Question 1

What would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?
A) fewer domestic goods and foreign goods
B) more domestic goods,but fewer foreign goods
C) fewer domestic goods,but more foreign goods
D) more domestic goods and foreign goods

Accepted Answer

An appreciation of the Canadian real exchange rate would make foreign goods relatively cheaper compared to domestic goods, leading Canadian consumers to buy more foreign goods and fewer domestic goods. Therefore, the answer is C (fewer domestic goods but more foreign goods).

Question 2

Suppose the real exchange rate is 1 litre of Canadian gasoline per 2 litres of U.S.gasoline,1 litre of U.S.gasoline costs $0.45 U.S.,and a litre of Canadian gas costs $1.30 Canadian.What is the nominal exchange rate?
A) 0.38 U.S.dollars per Canadian dollar
B) 0.45 U.S.dollars per Canadian dollar
C) 0.69 U.S.dollars per Canadian dollar
D) 1.30 U.S.dollars per Canadian dollar

Accepted Answer

We can start by expressing the real exchange rate in terms of U.S. dollars per Canadian dollar:
1/2 = (0.45 USD)/(1.30 CAD)

Solving for CAD/USD, we get:

CAD/USD = 1/(0.45/1.3) = 0.69

Therefore, the nominal exchange rate is 0.69 U.S. dollars per Canadian dollar.

Question 3

What is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?
A) French citizens will buy less of Alberta beef.
B) French citizens will buy more of Alberta beef.
C) The quantity of Alberta beef demanded by French citizens will not change because the nominal exchange rate has not changed.
D) The quantity of Alberta beef demanded by French citizens will not change because it is the French real interest rate that matters for French citizens.

Accepted Answer

An appreciation in the Canadian real exchange rate would make Alberta beef more expensive for French citizens, as it would require more euros to purchase the same amount of Canadian dollars to buy the beef. This would likely lead to a decrease in the quantity of Alberta beef demanded by French citizens.

Question 4

Which unit of measurement would be appropriate for a real exchange rate?
A) 9 euros per dollar
B) 15 euros per basket of Canadian goods
C) 1 / 2 case of German beer per case of Canadian beer
D) 1 / 2 case of German beer per dollar of Canadian beer

Accepted Answer

The answer of Which unit of measurement would be appropriate...

Question 5

Suppose the real exchange rate is 3 / 5 kilograms of Chilean beef per kilogram of Canadian beef,a kilogram of Canadian beef costs $3,and the nominal exchange rate is 500 Chilean pesos per dollar.What does Chilean beef cost?
A) 960 pesos per kilogram
B) 1200 pesos per kilogram
C) 1500 pesos per kilogram
D) 2500 pesos per kilogram

Accepted Answer

The answer of Suppose the real exchange rate is 3...

Question 6

If the exchange rate changes from 0.35 HYPERLINK "http: / / en.wikipedia.org / wiki / Saudi_riyal" Saudi riyal per dollar to 0.30 HYPERLINK "http: / / en.wikipedia.org / wiki / Saudi_riyal" Saudi riyal per dollar,what has happened to the dollar?
A) It has appreciated and so buys more Kuwaiti goods.
B) It has appreciated and so buys fewer Kuwaiti goods.
C) It has depreciated and so buys more Kuwaiti goods.
D) It has depreciated and so buys fewer Kuwaiti goods.

Accepted Answer

A decrease in the exchange rate from 0.35 Saudi riyal per dollar to 0.30 Saudi riyal per dollar means that the Saudi riyal has appreciated and the dollar has depreciated. Therefore, the dollar now buys fewer Kuwaiti goods than before.

Question 7

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?
A) fewer domestic goods and foreign goods
B) more domestic goods,but fewer foreign goods
C) fewer domestic goods,but more foreign goods
D) more domestic goods and foreign goods

Accepted Answer

A depreciation of the Canadian real exchange rate makes foreign goods more expensive relative to domestic goods, leading Canadian consumers to buy more domestic goods and fewer foreign goods.

Question 8

If it took as many dollars to buy goods in Canada as it did to buy enough currency to buy the same goods in Kenya,the real exchange rate would be computed as how many Kenyan goods per Canadian goods?
A) one
B) the number of dollars needed to buy Canadian goods divided by the number of shillings needed to buy Kenyan goods
C) the number of shillings needed to buy Kenyan goods divided by the number of dollars needed to buy Canadian goods
D) a number equal to the nominal exchange rate

Accepted Answer

If the cost in dollars is the same for goods in both countries, the real exchange rate is one, meaning one Canadian good equals one Kenyan good in terms of purchasing power.

Question 9

Suppose that the real exchange rate between Canada and Tanzania is defined in terms of baskets of goods.What will increase the real exchange rate (that is,increase the number of baskets of Tanzanian goods a basket of Canadian goods buys)?
A) an increase in the number of Tanzanian shillings that can be purchased with a dollar
B) an increase in the price in Canadian dollars of Tanzanian goods
C) an increase in the price in Tanzanian shillings of Tanzanian goods
D) a decrease in the number of Tanzanian shillings that can be purchased with a dollar

Accepted Answer

The answer of Suppose that the real exchange rate between...

Question 10

If the exchange rate changes from 40 Thai baht per dollar to 25 Thai baht per dollar,what has happened to the dollar?
A) It has appreciated and so buys more Thai goods.
B) It has appreciated and so buys fewer Thai goods.
C) It has depreciated and so buys more Thai goods.
D) It has depreciated and so buys fewer Thai goods.

Accepted Answer

The dollar has depreciated and so buys fewer Thai goods. This is because now it takes more dollars to buy the same amount of Thai baht. The exchange rate has decreased from 40 baht per dollar to 25 baht per dollar, which means the dollar is worth less in relation to the Thai baht.

Question 11

In Canada,a cup of hot chocolate costs $6.In Australia,the same hot chocolate costs 6 Australian dollars.If the exchange rate is $2 Australian dollars per Canadian dollar,what is the real exchange rate?
A) 1 / 2 cup of Australian hot chocolate per cup of Canadian hot chocolate
B) 1 cup of Australian hot chocolate per cup of Canadian hot chocolate
C) 2 cups of Australian hot chocolate per cup of Canadian hot chocolate
D) 3 cups of Australian hot chocolate per cup of Canadian hot chocolate

Accepted Answer

To find the real exchange rate, we need to compare the price of the same item in both currencies. We know that a cup of hot chocolate in Canada costs $6, and the same cup of hot chocolate in Australia costs 6 Australian dollars. 
To convert the price of the hot chocolate in Australia to Canadian dollars, we multiply 6 Australian dollars by the exchange rate of $2 Australian dollars per Canadian dollar:

6 Australian dollars * ($2 Australian dollars / 1 Canadian dollar)

= $12 Canadian dollars

So, for the same price as $6 Canadian dollars, you could buy 2 cups of hot chocolate in Australia.

Therefore, the real exchange rate is 2 cups of Australian hot chocolate per cup of Canadian hot chocolate. Hence, the best choice is C.

Question 12

Suppose that a kilogram can of coffee costs about $16 in Canada.Suppose the exchange rate is 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 5.6 euros.What is the real exchange rate?
A) 3 / 4 cans of Belgian coffee per can of Canadian coffee
B) 2 cans of Belgian coffee per can of Canadian coffee
C) 2.45 cans of Belgian coffee per can of Canadian coffee
D) 3.5 cans of Belgian coffee per can of Canadian coffee

Accepted Answer

The answer of Suppose that a kilogram can of coffee...

Question 13

If the Canadian real exchange rate appreciates,what will most likely happen?
A) Exports increase and imports decrease.
B) Exports decrease and imports increase.
C) Exports and imports both increase.
D) Exports and imports both decrease.

Accepted Answer

When the Canadian real exchange rate appreciates, Canadian goods become more expensive to foreigners, leading to a decrease in exports. Conversely, foreign goods become cheaper to Canadians, leading to an increase in imports.

Question 14

If goods in Canada cost the same number of dollars as German goods cost in euros,the real exchange rate would be computed as how many German goods per Canadian goods?
A) one
B) the price of the Canadian goods
C) the amount of German currency that can be bought with one unit of Canadian currency
D) the amount of Canadian currency that can be bought with one unit of German currency

Accepted Answer

The real exchange rate is the rate at which one currency can be exchanged for another, adjusted for the difference in prices between the two countries. If goods in Canada cost the same number of dollars as German goods cost in euros, it means that the prices of goods in both countries are equal when converted to a common currency. Therefore, the real exchange rate can be calculated by determining how many units of the German currency can be bought with one unit of the Canadian currency. This is represented by choice C.

Question 15

Suppose that in 1999 you could purchase about 400 Greek drachmas (the former Greek currency,replaced by the euro in 2002)for a dollar.In 2000,you could purchase about 350 drachmas for a dollar.Which statement best explains the changes that could have taken place between 1999 and 2000?
A) The dollar appreciated,increasing the trade balance.
B) The dollar depreciated,decreasing the trade balance.
C) The dollar appreciated,decreasing the trade balance.
D) The dollar depreciated,increasing the trade balance.

Accepted Answer

The answer of Suppose that in 1999 you could purchase...

Question 16

If the Canadian real exchange rate appreciates,what will most likely happen?
A) Net exports increase,and net capital outflow decreases.
B) Net exports decrease,and net capital outflow increases.
C) Net exports and net capital outflow both increase.
D) Net exports and net capital outflow both decrease.

Accepted Answer

The answer of If the Canadian real exchange rate appreciates,what...

Question 17

In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?
A) 0.53 pints of Irish beer per pint of Australian beer
B) 0.8 pints of Irish beer per pint of Australian beer
C) 1.11 pints of Irish beer per pint of Australian beer
D) 1.25 pints of Irish beer per pint of Australian beer

Accepted Answer

The real exchange rate is the price of one good in terms of another good. In this case, the real exchange rate is the price of a pint of Irish beer in terms of a pint of Australian beer.To calculate the real exchange rate, we need to divide the price of a pint of Irish beer by the price of a pint of Australian beer.In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. The exchange rate is 0.8 punts per Australian dollar.So, the real exchange rate is:4 Irish punts / 6 Australian dollars * 0.8 punts per Australian dollar = 0.53 pints of Irish beer per pint of Australian beerTherefore, the correct answer is A.

Question 18

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,what is the definition of the real exchange rate?
A) e(P* / P)
B) e(P / P*)
C) e + P / P
D) e - P / P*

Accepted Answer

The real exchange rate is the nominal exchange rate adjusted for differences in the relative price levels between two countries. Therefore, it is defined as e(P / P*), where e is the nominal exchange rate, P is the domestic price level, and P* is the foreign price level. This measures the relative purchasing power of the two currencies and shows how much of one currency is needed to buy a unit of the other currency based on their relative prices.

Question 19

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico.If the nominal exchange rate is 30 pesos per dollar,what is the real exchange rate?
A) 1 / 3
B) 1
C) 3
D) 10

Accepted Answer

The real exchange rate is calculated as (Nominal exchange rate * Price in domestic currency) / Price in foreign currency. Here, it is (30 pesos/dollar * 5 dollars) / 50 pesos = 3.

Question 20

If the Canadian dollar gets weaker relative to the Japanese yen,what might happen?
A) Canadian trade surplus will fall.
B) Canadian trade deficit will fall.
C) Japanese trade surplus will rise.
D) Japanese trade deficit will fall.

Accepted Answer

A weaker Canadian dollar makes Canadian goods cheaper for Japanese consumers, potentially increasing Canadian exports and reducing the Canadian trade deficit.

Quiz 12: Open-Economy Macroeconomics: Basic Concepts

What would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Suppose the real exchange rate is 1 litre of Canadian gasoline per 2 litres of U.S.gasoline,1 litre of U.S.gasoline costs $0.45 U.S.,and a litre of Canadian gas costs $1.30 Canadian.What is the nominal exchange rate?

What is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?

Which unit of measurement would be appropriate for a real exchange rate?

Suppose the real exchange rate is 3 / 5 kilograms of Chilean beef per kilogram of Canadian beef,a kilogram of Canadian beef costs $3,and the nominal exchange rate is 500 Chilean pesos per dollar.What does Chilean beef cost?

If the exchange rate changes from 0.35 HYPERLINK "http: / / en.wikipedia.org / wiki / Saudi_riyal" Saudi riyal per dollar to 0.30 HYPERLINK "http: / / en.wikipedia.org / wiki / Saudi_riyal" Saudi riyal per dollar,what has happened to the dollar?

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

If it took as many dollars to buy goods in Canada as it did to buy enough currency to buy the same goods in Kenya,the real exchange rate would be computed as how many Kenyan goods per Canadian goods?

Suppose that the real exchange rate between Canada and Tanzania is defined in terms of baskets of goods.What will increase the real exchange rate (that is,increase the number of baskets of Tanzanian goods a basket of Canadian goods buys) ?

If the exchange rate changes from 40 Thai baht per dollar to 25 Thai baht per dollar,what has happened to the dollar?

In Canada,a cup of hot chocolate costs $6.In Australia,the same hot chocolate costs 6 Australian dollars.If the exchange rate is $2 Australian dollars per Canadian dollar,what is the real exchange rate?

Suppose that a kilogram can of coffee costs about $16 in Canada.Suppose the exchange rate is 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 5.6 euros.What is the real exchange rate?

If the Canadian real exchange rate appreciates,what will most likely happen?

If goods in Canada cost the same number of dollars as German goods cost in euros,the real exchange rate would be computed as how many German goods per Canadian goods?

Suppose that in 1999 you could purchase about 400 Greek drachmas (the former Greek currency,replaced by the euro in 2002) for a dollar.In 2000,you could purchase about 350 drachmas for a dollar.Which statement best explains the changes that could have taken place between 1999 and 2000?

If the Canadian real exchange rate appreciates,what will most likely happen?

In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,what is the definition of the real exchange rate?

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico.If the nominal exchange rate is 30 pesos per dollar,what is the real exchange rate?

If the Canadian dollar gets weaker relative to the Japanese yen,what might happen?