Question 1

Holding all else constant,a decrease in the preferences of Canadians for Mexican goods will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Accepted Answer

A decrease in the preferences of Canadians for Mexican goods will lead to a decrease in the demand for Mexican goods, resulting in a decrease in the demand for Mexican pesos, and a decrease in the supply of Canadian dollars in the foreign exchange market. Therefore, there will be a decrease in the supply of dollars in the foreign exchange market, and the equilibrium Mexican peso-dollar exchange rate will increase.

Question 2

As the dollar exchange rate decreases,the quantity of dollars supplied in the foreign exchange market _________ and the quantity of dollars demanded in the foreign exchange market _________.

Accepted Answer

As the dollar exchange rate decreases, meaning the value of the dollar falls, the quantity of dollars supplied in the foreign exchange market decreases because people are less willing to supply dollars in exchange for other currencies. At the same time, the quantity of dollars demanded in the foreign exchange market increases, because people will want to buy more dollars in order to take advantage of the lower exchange rate. Therefore, the correct answer is E: decreases; increases.

Question 3

When real interest rates fall in Canada as compared to other nations,other things being equal,we would expect the dollar to experience

Accepted Answer

When real interest rates fall in Canada as compared to other nations, this makes Canadian assets less attractive to foreign investors, which would decrease the demand for Canadian dollars and cause its value to depreciate.

Question 4

Holding all else constant,a decrease in U.S.real GDP will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

A decrease in U.S. real GDP would likely lead to a decrease in demand for Canadian goods and services, thus decreasing the demand for Canadian dollars. This would lead to a decrease in the equilibrium exchange rate of the U.S. dollar to the Canadian dollar.

Question 5

Holding all else constant,a decrease in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

A decrease in preferences for Canadian goods by Americans will lead to a decrease in the demand for Canadian dollars, as fewer Canadian goods will be purchased. This decrease in demand will also lead to a decrease in the equilibrium exchange rate for the U.S. dollar-Canadian dollar.

Question 6

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008.
 
-From January 2003 to January 2008,the Canadian dollar _____________;by the end of the period,it was worth approximately ______________ than at the beginning.

Accepted Answer

From January 2003 to January 2008, the Canadian dollar appreciated, as seen by the upward trend in the exchange rate. By the end of the period, the exchange rate was approximately US$0.40 higher than at the beginning (based on the difference between the highest and lowest points on the graph during this period). Therefore, choice C, "appreciated; US$0.40 more," is the best choice.

Question 7

The exchange rate that equates the quantity of the currency supplied and the quantity of the currency demanded in the foreign exchange market is called the __________ exchange rate.

Accepted Answer

The market equilibrium exchange rate is the exchange rate at which the quantity of currency demanded by foreign exchange buyers equals the quantity supplied by foreign exchange sellers. This means that there is neither a surplus nor a shortage of foreign exchange, and the exchange rate is balanced.

Question 8

Holding all else constant,an increase in the preferences of Canadians for Mexican goods will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Accepted Answer

The answer of Holding all else constant,an increase in the...

Question 9

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008.
 
-From January 1971 to January 2001,the Canadian dollar _________ by approximately _________.

Accepted Answer

The Canadian dollar depreciated by approximately 40% against the US dollar from January 1971 to January 2001.

Question 10

The market equilibrium value of the exchange rate is the

Accepted Answer

The market equilibrium value of the exchange rate is the exchange rate at which the quantity of the currency demanded in the foreign exchange market is equal to the quantity of the currency supplied. This means that buyers and sellers are willing to trade the currency at a mutually agreed upon rate, which represents the market equilibrium value of the exchange rate. Choices A, B, C, and D do not fully capture the concept of market equilibrium in the foreign exchange market.

Question 11

Holding all else constant,an increase in U.S.real GDP will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

An increase in U.S. real GDP will increase demand for Canadian goods and services, leading to an increase in demand for Canadian dollars in the foreign exchange market. As a result, the equilibrium U.S. dollar-Canadian dollar exchange rate will increase.

Question 12

Holding all else constant,a decrease in the real interest rate on U.S.assets will _________ the supply of Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

A decrease in the real interest rate on U.S. assets would decrease the returns for investors holding U.S. assets, making them less attractive. This would reduce the demand for U.S. assets, including the demand for the U.S. dollar necessary to purchase those assets. This decrease in U.S. demand would, in turn, increase the supply of U.S. dollars on the foreign exchange market. Holding all else constant, the increased supply of U.S. dollars would cause the equilibrium U.S. dollar-Canadian dollar exchange rate to decrease. As a result, an decrease in the real interest rate on U.S. assets will decrease the demand for a currency, and thus, decrease the exchange rate.

Question 13

Holding all else constant,an increase in Canada's real GDP will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Accepted Answer

An increase in Canada's real GDP will increase the supply of Canadian dollars in the foreign exchange market as there will be a higher demand for Canadian goods and services. This increase in supply will cause the value of the Canadian dollar to decrease relative to other currencies, including the Mexican peso, leading to a decrease in the equilibrium peso-dollar exchange rate. Therefore, the correct answer is B.

Question 14

As the dollar exchange rate increases,the quantity of dollars supplied in the foreign exchange market _________ and the quantity of dollars demanded in the foreign exchange market _________.

Accepted Answer

As the dollar exchange rate increases, the quantity of dollars supplied increases because holders of dollars are more willing to exchange them for other currencies at a higher rate. Conversely, the quantity of dollars demanded decreases because foreign buyers find it more expensive to purchase dollars.

Question 15

One plausible reason for the relative __________ of the Canadian dollar during the late 1980s and the early 1990s may have been the __________ of the __________ in pursuit of long-term price stability.

Accepted Answer

The Canadian dollar appreciated due to the Bank of Canada's tight monetary policy aimed at achieving long-term price stability.

Question 16

Holding all else constant,a decrease in Canada's real GDP will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

Accepted Answer

A decrease in Canada's real GDP will lead to a decrease in the supply of dollars in the foreign exchange market, as there will be fewer Canadian goods and services demanded by other countries. This decrease in supply of dollars will cause the equilibrium Mexican peso-dollar exchange rate to increase, as there will be fewer dollars available to purchase Mexican pesos, resulting in a depreciation of the dollar and an appreciation of the peso.

Question 17

The principal demander(s)of Canadian dollars in the foreign exchange market is/are

Accepted Answer

Foreigners wishing to purchase Canadian goods or assets are the principal demanders of Canadian dollars in the foreign exchange market. This is because they need Canadian dollars to carry out transactions in Canada, such as buying Canadian exports, investing in Canadian assets, or traveling to Canada.

Question 18

The principal supplier(s)of Canadian dollars to the foreign exchange market is/are

Accepted Answer

Canadian households or firms wishing to purchase foreign goods or assets supply Canadian dollars to the foreign exchange market as they exchange their currency for foreign currency to make these purchases.

Question 19

Holding all else constant,an increase in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

An increase in preferences for Canadian goods will lead to an increase in demand for Canadian dollars in the foreign exchange market, as more Americans will need to purchase Canadian dollars in order to buy those goods. This increase in demand will then lead to an increase in the equilibrium U.S. dollar-Canadian dollar exchange rate, as the value of the Canadian dollar will rise relative to the U.S. dollar.

Question 20

Holding all else constant,an increase in the real interest rate on U.S.assets will _________ the supply of Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Accepted Answer

The answer of Holding all else constant,an increase in the...

Quiz 13: Savings, Capital Formation and Comparative Economic Growth

Holding all else constant,a decrease in the preferences of Canadians for Mexican goods will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate decreases,the quantity of dollars supplied in the foreign exchange market _ and the quantity of dollars demanded in the foreign exchange market _.

When real interest rates fall in Canada as compared to other nations,other things being equal,we would expect the dollar to experience

Holding all else constant,a decrease in U.S.real GDP will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in preferences by Americans for Canadian goods will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 2003 to January 2008,the Canadian dollar _;by the end of the period,it was worth approximately __ than at the beginning.

The exchange rate that equates the quantity of the currency supplied and the quantity of the currency demanded in the foreign exchange market is called the __________ exchange rate.

Holding all else constant,an increase in the preferences of Canadians for Mexican goods will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 1971 to January 2001,the Canadian dollar _ by approximately _.

The market equilibrium value of the exchange rate is the

Holding all else constant,an increase in U.S.real GDP will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in the real interest rate on U.S.assets will _ the supply of Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in Canada's real GDP will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate increases,the quantity of dollars supplied in the foreign exchange market _ and the quantity of dollars demanded in the foreign exchange market _.

One plausible reason for the relative of the Canadian dollar during the late 1980s and the early 1990s may have been the of the __ in pursuit of long-term price stability.

Holding all else constant,a decrease in Canada's real GDP will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

The principal demander(s) of Canadian dollars in the foreign exchange market is/are

The principal supplier(s) of Canadian dollars to the foreign exchange market is/are

Holding all else constant,an increase in preferences by Americans for Canadian goods will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in the real interest rate on U.S.assets will _ the supply of Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Quiz 13: Savings, Capital Formation and Comparative Economic Growth

Holding all else constant,a decrease in the preferences of Canadians for Mexican goods will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate decreases,the quantity of dollars supplied in the foreign exchange market _________ and the quantity of dollars demanded in the foreign exchange market _________.

When real interest rates fall in Canada as compared to other nations,other things being equal,we would expect the dollar to experience

Holding all else constant,a decrease in U.S.real GDP will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 2003 to January 2008,the Canadian dollar _____________;by the end of the period,it was worth approximately ______________ than at the beginning.

The exchange rate that equates the quantity of the currency supplied and the quantity of the currency demanded in the foreign exchange market is called the __________ exchange rate.

Holding all else constant,an increase in the preferences of Canadians for Mexican goods will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 1971 to January 2001,the Canadian dollar _________ by approximately _________.

The market equilibrium value of the exchange rate is the

Holding all else constant,an increase in U.S.real GDP will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in the real interest rate on U.S.assets will _________ the supply of Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in Canada's real GDP will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate increases,the quantity of dollars supplied in the foreign exchange market _________ and the quantity of dollars demanded in the foreign exchange market _________.

One plausible reason for the relative __________ of the Canadian dollar during the late 1980s and the early 1990s may have been the __________ of the __________ in pursuit of long-term price stability.

Holding all else constant,a decrease in Canada's real GDP will _________ the supply of dollars in the foreign exchange market and _________ the equilibrium Mexican peso-dollar exchange rate.

The principal demander(s) of Canadian dollars in the foreign exchange market is/are

The principal supplier(s) of Canadian dollars to the foreign exchange market is/are

Holding all else constant,an increase in preferences by Americans for Canadian goods will _________ the demand for Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in the real interest rate on U.S.assets will _________ the supply of Canadian dollars in the foreign exchange market and _________ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in the preferences of Canadians for Mexican goods will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate decreases,the quantity of dollars supplied in the foreign exchange market _ and the quantity of dollars demanded in the foreign exchange market _.

Holding all else constant,a decrease in U.S.real GDP will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in preferences by Americans for Canadian goods will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 2003 to January 2008,the Canadian dollar _;by the end of the period,it was worth approximately __ than at the beginning.

Holding all else constant,an increase in the preferences of Canadians for Mexican goods will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

The figure below shows the U.S.dollar-Canadian dollar nominal exchange rate from January 1971 to March 2008. -From January 1971 to January 2001,the Canadian dollar _ by approximately _.

Holding all else constant,an increase in U.S.real GDP will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,a decrease in the real interest rate on U.S.assets will _ the supply of Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in Canada's real GDP will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

As the dollar exchange rate increases,the quantity of dollars supplied in the foreign exchange market _ and the quantity of dollars demanded in the foreign exchange market _.

One plausible reason for the relative of the Canadian dollar during the late 1980s and the early 1990s may have been the of the __ in pursuit of long-term price stability.

Holding all else constant,a decrease in Canada's real GDP will _ the supply of dollars in the foreign exchange market and _ the equilibrium Mexican peso-dollar exchange rate.

Holding all else constant,an increase in preferences by Americans for Canadian goods will _ the demand for Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.

Holding all else constant,an increase in the real interest rate on U.S.assets will _ the supply of Canadian dollars in the foreign exchange market and _ the equilibrium U.S.dollar-Canadian dollar exchange rate.