Question 1

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the ________ German currency to _______.

Accepted Answer

If Americans decide they want to drive more German-made cars, this would increase the demand for German cars, causing an increase in the demand for Euros (since German cars are priced in Euros). This increase in demand for Euros would cause an appreciation in the value of the Euro (i.e. the currency would increase in value).

Question 2

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the ________ U.S.currency to _______.

Accepted Answer

If Canadians decide they want to eat more U.S.-grown soybeans, it means there is an increase in the demand for U.S.-grown soybeans. This would cause an increase in the demand for U.S. dollars, since Canadians would need to purchase U.S. dollars in order to buy the soybeans. Therefore, the U.S. currency would increase in value.

Question 3

A major problem with countries setting fixed exchange rates for their currencies is

Accepted Answer

The fixed rate will have to be maintained by currency market intervention.

Question 4

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus,an increase in imports of French goods by Japanese consumers,ceteris paribus,would result in a

Accepted Answer

C) An increase in imports of French goods by Japanese consumers would lead to an outflow of currency from Japan to France to pay for these imports, ceteris paribus. This would result in a balance-of-payments deficit for Japan, as more money is leaving the country than coming in from the trade of goods and services.

Question 5

As a result of an increase in demand from D₂ to D₁ in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Accepted Answer

According to the law of demand, an increase in demand causes an increase in price, ceteris paribus. Therefore, as the demand for the U.S. computer system increases from D₂ to D₁, the price of the computer system will increase, ceteris paribus. The exact amount of increase in price can be calculated by multiplying the change in demand (i.e., 1 unit) by the price elasticity of demand for the computer system in terms of Japanese yen, which is $2,000,000,000/$40,000 = 50,000 yen per dollar. Therefore, the price will increase by 50,000 yen per dollar of the price of the computer system. Since the initial price of the computer system in terms of Japanese yen is $40,000 x 80 yen/dollar = 3,200,000 yen, the total increase in price would be 50,000 yen/dollar x $40,000/$1 x 1 unit = 2,000,000 yen, which is approximately 800,000 yen. Therefore, the correct answer is D.

Question 6

Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

Accepted Answer

As the supply of U.S. dollars in Japan increases, there will be a surplus of dollars in the foreign exchange market, leading to a decrease in the value of the U.S. dollar relative to the yen (ceteris paribus). This makes U.S. exports cheaper for Japanese consumers, which may increase demand for U.S. goods and decrease the trade deficit. Trade restrictions are not the only solution, as exchange rate adjustments can also affect the deficit. Option C is also incorrect as the trade deficit may not necessarily continue to increase in size as there are various factors that can affect it.

Question 7

A gold standard has the advantage of

Accepted Answer

A gold standard provides greater stability for exchange rates in the short run because it fixes the value of a currency to a specific amount of gold, reducing fluctuations in exchange rates.

Question 8

Ceteris paribus,if the French decide they want to drink more Chinese-grown tea,this causes the ________ Chinese currency to _______.

Accepted Answer

If the French decide they want to drink more Chinese-grown tea, this increases the demand for Chinese tea, which will lead to an increase in the Chinese currency.

Question 9

Excess demand for a specific foreign currency,such as the pound,implies a

Accepted Answer

Excess demand for a specific foreign currency means that there is more demand for that currency than its supply, which leads to an increase in its value. This, in turn, makes imports cheaper and exports more expensive, resulting in a trade deficit, which is a component of the balance of payments. Therefore, excess demand for a specific foreign currency implies a balance-of-payments deficit for the United States.

Question 10

The inflow of foreign investment into the United States

Accepted Answer

The inflow of foreign investment into the United States stimulates more economic growth for the United States. This is because foreign investment brings in capital, technology, and expertise that can help to expand businesses and create more jobs, leading to increased economic activity and growth.

Question 11

The fact that the United States has become the world's largest debtor nation is an indication that

Accepted Answer

The status of the United States as the world's largest debtor nation indicates that it is able to borrow large sums internationally, which suggests confidence in its economy by global investors. This reflects the attractiveness of the U.S. economy to foreign investors rather than its decline or the need for trade restrictions or a return to the gold standard.

Question 12

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

Accepted Answer

This situation is known as a market shortage, where demand exceeds supply at a given price. It indicates that there is a potential opportunity for suppliers to increase the price, or for more suppliers to enter the market to fulfill the excess demand. Market surplus, on the other hand, occurs when supply exceeds demand at a given price. Balance-of-payments deficit and surplus are concepts related to international trade and represent the difference between a country's payments to and receipts from other countries.

Question 13

In a fixed exchange rate system,

Accepted Answer

The answer of In a fixed exchange rate system,
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Question 14

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

Accepted Answer

The return to a worldwide gold standard is unrelated to resistance to exchange rate fluctuations, which refers to the impact of currency value changes on exports, imports, and investments in world markets.

Question 15

An excess demand for foreign currency at current exchange rates is known as a

Accepted Answer

An excess demand for foreign currency means that more currency is being demanded than supplied, leading to a deficit in the balance of payments (BOP). The BOP measures all financial transactions between a country and the rest of the world, including trade, investment, and remittances. Therefore, an excess demand for foreign currency would result in a BOP deficit. Choice B, C, and D are not accurate because they refer to specific types of deficits/surpluses within the BOP or trade, rather than a general excess demand for foreign currency.

Question 16

Ceteris paribus,with a fixed exchange rate,if Americans decide to buy more Japanese-made television sets,this causes a market ________ of Japanese currency and creates a balance-of-payments ________ for the United States.

Accepted Answer

When Americans buy more Japanese-made television sets, they need more Japanese currency to make these purchases, leading to a market shortage of Japanese currency due to increased demand. Simultaneously, the United States will experience a balance-of-payments deficit because more money is leaving the country to pay for these imports than is coming in.

Question 17

Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

Accepted Answer

Since the exchange rate between the pound and the dollar is fixed and defined by their respective gold values, we can calculate the implied exchange rate based on those values. Given that $1 = 0.1 oz gold and £1 = 0.05 oz gold, we can simply divide the gold values to get the implied exchange rate:

$1/0.1 oz gold ÷ £1/0.05 oz gold = $1/£2

Therefore, the implied exchange rate between the pound and the dollar is fixed at $1 = £2. Option B is the correct answer.

Question 18

A mechanism for fixing exchange rates is the

Accepted Answer

The gold standard fixes exchange rates by tying the value of currencies to gold. This eliminates foreign exchange risk and provides stability in international trade. The other options are either not mechanisms for fixing exchange rates (WTO agreement) or allow for flexibility in exchange rates (Flexible exchange standard and IMF).

Question 19

Under a system of fixed exchange rates,excess demand by Germans for the Swiss franc represents a potential

Accepted Answer

If Germans have excess demand for the Swiss franc, it means that they are willing to buy more Swiss goods and services than what they are currently exporting to Switzerland. This will lead to a German balance-of-payments deficit with Switzerland as they have to pay for the excess imports by selling their own currency, the euro, to buy Swiss francs. This would increase the value of the Swiss franc and decrease the value of the euro, resulting in a trade deficit for Germany and a trade surplus for Switzerland.

Question 20

Which of the following is not likely to occur because of exchange rate fluctuations?

Accepted Answer

Exchange rate fluctuations may impact the demand for exports and imports as well as inflation, but they are unlikely to lead to an end to flexible exchange rates worldwide. Flexible exchange rates allow market forces to determine the value of different currencies, which is beneficial for trade and economic growth.

Quiz 20: International Finance

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the __ German currency to _.

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the __ U.S.currency to _.

A major problem with countries setting fixed exchange rates for their currencies is

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus,an increase in imports of French goods by Japanese consumers,ceteris paribus,would result in a

As a result of an increase in demand from D₂ to D₁ in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

A gold standard has the advantage of

Ceteris paribus,if the French decide they want to drink more Chinese-grown tea,this causes the __ Chinese currency to _.

Excess demand for a specific foreign currency,such as the pound,implies a

The inflow of foreign investment into the United States

The fact that the United States has become the world's largest debtor nation is an indication that

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

In a fixed exchange rate system,

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

An excess demand for foreign currency at current exchange rates is known as a

Ceteris paribus,with a fixed exchange rate,if Americans decide to buy more Japanese-made television sets,this causes a market of Japanese currency and creates a balance-of-payments for the United States.

Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

A mechanism for fixing exchange rates is the

Under a system of fixed exchange rates,excess demand by Germans for the Swiss franc represents a potential

Which of the following is not likely to occur because of exchange rate fluctuations?

Quiz 20: International Finance

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the ________ German currency to _______.

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the ________ U.S.currency to _______.

A major problem with countries setting fixed exchange rates for their currencies is

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus,an increase in imports of French goods by Japanese consumers,ceteris paribus,would result in a

As a result of an increase in demand from D2 to D1 in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

A gold standard has the advantage of

Ceteris paribus,if the French decide they want to drink more Chinese-grown tea,this causes the ________ Chinese currency to _______.

Excess demand for a specific foreign currency,such as the pound,implies a

The inflow of foreign investment into the United States

The fact that the United States has become the world's largest debtor nation is an indication that

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

In a fixed exchange rate system,

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

An excess demand for foreign currency at current exchange rates is known as a

Ceteris paribus,with a fixed exchange rate,if Americans decide to buy more Japanese-made television sets,this causes a market ________ of Japanese currency and creates a balance-of-payments ________ for the United States.

Suppose the U.S.dollar is defined by law as being equal to 0.1 ounce of gold.Further suppose the British pound is defined as being equal to 0.05 ounce of gold.The implied exchange rate between the pound and the dollar is

A mechanism for fixing exchange rates is the

Under a system of fixed exchange rates,excess demand by Germans for the Swiss franc represents a potential

Which of the following is not likely to occur because of exchange rate fluctuations?

Ceteris paribus,if Americans decide they want to drive more German-made cars,this causes the __ German currency to _.

Ceteris paribus,if Canadians decide they want to eat more U.S.-grown soybeans,this causes the __ U.S.currency to _.

As a result of an increase in demand from D₂ to D₁ in Figure 36.4,ceteris paribus,the price of a $40,000 U.S.computer system,in terms of Japanese yen,would: =

Ceteris paribus,if the French decide they want to drink more Chinese-grown tea,this causes the __ Chinese currency to _.

Ceteris paribus,with a fixed exchange rate,if Americans decide to buy more Japanese-made television sets,this causes a market of Japanese currency and creates a balance-of-payments for the United States.