Question 1

A decrease in the value of the dollar relative to foreign currencies would _____ the supply of foreign products in the U.S.and _____ the demand for U.S.products in other countries.

Accepted Answer

If the value of the dollar decreases relative to foreign currencies, foreign products become relatively more expensive in the U.S., which decreases the demand for foreign products and increases the supply of foreign products in the U.S. On the other hand, U.S. products become relatively less expensive in other countries, which increases the demand for U.S. products and increases their exports.

Question 2

If the inflation rate in the U.S.is higher than in other countries,the value of the dollar in international currency markets will be expected to

Accepted Answer

The value of the dollar is expected to fall if the inflation rate in the U.S. is higher than in other countries. This is because the higher inflation erodes the purchasing power of the dollar, making imports more expensive and exports cheaper. As a result, demand for the dollar decreases, causing its value to fall in international currency markets.

Question 3

If the U.S.experiences a current account deficit,then

Accepted Answer

When a country experiences a current account deficit, it means that it is importing more goods, services, and capital than it is exporting. To finance this deficit, the country must attract foreign capital, leading to a capital account surplus. This is because the balance of payments (which includes the current account and the capital account) must balance out. If there's a deficit in the current account, it is offset by a surplus in the capital account.

Question 4

Suppose the exchange rate is initially set at 100 yen per dollar and increases to 125 yen per dollar.This would be expected to cause the price of U.S.goods in the Japanese economy to

Accepted Answer

When the exchange rate increases from 100 yen per dollar to 125 yen per dollar, it means that more yen is required to buy a single dollar. This makes U.S. goods more expensive in yen terms, leading to an increase in the price of U.S. goods in the Japanese economy.

Question 5

Under a gold standard,a country with a trade deficit should expect

Accepted Answer

Under a gold standard, the value of a currency is tied to the amount of gold a country possesses. If a country has a trade deficit, it means that it is importing more goods than it is exporting, resulting in a net outflow of gold from the country. As a result, the value of the currency will decline to reflect the decrease in the amount of gold backing the currency. Therefore, choice A is the correct answer.

Question 6

Higher domestic interest rates encourage

Accepted Answer

Higher domestic interest rates make domestic investments more attractive compared to foreign investments, encouraging U.S. investors to bring their funds back to the U.S. from abroad to take advantage of the higher returns.

Question 7

Under a gold standard,if the U.S.has a trade deficit with Japan,

Accepted Answer

Under a gold standard, a trade deficit means that the country is losing gold to pay for the imports. Therefore, in this scenario, the U.S. would lose gold to Japan. As a result, the U.S. money supply would decline (since gold is leaving the country, there is less money to back the currency) and the U.S. price level would fall (since there is less money in circulation, prices would decrease).

Question 8

Under a gold standard in which France defined one franc to be worth 1/50^th of an ounce of gold and the U.S.defined one dollar to be worth 1/10^th of an ounce of gold,then

Accepted Answer

Since one dollar is defined as 1/10 of an ounce of gold and one franc is defined as 1/50 of an ounce of gold, one dollar is worth five times as much as one franc. Therefore, one dollar would exchange for five francs.

Question 9

Suppose that the tastes of U.S.beer drinkers shift from domestic brands toward more expensive brands imported from Germany.If this change is large enough,it will cause the ___ for foreign currencies to increase,and the dollar to _______.

Accepted Answer

When U.S. beer drinkers shift their preference towards more expensive imported brands from Germany, they increase the demand for foreign currencies (to pay for these imports), which leads to the depreciation of the dollar as more dollars are needed to purchase the same amount of foreign currency.

Question 10

The exchange rate between the dollar and the Swiss franc is $1 = 8 francs,and the price of a Swiss army knife is $5.If the exchange rate changes to $1 = 4 francs,the dollar price of the Swiss army knife ____ to _______.

Accepted Answer

When the exchange rate changes from $1 = 8 francs to $1 = 4 francs, it means that the dollar has depreciated relative to the Swiss franc. Originally, if the Swiss army knife costs $5, it would be equivalent to 40 francs (5 * 8). With the new exchange rate, to get the same 40 francs, you now need $10 (40 / 4), meaning the dollar price of the Swiss army knife rises to $10.

Question 11

The exchange rate between the dollar and the Swiss franc is $1 = 4 francs and the price of an imported Swiss box of chocolates is $5.If the exchange rate changes to $1 = 2 francs,the dollar price of the Swiss chocolates

Accepted Answer

Initially, the price of Swiss chocolates in dollars was $5. With the first exchange rate, $1 = 4 francs, this means that the price of chocolates in francs was 20 francs (5 dollars x 4 francs/dollar = 20 francs).

If the exchange rate changes to $1 = 2 francs, then the price of the chocolates in francs is now only 10 francs (20 francs / 2 francs/dollar = 10 francs).

To convert this back to dollars, we use the new exchange rate of $1 = 2 francs and find that the price in dollars is $5 (10 francs x 1 dollar/2 francs = $5).

Therefore, the dollar price of the Swiss chocolates rises to $10.

Question 12

If the price of pesos in dollars is $0.10,

Accepted Answer

If 1 peso is worth $0.10, then 1 dollar, which is worth 10 times more, would be equivalent to 10 pesos. This is a direct conversion based on the given exchange rate.

Question 13

If the dollar depreciated relative to the yen,it would be expected that

Accepted Answer

The answer of If the dollar depreciated relative to the...

Question 14

A deficit in a country's current account balance occurs whenever

Accepted Answer

A deficit in the current account balance occurs when a country is spending more on imports, foreign investments, and foreign aid than it is earning through exports, investments, and aid received from other countries. This leads to a net outflow of currency and a negative balance in the current account.

Question 15

In considering pounds and dollars we can say that when the dollar rate of exchange for the pound rises

Accepted Answer

When the dollar rate of exchange for the pound rises, it means that the dollar has become stronger in relation to the pound. This also means that it will take fewer dollars to purchase one pound. Therefore, the demand for pounds will fall and the supply will increase. This increased supply will lead to a depreciation in the value of the pound, causing the pound rate of exchange for the dollar to fall. Thus, option A is the correct answer. Option B is not correct because while the pound may rise against other currencies, it will still fall against the dollar. Option C is not the best choice because it does not give a definite answer. Option D is not correct because it focuses on the impact on American net exports rather than the exchange rate.

Question 16

Suppose the exchange rate between the U.S.and Argentina is initially set at 20 pesos per dollar and increases to 25 pesos per dollar.In the U.S.economy this would be expected to

Accepted Answer

When the exchange rate increases from 20 pesos per dollar to 25 pesos per dollar, the U.S. dollar has appreciated relative to the Argentine peso. This makes U.S. goods more expensive for Argentine consumers, leading to a decrease in U.S. exports. Conversely, Argentine goods become cheaper for U.S. consumers, leading to an increase in U.S. imports from Argentina.

Question 17

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is

Accepted Answer

The answer of If the exchange rate between the U.S.dollar...

Question 18

An increase in the dollar price of the English pound will

Accepted Answer

An increase in the dollar price of the English pound means that one dollar can buy fewer pounds. As a result, there will be a decrease in the demand for pounds and an increase in the demand for dollars. This will lead to a decrease in the pound price of the dollar. Therefore, the correct answer is D - cause a decrease in the pound price of the dollar.

Question 19

An increase in foreign demand for U.S.exports will ____ demand for the dollar,causing the dollar to _____.

Accepted Answer

An increase in foreign demand for U.S. exports means that foreigners will need to buy dollars to pay for those exports, leading to an increase in demand for the dollar. This increased demand will cause the value of the dollar to appreciate.

Question 20

Depreciation of the dollar will tend to

Accepted Answer

Depreciation of the dollar means that it becomes weaker in comparison to other currencies. This means that it will take more dollars to purchase goods from other countries, which will increase the prices of imports for Americans. However, it also means that goods produced in the United States will become cheaper for foreign buyers, leading to higher demand and ultimately resulting in lower prices for American exports. Therefore, depreciation of the dollar will increase the prices of goods Americans import, but decrease the prices to foreigners of the goods Americans export.

Quiz 32: International Finance

A decrease in the value of the dollar relative to foreign currencies would _ the supply of foreign products in the U.S.and _ the demand for U.S.products in other countries.

If the inflation rate in the U.S.is higher than in other countries,the value of the dollar in international currency markets will be expected to

If the U.S.experiences a current account deficit,then

Suppose the exchange rate is initially set at 100 yen per dollar and increases to 125 yen per dollar.This would be expected to cause the price of U.S.goods in the Japanese economy to

Under a gold standard,a country with a trade deficit should expect

Higher domestic interest rates encourage

Under a gold standard,if the U.S.has a trade deficit with Japan,

Under a gold standard in which France defined one franc to be worth 1/50^th of an ounce of gold and the U.S.defined one dollar to be worth 1/10^th of an ounce of gold,then

Suppose that the tastes of U.S.beer drinkers shift from domestic brands toward more expensive brands imported from Germany.If this change is large enough,it will cause the _ for foreign currencies to increase,and the dollar to _____.

The exchange rate between the dollar and the Swiss franc is $1 = 8 francs,and the price of a Swiss army knife is $5.If the exchange rate changes to $1 = 4 francs,the dollar price of the Swiss army knife to ___.

The exchange rate between the dollar and the Swiss franc is $1 = 4 francs and the price of an imported Swiss box of chocolates is $5.If the exchange rate changes to $1 = 2 francs,the dollar price of the Swiss chocolates

If the price of pesos in dollars is $0.10,

If the dollar depreciated relative to the yen,it would be expected that

A deficit in a country's current account balance occurs whenever

In considering pounds and dollars we can say that when the dollar rate of exchange for the pound rises

Suppose the exchange rate between the U.S.and Argentina is initially set at 20 pesos per dollar and increases to 25 pesos per dollar.In the U.S.economy this would be expected to

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is

An increase in the dollar price of the English pound will

An increase in foreign demand for U.S.exports will demand for the dollar,causing the dollar to _.

Depreciation of the dollar will tend to

Quiz 32: International Finance

A decrease in the value of the dollar relative to foreign currencies would _____ the supply of foreign products in the U.S.and _____ the demand for U.S.products in other countries.

If the inflation rate in the U.S.is higher than in other countries,the value of the dollar in international currency markets will be expected to

If the U.S.experiences a current account deficit,then

Suppose the exchange rate is initially set at 100 yen per dollar and increases to 125 yen per dollar.This would be expected to cause the price of U.S.goods in the Japanese economy to

Under a gold standard,a country with a trade deficit should expect

Higher domestic interest rates encourage

Under a gold standard,if the U.S.has a trade deficit with Japan,

Under a gold standard in which France defined one franc to be worth 1/50th of an ounce of gold and the U.S.defined one dollar to be worth 1/10th of an ounce of gold,then

Suppose that the tastes of U.S.beer drinkers shift from domestic brands toward more expensive brands imported from Germany.If this change is large enough,it will cause the ___ for foreign currencies to increase,and the dollar to _______.

The exchange rate between the dollar and the Swiss franc is $1 = 8 francs,and the price of a Swiss army knife is $5.If the exchange rate changes to $1 = 4 francs,the dollar price of the Swiss army knife ____ to _______.

The exchange rate between the dollar and the Swiss franc is $1 = 4 francs and the price of an imported Swiss box of chocolates is $5.If the exchange rate changes to $1 = 2 francs,the dollar price of the Swiss chocolates

If the price of pesos in dollars is $0.10,

If the dollar depreciated relative to the yen,it would be expected that

A deficit in a country's current account balance occurs whenever

In considering pounds and dollars we can say that when the dollar rate of exchange for the pound rises

Suppose the exchange rate between the U.S.and Argentina is initially set at 20 pesos per dollar and increases to 25 pesos per dollar.In the U.S.economy this would be expected to

If the exchange rate between the U.S.dollar and the Japanese yen is $1 = 200 yen,then the dollar price of yen is

An increase in the dollar price of the English pound will

An increase in foreign demand for U.S.exports will ____ demand for the dollar,causing the dollar to _____.

Depreciation of the dollar will tend to

A decrease in the value of the dollar relative to foreign currencies would _ the supply of foreign products in the U.S.and _ the demand for U.S.products in other countries.

Under a gold standard in which France defined one franc to be worth 1/50^th of an ounce of gold and the U.S.defined one dollar to be worth 1/10^th of an ounce of gold,then

Suppose that the tastes of U.S.beer drinkers shift from domestic brands toward more expensive brands imported from Germany.If this change is large enough,it will cause the _ for foreign currencies to increase,and the dollar to _____.

The exchange rate between the dollar and the Swiss franc is $1 = 8 francs,and the price of a Swiss army knife is $5.If the exchange rate changes to $1 = 4 francs,the dollar price of the Swiss army knife to ___.

An increase in foreign demand for U.S.exports will demand for the dollar,causing the dollar to _.