Question 1

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,

Accepted Answer

If U.S. residents believe that the dollar will appreciate in the future, they will demand more dollars now in order to benefit from the expected future exchange rate. This increase in demand for dollars will shift the demand curve for dollars rightward.

Question 2

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

Accepted Answer

A decrease in the U.S. interest rate differential would decrease the return on holding dollar-denominated assets, making them less attractive to foreign investors and reducing the demand for dollars in the foreign exchange market.

Question 3

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

Accepted Answer

If people believe the U.S. dollar will be worth less in the future, they will be less inclined to hold or demand U.S. dollars now, decreasing its demand.

Question 4

If the interest rate on Japanese yen assets falls, the

Accepted Answer

When the interest rate on Japanese yen assets falls, investors may seek higher returns elsewhere, increasing the demand for dollars to invest in U.S. assets.

Question 5

An increase in the interest rate in the United States compared to the interest rate in Great Britain will

Accepted Answer

An increase in the interest rate in the United States compared to Great Britain will cause the U.S. interest rate differential to increase, which will result in a higher demand for dollars, shifting the demand curve for dollars rightward. Therefore, both answer choices A and C are correct. An increase in the U.S. interest rate will also reduce the demand for pounds since there will be a higher interest rate elsewhere. Hence, answer choice B is incorrect.

Question 6

If there is an increase in the expected future U.S. exchange rate, there is

Accepted Answer

An increase in the expected future U.S. exchange rate makes holding dollars more attractive, leading to a rightward shift in the demand curve for dollars as investors and traders anticipate higher returns.

Question 7

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

Accepted Answer

The answer of 
-In the figure above, the shift in...

Question 8

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

Accepted Answer

An increase in the U.S. interest rate makes U.S. assets more attractive, increasing the demand for U.S. dollars as investors seek higher returns.

Question 9

If the interest rate on Swiss franc assets increases, the

Accepted Answer

When the interest rate on Swiss franc assets increases, investors are more likely to invest in Swiss franc assets rather than dollar assets, leading to a decrease in the demand for dollars.

Question 10

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

Accepted Answer

The answer of 
-In the figure above, the shift in...

Question 11

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

Accepted Answer

When foreign interest rates drop, U.S. assets become more attractive, increasing the demand for U.S. dollars as investors seek to invest in the U.S.

Question 12

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

Accepted Answer

An increase in interest rates in the United States will make the dollar more attractive for investors seeking higher returns on their investments. Therefore, the demand for dollars is likely to increase, leading to an appreciation in the value of the dollar relative to the euro.

Question 13

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

Accepted Answer

The answer of 
-In the figure above, the shift in...

Question 14

U.S. residents come to believe that the dollar will depreciate in the future, that is, the exchange rate in the future will be lower than the current exchange rate. As a result,

Accepted Answer

If residents believe that the dollar will depreciate in the future, they will not want to hold onto dollars and will instead try to exchange them for other currencies. This will cause a decrease in demand for dollars, shifting the demand curve leftward.

Question 15

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

Accepted Answer

If people expect the dollar to be worth more euros in the future, they will want to hold more dollars now to benefit from the expected appreciation, thus increasing the demand for dollars.

Question 16

If people expect the foreign exchange rate for dollars to rise in the future,

Accepted Answer

If people expect the foreign exchange rate for dollars to rise in the future, they will want to buy dollars now to get a better exchange rate in the future. This will increase the demand for dollars, as more people will be willing to exchange their own currency for dollars.

Question 17

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

Accepted Answer

An increase in the expected future exchange rate makes holding U.S. dollars more attractive, leading to an increase in demand for dollars, shifting the demand curve from D0 to D1.

Question 18

If the interest rate in the United States increases, then in the foreign exchange market the

Accepted Answer

When the interest rate in the United States increases, foreign investors are attracted to invest in U.S. assets to earn higher returns, leading to an increased demand for U.S. dollars to purchase these assets.

Question 19

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the __________U.S. dollars will __________.

Accepted Answer

If investors believe they can make a bigger profit from U.S. assets, there will be an increase in demand for U.S. dollars as they will need to use them to purchase these assets, increasing the value of U.S. dollars. Therefore, the correct answer is the demand for U.S. dollars will increase.

Question 20

If the U.S. interest rate rises while interest rates in the rest of the world do not change, the higher
u.S. interest rate

Accepted Answer

When the U.S. interest rate rises while interest rates in other countries do not change, investors will seek to earn higher returns by investing in U.S. assets, leading to an increase in demand for dollars.

Quiz 9: The Exchange Rate and the Balance of Payments

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

If the interest rate on Japanese yen assets falls, the

An increase in the interest rate in the United States compared to the interest rate in Great Britain will

If there is an increase in the expected future U.S. exchange rate, there is

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

If the interest rate on Swiss franc assets increases, the

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

U.S. residents come to believe that the dollar will depreciate in the future, that is, the exchange rate in the future will be lower than the current exchange rate. As a result,

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

If people expect the foreign exchange rate for dollars to rise in the future,

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

If the interest rate in the United States increases, then in the foreign exchange market the

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the U.S. dollars will .

If the U.S. interest rate rises while interest rates in the rest of the world do not change, the higher u.S. interest rate

Quiz 9: The Exchange Rate and the Balance of Payments

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,

The demand for dollars in the foreign exchange market will decrease and the demand curve will shift leftward if

Today the U.S. dollar is worth 1.5 Canadian dollars. Because of changes in economic conditions, people come to believe that by the end of the month the U.S. dollar will be worth 1.2 Canadian dollars. This belief

If the interest rate on Japanese yen assets falls, the

An increase in the interest rate in the United States compared to the interest rate in Great Britain will

If there is an increase in the expected future U.S. exchange rate, there is

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when

If the interest rate on Swiss franc assets increases, the

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when

Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

U.S. residents come to believe that the dollar will depreciate in the future, that is, the exchange rate in the future will be lower than the current exchange rate. As a result,

Today, the dollar is worth 1.15 euros. Due to changes in economic conditions, in one month people come to expect the dollar will be worth 1.20 euros. This belief

If people expect the foreign exchange rate for dollars to rise in the future,

-In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when

If the interest rate in the United States increases, then in the foreign exchange market the

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the __________U.S. dollars will __________.

If the U.S. interest rate rises while interest rates in the rest of the world do not change, the higher u.S. interest rate

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₂could occur when

-In the figure above, the shift in the demand curve for U.S. dollars from D₀to D₁could occur when

If growth in the United States speeds up so that investors believe they can make a bigger profit from U.S. assets, the U.S. dollars will .