Question 1

Under crawling band systems, governments adjust the range within which exchange rate values can move

Accepted Answer

Under crawling band systems, governments periodically adjust the permissible range (band) within which the exchange rate can fluctuate, allowing for more flexibility in response to economic indicators.

Question 2

Under managed float exchange rate systems, governments do not interfere with the supply and demand market forces for their national currencies

Accepted Answer

In a managed float exchange rate system, governments or central banks may intervene to influence the value of their national currencies, albeit not adhering to a fixed exchange rate path, allowing for some fluctuation according to market forces.

Question 3

When Japanese firms repatriate profits from the US to Japan, this creates demand for dollars

Accepted Answer

When Japanese firms repatriate profits from the US to Japan, they exchange dollars for yen, creating demand for yen, not dollars.

Question 4

Independently floating exchange rates have their values determined by supply and demand for their currencies

Accepted Answer

Independently floating exchange rates fluctuate based on the supply and demand for the currency in the foreign exchange market, without direct intervention by the country's government or central bank.

Question 5

Crawling pegs are usually used when national exchange rates are consistently going down (i.e. depreciating) in value against other major currencies

Accepted Answer

Crawling pegs are often implemented to stabilize a currency that is depreciating by allowing for gradual adjustments in the exchange rate, thus avoiding sudden devaluations.

Question 6

Crawling pegs are used when countries have consistent inflation problems causing governments to constantly appreciate their national currencies (i.e. more national currency units per dollar or Euro).

Accepted Answer

Crawling pegs are typically used to gradually devalue a national currency in response to persistent inflation, not to appreciate it. This system allows for small, frequent adjustments to the exchange rate, helping to stabilize the economy and combat inflation by making exports cheaper and imports more expensive.

Question 7

Dollar supply consists of dollars leaving the US and being converted into foreign currencies

Accepted Answer

The answer of Dollar supply consists of dollars leaving the...

Question 8

When the US exports to the Euro zone in Western Europe, this increases the supply of dollars leaving the US and increases demand for Euros

Accepted Answer

The answer of When the US exports to the Euro...

Question 9

When European tourists come to the US and convert their money, this creates demand for US dollars

Accepted Answer

When European tourists convert their money to US dollars, they are essentially buying US dollars with their own currency, which increases the demand for US dollars in the foreign exchange market.

Question 10

Under managed float exchange rate systems, governments can influence their exchange rate values through fiscal (taxation) and/or monetary (interest rate) policies

Accepted Answer

Under a managed float exchange rate system, governments can use fiscal and monetary policies to influence the value of their currency by affecting the demand and supply for it in the foreign exchange market.

Question 11

When European tourists go to Japan, they increase the supply of Euros leaving Western Europe and increase demand for Japanese yen

Accepted Answer

When European tourists go to Japan, they exchange Euros for Japanese yen, increasing the supply of Euros in the currency exchange market and increasing the demand for Japanese yen, as they need yen to pay for goods and services in Japan.

Question 12

When currencies float independently, good economic news tends to create demand for and therefore weaken the national currency

Accepted Answer

Good economic news tends to increase demand for a country's currency, thereby strengthening it, as investors seek to invest in a country with a strong economic outlook.

Question 13

Dollar supply consists of dollars being converted back from foreign currencies into US dollars

Accepted Answer

Dollar supply refers to the total amount of US dollars available, including those in circulation and in bank reserves, not just dollars being converted back from foreign currencies.

Question 14

When European firms export to the USA, dollars leave the US and create demand for Euros

Accepted Answer

When European firms export to the USA, American buyers need to exchange their dollars for euros to pay for the goods, increasing demand for euros and causing dollars to leave the US.

Question 15

Under crawling band exchange rate systems, governments constantly re-peg national currency values within a pre-determined range

Accepted Answer

The answer of Under crawling band exchange rate systems, governments...

Question 16

Crawling pegs are usually used when national exchange rates are consistently going up (i.e. appreciating) in value against other major currencies

Accepted Answer

Crawling pegs are a type of exchange rate regime typically used to stabilize a national currency by allowing it to fluctuate within a controlled range, often to avoid abrupt devaluation rather than to manage consistent appreciation.

Question 17

Currencies pegged within a horizontal band are allowed to move slightly upwards or downwards around a pre-determined exchange rate

Accepted Answer

Currencies pegged within a horizontal band have a fixed exchange rate with slight flexibility, allowing them to fluctuate within a predetermined range around a central rate.

Question 18

When aggregate demand for dollars exceeds aggregate supply, the dollar is likely to depreciate in value

Accepted Answer

When aggregate demand for dollars exceeds aggregate supply, the dollar is likely to appreciate in value, not depreciate, because higher demand relative to supply increases the currency's value.

Question 19

When the European Union is doing well economically, the Euro is likely to appreciate in value

Accepted Answer

When the European Union's economy is performing well, it typically leads to increased investor confidence in the Euro, which can cause the currency to appreciate in value due to higher demand.

Question 20

When Japanese companies invest in the US, they create demand for dollars

Accepted Answer

When Japanese companies invest in the United States, they need to convert their yen into dollars to make investments, pay for services, or buy goods. This conversion process increases the demand for dollars in the foreign exchange market.

Quiz 1: Globalization and Worldwide Infrastructure Development