Question 1

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

Accepted Answer

This phenomenon is the result of the violation of purchasing power parity, which states that exchange rates should adjust to equalize the prices of identical goods across different countries. As prices of European goods are rising faster, their relative prices become higher than those of similar American goods, leading to a shift in consumption towards American products and thus a depreciation in the euro.

Question 2

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

Accepted Answer

The answer of If the exchange rate of the Swiss...

Question 3

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

Accepted Answer

When the U.S. exports passenger jet aircraft, it earns revenue in foreign currency. This increases the demand for U.S. dollars as foreign buyers need to exchange their currency to U.S. dollars to pay for the exports. Hence, the effect in the foreign exchange market is an increase in demand for U.S. dollars.

Question 4

If the U.S.purchases oil from Venezuela,what is the effect in the foreign exchange market?

Accepted Answer

The answer of If the U.S.purchases oil from Venezuela,what is...

Question 5

In the long run,the chief determinant of exchange rate changes is a change in

Accepted Answer

In the long run, the chief determinant of exchange rate changes is price levels. This is because changes in price levels affect a country's competitiveness, which in turn affects demand for its currency. For example, if a country experiences high inflation, its products become less competitive on the global market and demand for its currency decreases, causing its exchange rate to depreciate. On the other hand, if a country experiences low inflation or deflation, its products become more competitive and demand for its currency increases, causing its exchange rate to appreciate. Interest rates, real GDP, and the price of gold can also affect exchange rates in the short run, but in the long run, price levels are the primary determinant.

Question 6

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

Accepted Answer

The purchasing power parity theory states that exchange rates should adjust to equalize the purchasing power of different currencies. One of the main factors affecting purchasing power is inflation, so differences in inflation rates are likely to affect exchange rates.

Question 7

A prolonged recession in Europe should decrease the

Accepted Answer

During a prolonged recession in Europe, there will be lower economic growth and less investment opportunities, which will decrease the demand for U.S. dollars as investors are more risk-averse and less likely to invest in foreign markets. As a result, the value of the euro will decrease relative to the dollar, leading to a decrease in demand for dollars.

Question 8

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars,how many U.S.dollars does it cost to ski at Whistler?

Accepted Answer

To find the cost in U.S. dollars, we need to multiply the cost in Canadian dollars by the exchange rate:

$50 CAD x 0.68 USD/CAD = $34 USD

Therefore, it costs $34 USD to ski at Whistler. Choice B is the correct answer.

Question 9

If the dollar depreciates relative to other currencies,which of the following is true?

Accepted Answer

If the dollar depreciates, it means its value has decreased compared to other currencies. Therefore, it will take more dollars to buy a foreign currency.

Question 10

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Accepted Answer

The answer of If Japanese tourists visit Yellowstone Park,what is...

Question 11

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Accepted Answer

Japanese tourists visiting Yellowstone Park will need to exchange their yen for U.S. dollars in order to pay for goods and services in the U.S. This increases the demand for U.S. dollars in the foreign exchange market.

Question 12

Which of the following would cause a decrease in the demand for U.S.dollars?

Accepted Answer

The answer of Which of the following would cause a...

Question 13

An economic boom in America should increase the

Accepted Answer

The answer of An economic boom in America should increase...

Question 14

If exchange rates are determined in a floating rate system,what determines the value of a U.S.dollar in terms of euros?

Accepted Answer

In a floating rate system, the value of a currency is determined by the demand and supply in the foreign exchange market. Therefore, the value of a U.S. dollar in terms of euros is determined by the demand and supply of U.S. dollars and euros in the foreign exchange market. The other options (A, B, and D) do not have a direct impact on the exchange rate determination in a floating rate system.

Question 15

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac,fries,and a Coke cost $3.91 in San Francisco,how much should the same order cost in yen in Osaka?

Accepted Answer

The answer of The exchange rate between yen and dollars...

Question 16

Which of the following would cause an increase in the demand for U.S.dollars?

Accepted Answer

The answer of Which of the following would cause an...

Question 17

The purchasing power parity theory of exchange rate determination states that

Accepted Answer

The purchasing power parity theory suggests that in the long run, exchange rates between two currencies will adjust such that the price of a basket of goods and services in one country will be equivalent to the price of a similar basket of goods and services in the other country. This means that the exchange rate will reflect differences in price levels between the two countries. However, in the short run, other factors such as speculation, political instability, interest rates, and inflation can also impact exchange rates.

Question 18

If Americans decide to buy more South African diamonds,what is the effect in the foreign market?

Accepted Answer

The answer of If Americans decide to buy more South...

Question 19

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

Accepted Answer

When Americans purchase land in Germany and build factories, they are investing in Germany, which requires converting USD to EUR. This increases demand for the euro, leading to its appreciation relative to the dollar.

Question 20

If a Mexican pension fund decides to purchase U.S.government bonds,what is the effect in the foreign exchange market?

Accepted Answer

When a Mexican pension fund purchases U.S. government bonds, they need to convert their Mexican pesos into U.S. dollars to make the purchase. This increases the demand for U.S. dollars in the foreign exchange market, leading to an appreciation of the U.S. dollar relative to the Mexican peso.

Quiz 19: The International Monetary System Order Or Disorder

Prices of European goods are rising faster than prices of similar goods in the United States.Consequently Europeans substitute American goods for European goods and the euro depreciates.This phenomenon is the basis of

If the exchange rate of the Swiss franc is 1.61 francs per dollar,then the Swiss franc is worth about

If the U.S.exports passenger jet aircraft,what is the effect in the foreign exchange market?

If the U.S.purchases oil from Venezuela,what is the effect in the foreign exchange market?

In the long run,the chief determinant of exchange rate changes is a change in

According to the purchasing power parity theory,which of the following is most likely to affect exchange rates?

A prolonged recession in Europe should decrease the

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia.If the current value of the Canadian dollar is 0.68 U.S.dollars,how many U.S.dollars does it cost to ski at Whistler?

If the dollar depreciates relative to other currencies,which of the following is true?

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

If Japanese tourists visit Yellowstone Park,what is the effect in the foreign exchange market?

Which of the following would cause a decrease in the demand for U.S.dollars?

An economic boom in America should increase the

If exchange rates are determined in a floating rate system,what determines the value of a U.S.dollar in terms of euros?

The exchange rate between yen and dollars at one point in 2010 was 83 yen per dollar.If a Big Mac,fries,and a Coke cost $3.91 in San Francisco,how much should the same order cost in yen in Osaka?

Which of the following would cause an increase in the demand for U.S.dollars?

The purchasing power parity theory of exchange rate determination states that

If Americans decide to buy more South African diamonds,what is the effect in the foreign market?

Everything else being equal,one can expect the euro to appreciate relative to the dollar if

If a Mexican pension fund decides to purchase U.S.government bonds,what is the effect in the foreign exchange market?