Question 1

In equilibrium, if $1 = .5 pounds sterling and 1 pound sterling = 40 Swiss francs, the exchange rate between dollars and Swiss francs will be:

Accepted Answer

The answer of In equilibrium, if $1 = .5 pounds...

Question 2

Refer to the diagram below where D and S are Canada's demand for and supply of pesos. At the equilibrium exchange rate, E, Canada's balance of payments is in equilibrium. Under a system of flexible exchange rates, the shift in demand from D₁ to D₂ will:

Accepted Answer

The shift in demand from D₁ to D₂ will cause an increase in the exchange rate, resulting in a depreciation of the peso. This will make Canadian exports cheaper and more attractive to foreign buyers, leading to an increase in exports. At the same time, the higher exchange rate will make imports more expensive, leading to a decrease in imports. Therefore, the shift in demand will improve Canada's balance of payments.

Question 3

The Canadian demand for pounds is:

Accepted Answer

A lower dollar price of pounds means that it takes fewer Canadian dollars to purchase one pound, making British goods cheaper for Canadian consumers. Therefore, as the price of pounds decreases (or the dollar price of pounds declines), the quantity demanded of pounds increases, indicating a downward-sloping demand curve.

Question 4

If the dollar depreciates relative to the pound, then the pound:

Accepted Answer

If the dollar depreciates relative to the pound, it means that it will take more dollars to buy one pound. This means that the pound is stronger in relation to the dollar and has appreciated relative to the dollar.

Question 5

If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

Accepted Answer

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Question 6

If the rate of exchange for a British pound is $4, the rate of exchange for the dollar:

Accepted Answer

The answer of If the rate of exchange for a...

Question 7

Appreciation of the Swiss franc will:

Accepted Answer

Appreciation of the Swiss franc will make it more expensive for French buyers to purchase Swiss goods, causing a decrease in imports from Switzerland. At the same time, French goods will become more expensive for Swiss buyers, causing a decrease in exports to Switzerland. As a result, this will cause France's exports to become less competitive and its imports to become cheaper, creating a trade deficit.

Question 8

In 1985 the dollar would buy 262 yen, but in 1992 it would buy only 123 yen. Relative to the yen, the value of the dollar:

Accepted Answer

The difference between buying power in 1985 versus 1992 is (262-123)/262 = 0.53 or 53%. This means that relative to the yen, the value of the dollar decreased by about 50%.

Question 9

Suppose that in 2002 the exchange rate between the Canadian dollar and the Japanese yen was
$1 = 220 yen, and in 2012 it was $1 = 100 yen.
-Refer to the above information. Between 2002 and 2012 the:

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The answer of Suppose that in 2002 the exchange rate...

Question 10

An increase in the dollar price of British pounds will:

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The answer of An increase in the dollar price of...

Question 11

Which of the following have substantially equivalent effects insofar as a nation's volume of exports and imports is concerned?

Accepted Answer

The answer of Which of the following have substantially equivalent...

Question 12

If the Canadian dollar price of United States dollars increases from $.80 to $1.00, it can be concluded that:

Accepted Answer

When the Canadian dollar price of United States dollars increases, it means that a larger amount of Canadian dollars is required to purchase one United States dollar. This indicates that the Canadian dollar has depreciated in value relative to the United States dollar.

Question 13

In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:

Accepted Answer

When the dollar rate of exchange for the British pound rises, it means that people are willing to pay more dollars to buy one pound. Therefore, there is an increase in demand for pounds, which leads to an appreciation of the pound. This results in a decrease in the pound rate of exchange for the dollar.

Question 14

Under a system of flexible exchange rates a Canadian trade deficit with Mexico will tend to cause:

Accepted Answer

A trade deficit means that Canada is importing more goods and services from Mexico than it is exporting to Mexico. This will result in an increase in the demand for Mexican pesos in Canada to pay for these imports, and therefore an increase in the dollar price of pesos. This will make Canadian exports relatively cheaper to Mexican consumers, which could eventually help reduce the trade deficit.

Question 15

Refer to the diagram below. Assume the initial demand for and supply of dollars are shown by D₁ and S₁. The exchange rate will be:

Accepted Answer

The point where the demand and supply of dollars intersect is at a exchange rate of $5 for 1 British pound, as shown by the diagram at point E. Therefore, choice C is the correct answer.

Question 16

The Canadian demand for Swiss francs is:

Accepted Answer

The answer of The Canadian demand for Swiss francs is:
...

Question 17

In considering British pound and dollar, the rates of exchange for the pound and the dollar:

Accepted Answer

The rates of exchange for the pound and the dollar are inversely related. This means that when the pound strengthens, the dollar weakens and vice versa. The exchange rate is determined by the relative strength of each currency's economy and political situation. When one country's economy is performing well, its currency tends to strengthen relative to other currencies, including the dollar.

Question 18

If the equilibrium exchange rate changes so that fewer dollars are required to buy a pound, then:

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Question 19

If the dollar price of yen rises, then:

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The answer of If the dollar price of yen rises,...

Question 20

The Canadian supply of pounds is:

Accepted Answer

The answer of The Canadian supply of pounds is:
...

Quiz 17: Exchange Rates and the Balance of Payments