Question 1

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

Accepted Answer

Under a gold standard, a country's currency is tied to gold and can be exchanged for gold. If a country has a trade deficit, it means that it is importing more than it is exporting, which leads to an outflow of gold as it pays for its imports. Therefore, a country with a trade deficit can expect gold to flow out of the country to other countries.

Question 2

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 will increase the demand for the dollar as foreign buyers will need to purchase U.S. dollars in order to pay for the exports. This increase in demand for the dollar will cause its value to appreciate.

Question 3

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

Accepted Answer

A deficit in a country's current account balance occurs whenever there is an excess of money outflows from the country compared to its money inflows. This means that the country is spending more on imports, investments abroad, or transfer payments to other countries than it is receiving from exports, investments from other countries, or transfer payments received from abroad. This results in a net outflow of money from the country, leading to a current account deficit.

Question 4

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 5

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

The answer of The exchange rate between the dollar and...

Question 6

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

When inflation in the U.S. is higher than in other countries, the relative value of the U.S. dollar decreases because its purchasing power decreases in comparison to other currencies. This leads to a decrease in demand for the U.S. dollar on international currency markets, causing its value to fall.

Question 7

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

An increase in the exchange rate (from 20 to 25 pesos per dollar) makes the Argentine peso relatively weaker and the US dollar relatively stronger. As a result, imports from Argentina become cheaper for US consumers, which would lead to an increase in US imports from Argentina. On the other hand, US exports to Argentina become more expensive for Argentine consumers, which would lead to a decrease in US exports to Argentina. Therefore, the correct answer is E, which states that the exchange rate increase would increase imports and decrease exports in the US economy.

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

Under the gold standard, the value of currency is directly linked to a specific amount of gold. Since one U.S. dollar is worth 1/10th of an ounce of gold and one French franc is worth 1/50th of an ounce of gold, one U.S. dollar would exchange for five French francs (1/10 divided by 1/50 equals 5).

Question 9

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 importing country is sending gold to the exporting country to pay for the difference in trade. In this case, the U.S. is importing more from Japan than it is exporting to Japan, so it will lose gold to Japan. To counteract the outflow of gold, the U.S. money supply would have to decline, which would result in a fall in the U.S. price level. Therefore, choice D is the correct answer.

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

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

A decrease in the value of the dollar makes foreign products more expensive for Americans, so the supply of foreign products in the U.S. would decrease. On the other hand, U.S. products become less expensive for people in other countries, which would increase the demand for U.S. products.

Question 12

Depreciation of the dollar will tend to

Accepted Answer

Depreciation of the dollar means that it is worth less relative to other currencies, making imports more expensive for Americans. On the other hand, it makes American exports cheaper for foreigners in their own currency, which could increase demand for American products. Therefore, it would increase the prices of the goods Americans import, but decrease the prices to foreigners of the goods Americans export.

Question 13

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 it now takes more dollars to purchase one pound. This means that the demand for dollars has increased in relation to the supply of pounds, causing the pound to depreciate in value. Therefore, there will be a decrease in the pound price of the dollar.

Question 14

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....

Question 15

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 16

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 17

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 pound has weakened against the dollar. This will result in a decrease in the pound rate of exchange for the dollar, making it more expensive for British citizens to purchase American goods and services. As a result, American net exports to Britain will tend to fall.

Question 18

If the price of pesos in dollars is $0.10,

Accepted Answer

If 1 peso is $0.10, then 1 dollar is 1/0.10 = 10 pesos.

Question 19

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 20

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.

Quiz 20: International Finance

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

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

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

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 = 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 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

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

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

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

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 ___.

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.

Depreciation of the dollar will tend to

An increase in the dollar price of the English pound will

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

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

Higher domestic interest rates encourage

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

If the price of pesos in dollars is $0.10,

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

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

Quiz 20: International Finance

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

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

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

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 = 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 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

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

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

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

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 _______.

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.

Depreciation of the dollar will tend to

An increase in the dollar price of the English pound will

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

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

Higher domestic interest rates encourage

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

If the price of pesos in dollars is $0.10,

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

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

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

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 _____.

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

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 ___.

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.