Question 1

Suppose the exchange rate is $0.01 per ¥ 1. A SONY television selling for ¥ 30,000 in Tokyo would be sell for ____ in New York.

Accepted Answer

Given the exchange rate of $0.01 per ¥1, to find the equivalent price in dollars for a ¥30,000 television, you multiply 30,000 by 0.01, which equals $300.

Question 2

A decrease in the interest rate in the United States relative to the rest of the world would:

Accepted Answer

A decrease in the interest rate in the United States relative to the rest of the world makes investments in the U.S. less attractive compared to other countries, leading to a decrease in foreign investment in the United States.

Question 3

Suppose the exchange rate is $1 per ¥ 100. A SONY television selling for ¥ 30,000 in Tokyo would be sell for ____ in New York.

Accepted Answer

To convert the price of the TV from yen to dollars, we need to divide the yen price by the exchange rate:

30,000 yen ÷ 100 yen/dollar = 300 dollars

Therefore, the TV would sell for $300 in New York.

Question 4

Suppose the exchange rate is $1 per ¥ 100. An IBM computer selling for $1500 in New York would be sell for ____ in Tokyo.

Accepted Answer

The price of the IBM computer in Tokyo would be ¥150,000.
To convert the $1500 price into yen, we need to multiply $1500 by 100 (to convert dollars to yen).
$1500 x 100 = ¥150,000
Therefore, the answer is C) ¥150,000.

Question 5

"Changes in exchange rates alter the international price of goods and service." Explain this statement.

Accepted Answer

The answer of "Changes in exchange rates alter the international...

Question 6

If 1 dollar can be traded for 5 francs, how many dollars will 1 franc buy?

Accepted Answer

The answer of If 1 dollar can be traded for...

Question 7

If the U.S. Federal Reserve were to purchase yen using dollars, what would be the result?

Accepted Answer

When the U.S. Federal Reserve purchases yen using dollars, it increases the supply of dollars in Japan as it exchanges dollars for yen. This action adds more dollars to the foreign exchange market, specifically in Japan, where the transaction occurs.

Question 8

Evaluate the following statement, "Only countries with fixed exchange rates will be interested in restricting capital flows."

Accepted Answer

The answer of Evaluate the following statement, "Only countries with...

Question 9

Suppose the U.S. balance of payments in 2000 was equal to the following.
  
a.What is the balance on the current account?
b.What is the balance on the capital account?
c.What is the balance of payments?

Accepted Answer

The answer of Suppose the U.S. balance of payments in...

Question 10

Use the following diagram to answer the following questions.
 
-Refer to Yen. If the United States fixes the exchange rate at 100, what action will be necessary to maintain this rate?

Accepted Answer

The answer of Use the following diagram to answer the...

Question 11

Suppose GDP in the United States increases as the economy enters an expansion. How will this change in GDP affect trade between the United States and other countries?

Accepted Answer

The answer of Suppose GDP in the United States increases...

Question 12

Evaluate the following statement, "Economists agree that a system of flexible exchange rates is the most appropriate for all countries."

Accepted Answer

The answer of Evaluate the following statement, "Economists agree that...

Question 13

Suppose the exchange rate is $0.01 per ¥ 1. An IBM computer selling for $1500 in New York would be sell for ____ in Tokyo.

Accepted Answer

To find out the price in Tokyo, we need to convert the price of the computer in dollars to yen. 
$1 = ¥0.01
$1,500 = ¥0.01 x 1,500 = ¥15,0000
Therefore, the computer would sell for ¥150,000 in Tokyo.

Question 14

Your trip to Mexico cost you 9,000 pesos. The exchange rate is 3 pesos per dollar. How much did the trip cost you in American dollars? How much would you pay in American dollars if the exchange rate was 5 pesos per dollar?

Accepted Answer

The answer of Your trip to Mexico cost you 9,000...

Question 15

Use the following diagram to answer the following questions.
 
-Refer to Diagram 18-1. Suppose that the demand for and supply of dollars is initially D₂ and S₂, respectively. If real GDP in the U.S. were to decrease, the effect would be to:

Accepted Answer

The answer of Use the following diagram to answer the...

Question 16

Use the following diagram to answer the following questions.
 
-Refer to Diagram 18-1. Suppose that the demand for dollars is initially represented by D₁ and the supply of dollars is represented by S₂. If the inflation rate were to decrease, the effect would:

Accepted Answer

If the inflation rate were to decrease, it would lead to an increase in the demand for dollars as it increases the purchasing power of the currency. Hence, the demand curve for dollars would shift to the right from D₁ to D₂. At the same time, the decrease in inflation would lead to a decrease in the supply of dollars in the foreign exchange market as there would be a lesser need to print more money to tackle inflation. Hence, the supply curve for dollars would shift to the left from S₂ to S₁. The intersection of the new demand and supply curves would lead to a new equilibrium exchange rate, which would be higher than the initial exchange rate, i.e., E₄.

Question 17

Use the following diagram to answer the following questions.
 
-Refer to Yen. If the United States fixes the exchange rate at 100, there will be a(n):

Accepted Answer

If the U.S. fixes the exchange rate at 100 yen per dollar and this rate is above the market equilibrium rate, it will lead to a balance of payments deficit as the U.S. will import more from Japan than it exports, causing an outflow of dollars.

Quiz 18: Financing Trade and the Trade Deficit