Question 1

Suppose the U.S. dollar is defined by law as being equal to 0.1 ounce of gold. Further suppose the British pound is defined as being equal to 0.05 ounce of gold. The implied exchange rate between the pound and the dollar is

Accepted Answer

Since the dollar is defined as 0.1 ounce of gold and the pound is defined as 0.05 ounce of gold, we can see that 2 pounds is worth the same amount of gold as 1 dollar. Therefore, the exchange rate between the pound and the dollar is fixed at $1 = 2 pounds.

Question 2

Excess demand for a specific foreign currency, such as the pound, implies a

Accepted Answer

Excess demand for a specific foreign currency, such as the pound, means that the United States is importing more from the UK than it is exporting to the UK. This leads to a current account deficit, which is part of the overall balance-of-payments. Therefore, the correct answer is a balance-of-payments deficit for the United States (choice C).

Question 3

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus, an increase in imports of French goods by Japanese consumers, ceteris paribus, would result in a

Accepted Answer

An increase in imports of French goods by Japanese consumers would lead to an outflow of Japanese currency to French currency in order to pay for the increased imports, resulting in a balance-of-payments deficit for Japan.

Question 4

Ceteris paribus, if Americans decide they want to drive more German-made cars, this causes the ________ German currency to _______.

Accepted Answer

If Americans decide they want to drive more German-made cars, this would increase the demand for German cars, causing an increase in the demand for Euros (since German cars are priced in Euros). This increase in demand for Euros would cause an appreciation in the value of the Euro (i.e. the currency would increase in value).

Question 5

Ceteris paribus, if the French decide they want to drink more Chinese-grown tea, this causes the ________ Chinese currency to _______.

Accepted Answer

If the French decide they want to drink more Chinese-grown tea, the demand for Chinese-grown tea will increase. This will lead to an increase in the demand for Chinese currency to purchase the tea, causing the Chinese currency to increase in value. Therefore, the answer is C) demand for; increase.

Question 6

Ceteris paribus, with a fixed exchange rate, if Americans decide to buy more Japanese-made television sets, this causes a market ________ of Japanese currency and creates a balance-of-payments ________ for the United States.

Accepted Answer

If Americans decide to buy more Japanese-made television sets, the demand for Japanese currency will increase, causing a market shortage of Japanese currency. This, in turn, creates a balance-of-payments deficit for the United States as they will be paying out more money to Japan than they are receiving back.

Question 7

The fact that the United States has become the world's largest debtor nation is an indication that

Accepted Answer

The status of the United States as the world's largest debtor nation indicates that it is able to borrow large sums internationally, which suggests confidence in its economy by global investors. This reflects the attractiveness of the U.S. economy to foreign investors rather than its decline or the need for trade restrictions or a return to the gold standard.

Question 8

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

Accepted Answer

The return to a worldwide gold standard is not a consequence of resistance to exchange rate fluctuations. The other options are consequences of exchange rate fluctuations.

Question 9

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

Accepted Answer

When the quantity demanded exceeds the quantity supplied, it creates a shortage in the market. This is because there is excess demand for the product or service, but the supply is not sufficient to meet this demand. A market surplus occurs when the quantity supplied exceeds the quantity demanded at a given price. The balance-of-payments deficit and surplus are related to international trade and refer to the difference between a country's total payments to foreign countries and its total receipts from them.

Question 10

An excess demand for foreign currency at current exchange rates is known as a

Accepted Answer

An excess demand for foreign currency means that there is a more significant demand for foreign goods and services than domestic goods and services, which leads to a higher outflow of domestic currency. This deficit in the balance of payments occurs when the imports are greater than the exports, leading to a shortage of domestic currency.

Question 11

As a result of an increase in demand from D₂ to D₁ in Figure 36.4, ceteris paribus, the price of a $40,000 U.S. computer system, in terms of Japanese yen, would: =

Accepted Answer

According to the law of demand, an increase in demand for a good leads to an increase in its price, ceteris paribus. Therefore, in this case, an increase in demand from D₂ to D₁ would lead to an increase in the price of a $40,000 U.S. computer system, in terms of Japanese yen. The increase in price would be determined by the extent of the increase in demand and the sensitivity of the price to changes in demand, so we cannot determine the exact amount of the increase from the given information. However, the only answer choice that reflects an increase in price is D, which is therefore the best choice.

Question 12

A major problem with countries setting fixed exchange rates for their currencies is

Accepted Answer

The answer of A major problem with countries setting fixed...

Question 13

The inflow of foreign investment into the United States

Accepted Answer

The inflow of foreign investment is seen as a positive sign for the United States' economy as it signals that foreign investors have confidence in the country's economic prospects. This, in turn, stimulates more economic growth as it provides more capital for investment and job creation.

Question 14

Under a system of fixed exchange rates, excess demand by Germans for the Swiss franc represents a potential

Accepted Answer

Under a fixed exchange rate system, excess demand for a currency signals that the demand for goods and services from that particular country is exceeding their supply, which affects the balance of payments. In this case, if Germans are demanding more Swiss francs than what is available, it means they are importing more goods and services from Switzerland than what they are exporting to Switzerland. This creates a German balance-of-payments deficit with Switzerland.

Question 15

Because of the United States' long-standing trade deficit with Japan, the supply of U.S. dollars in Japan has increased. Which of the following is true about this situation?

Accepted Answer

With an increase in the supply of U.S. dollars in Japan, there will be a surplus of U.S. dollars in the foreign exchange market. The demand for the U.S. dollar will decrease, causing its value to decrease in terms of the yen. This will make Japanese goods relatively more expensive and U.S. goods relatively cheaper, leading to an increase in U.S. exports and a decrease in imports, which will reduce the trade deficit. Therefore, option B is the correct answer. Option A is incorrect because trade restrictions on imported goods can hurt the domestic consumers and reduce competition. Option C is incorrect because the increase in economic strength may lead to an increase in imports from the U.S., but it could also stimulate Japanese demand for U.S. goods and services, which could help balance the trade deficit. Option D is incorrect because we do know that the trade deficit exists and we can analyze its causes and effects.

Question 16

In a fixed exchange rate system,

Accepted Answer

The answer of In a fixed exchange rate system,
...

Question 17

Ceteris paribus, if Canadians decide they want to eat more U.S.-grown soybeans, this causes the ________ U.S. currency to _______.

Accepted Answer

If Canadians decide they want to eat more U.S.-grown soybeans, this means there is an increase in demand for U.S. soybeans, which will cause the demand for U.S. currency to increase, as there will be an increase in the demand for U.S. dollars to purchase the soybeans.

Question 18

Which of the following is not likely to occur because of exchange rate fluctuations?

Accepted Answer

Exchange rate fluctuations may affect international trade, competitiveness of domestic industries, and the balance of payments. However, they are unlikely to lead to an end to flexible exchange rates worldwide as many countries have adopted this system to allow their currencies to fluctuate freely. The other options (B, C, D) are all possible consequences of exchange rate fluctuations.

Question 19

A mechanism for fixing exchange rates is the

Accepted Answer

The Gold Standard is a mechanism for fixing exchange rates by tying currencies to gold, ensuring stability and predictability in international trade.

Question 20

A gold standard has the advantage of

Accepted Answer

The answer of A gold standard has the advantage of
...

Quiz 22: International Economics

Suppose the U.S. dollar is defined by law as being equal to 0.1 ounce of gold. Further suppose the British pound is defined as being equal to 0.05 ounce of gold. The implied exchange rate between the pound and the dollar is

Excess demand for a specific foreign currency, such as the pound, implies a

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus, an increase in imports of French goods by Japanese consumers, ceteris paribus, would result in a

Ceteris paribus, if Americans decide they want to drive more German-made cars, this causes the __ German currency to _.

Ceteris paribus, if the French decide they want to drink more Chinese-grown tea, this causes the __ Chinese currency to _.

Ceteris paribus, with a fixed exchange rate, if Americans decide to buy more Japanese-made television sets, this causes a market of Japanese currency and creates a balance-of-payments for the United States.

The fact that the United States has become the world's largest debtor nation is an indication that

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

An excess demand for foreign currency at current exchange rates is known as a

As a result of an increase in demand from D₂ to D₁ in Figure 36.4, ceteris paribus, the price of a $40,000 U.S. computer system, in terms of Japanese yen, would: =

A major problem with countries setting fixed exchange rates for their currencies is

The inflow of foreign investment into the United States

Under a system of fixed exchange rates, excess demand by Germans for the Swiss franc represents a potential

Because of the United States' long-standing trade deficit with Japan, the supply of U.S. dollars in Japan has increased. Which of the following is true about this situation?

In a fixed exchange rate system,

Ceteris paribus, if Canadians decide they want to eat more U.S.-grown soybeans, this causes the __ U.S. currency to _.

Which of the following is not likely to occur because of exchange rate fluctuations?

A mechanism for fixing exchange rates is the

A gold standard has the advantage of

Quiz 22: International Economics

Suppose the U.S. dollar is defined by law as being equal to 0.1 ounce of gold. Further suppose the British pound is defined as being equal to 0.05 ounce of gold. The implied exchange rate between the pound and the dollar is

Excess demand for a specific foreign currency, such as the pound, implies a

Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus, an increase in imports of French goods by Japanese consumers, ceteris paribus, would result in a

Ceteris paribus, if Americans decide they want to drive more German-made cars, this causes the ________ German currency to _______.

Ceteris paribus, if the French decide they want to drink more Chinese-grown tea, this causes the ________ Chinese currency to _______.

Ceteris paribus, with a fixed exchange rate, if Americans decide to buy more Japanese-made television sets, this causes a market ________ of Japanese currency and creates a balance-of-payments ________ for the United States.

The fact that the United States has become the world's largest debtor nation is an indication that

There is resistance to exchange rate fluctuations because changes in the value of a currency are likely to cause all of the following except

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

An excess demand for foreign currency at current exchange rates is known as a

As a result of an increase in demand from D2 to D1 in Figure 36.4, ceteris paribus, the price of a $40,000 U.S. computer system, in terms of Japanese yen, would: =

A major problem with countries setting fixed exchange rates for their currencies is

The inflow of foreign investment into the United States

Under a system of fixed exchange rates, excess demand by Germans for the Swiss franc represents a potential

Because of the United States' long-standing trade deficit with Japan, the supply of U.S. dollars in Japan has increased. Which of the following is true about this situation?

In a fixed exchange rate system,

Ceteris paribus, if Canadians decide they want to eat more U.S.-grown soybeans, this causes the ________ U.S. currency to _______.

Which of the following is not likely to occur because of exchange rate fluctuations?

A mechanism for fixing exchange rates is the

A gold standard has the advantage of

Ceteris paribus, if Americans decide they want to drive more German-made cars, this causes the __ German currency to _.

Ceteris paribus, if the French decide they want to drink more Chinese-grown tea, this causes the __ Chinese currency to _.

Ceteris paribus, with a fixed exchange rate, if Americans decide to buy more Japanese-made television sets, this causes a market of Japanese currency and creates a balance-of-payments for the United States.

As a result of an increase in demand from D₂ to D₁ in Figure 36.4, ceteris paribus, the price of a $40,000 U.S. computer system, in terms of Japanese yen, would: =

Ceteris paribus, if Canadians decide they want to eat more U.S.-grown soybeans, this causes the __ U.S. currency to _.