, making imports more expensive and exports more affordable.

Question 18

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.01 U.S, and 1 Canadian dollar buys 6.63 South African rand. How many U.S. dollars will one rand buy?

Accepted Answer

To solve this problem, we want to find the exchange rate between U.S. dollars and South African rand. We can use the given exchange rates to set up a proportion:

1 Canadian dollar/6.63 South African rand = $1.01 U.S./1 Canadian dollar

Simplifying this expression, we get:

1 U.S. dollar/ (6.63/1.01) South African rand = $1 U.S./6.56 South African rand

So, one South African rand will buy $0.152 or $0.15 U.S. dollars (rounded to two decimal places). Therefore, the answer is D.

Question 19

Suppose the dollar-yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar. Then the yen has

Accepted Answer

When the exchange rate decreases from 140 yen per dollar to 130 yen per dollar, it means that the yen is now worth less in relation to the dollar. Therefore, the yen has depreciated against the dollar. At the same time, since it now takes fewer yen to buy one dollar, the dollar has appreciated against the yen. Option D represents this scenario where the yen has depreciated against the dollar, and the dollar has appreciated against the yen.

Question 20

Suppose that the Canadian dollar exchanges for 1.05 U.S. dollars and also for 0.65 euros. A U.S. dollar exchanges for

Accepted Answer

The answer of Suppose that the Canadian dollar exchanges for...

Quiz 25: The Exchange Rate and the Balance of Payments

The law of supply of foreign exchange tells us that, other things remaining the same,

Foreign currency is

The law of demand for foreign exchange tells us that other things remaining the same,

If the exchange rate is too high in the foreign exchange market,

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S, and 1 Canadian dollar buys 8.6 Chinese yuan. How many yuan will $1 U.S. buy?

Appreciation of a currency means

Between 2009 and 2011, the Canadian dollar

Currency depreciation is a reduction in the

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

Table 25.1.1 -Refer to Table 25.1.1. Between 2009 and 2010, the Canadian dollar versus the euro and versus the yen.

The exchange rate is the

Table 25.1.1 -Refer to Table 25.1.1. Between 2009 and 2010, the yen

If the exchange rate is 97 U.S. cents per Canadian dollar, then

The lower the exchange rate, the

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand. How many yuan will one rand buy?

Which of the following factors influence the demand for Canadian dollars?

If the Canadian dollar depreciates, it means that

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.01 U.S, and 1 Canadian dollar buys 6.63 South African rand. How many U.S. dollars will one rand buy?

Suppose the dollar-yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar. Then the yen has

Suppose that the Canadian dollar exchanges for 1.05 U.S. dollars and also for 0.65 euros. A U.S. dollar exchanges for

Quiz 25: The Exchange Rate and the Balance of Payments

The law of supply of foreign exchange tells us that, other things remaining the same,

Foreign currency is

The law of demand for foreign exchange tells us that other things remaining the same,

If the exchange rate is too high in the foreign exchange market,

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.05 U.S, and 1 Canadian dollar buys 8.6 Chinese yuan. How many yuan will $1 U.S. buy?

Appreciation of a currency means

Between 2009 and 2011, the Canadian dollar

Currency depreciation is a reduction in the

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

Table 25.1.1 -Refer to Table 25.1.1. Between 2009 and 2010, the Canadian dollar ________ versus the euro and ________ versus the yen.

The exchange rate is the

Table 25.1.1 -Refer to Table 25.1.1. Between 2009 and 2010, the yen

If the exchange rate is 97 U.S. cents per Canadian dollar, then

The lower the exchange rate, the

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys 7.2 Chinese yuan and 1 Canadian dollar buys 5.77 South African rand. How many yuan will one rand buy?

Which of the following factors influence the demand for Canadian dollars?

If the Canadian dollar depreciates, it means that

Suppose that the following situation exists in the foreign exchange market: 1 Canadian dollar buys $1.01 U.S, and 1 Canadian dollar buys 6.63 South African rand. How many U.S. dollars will one rand buy?

Suppose the dollar-yen foreign exchange rate changes from 140 yen per dollar to 130 yen per dollar. Then the yen has

Suppose that the Canadian dollar exchanges for 1.05 U.S. dollars and also for 0.65 euros. A U.S. dollar exchanges for

Table 25.1.1 -Refer to Table 25.1.1. Between 2009 and 2010, the Canadian dollar versus the euro and versus the yen.