Question 1

Which of the following exchange rates between the dollar and the peso would an American buyer of Mexican goods most prefer?

Accepted Answer

The lower the dollar amount needed to purchase a peso, the more pesos an American buyer can get for their dollars, making Mexican goods cheaper for them. Therefore, an exchange rate of $0.04 = 1 peso (D) is most preferable for an American buyer of Mexican goods.

Question 2

The more dollars that must be given up to buy one British pound, the __________ American goods are for the British and the __________ American goods the British will buy; thus __________ dollars will be demanded.

Accepted Answer

The answer of The more dollars that must be given...

Question 3

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen but currently the exchange rate is $0.0089 = 1 yen, then a __________ exists.

Accepted Answer

The answer of If the equilibrium exchange rate between U.S....

Question 4

The U.S. dollar has depreciated relative to the Japanese yen if it takes

Accepted Answer

When it takes fewer yen to buy a dollar, it means the dollar has depreciated relative to the yen, as the yen has become stronger or more valuable compared to the dollar.

Question 5

In a foreign exchange market diagram with dollars per peso on the vertical axis, the quantity of __________ would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the __________ curve.

Accepted Answer

In a foreign exchange market diagram, the quantity of pesos would be on the horizontal axis (since it is the currency being exchanged), and the U.S. demand for Mexican goods would help to determine the demand curve for pesos. The more U.S. dollars are demanded to purchase Mexican goods, the more pesos will be demanded in order to make those purchases, and thus the demand curve for pesos will shift to the right.

Question 6

Suppose that prices in the United States rise relative to prices in Japan. We expect that

Accepted Answer

If prices in the United States rise relative to prices in Japan, it means that goods and services in the United States will become more expensive compared to Japan. This will lead to a decrease in demand for US goods from Japan and an increase in demand for Japanese goods from the United States. As a result, US exports will decrease, and its imports will increase. To balance this trade deficit, the value of the US dollar will decrease, and the Japanese yen will appreciate.

Question 7

Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be __________ and the price of the raincoat in dollars will be __________.

Accepted Answer

To find the price of the television in pesos, we can multiply the dollar price by the exchange rate: $500 x 10 pesos/$1 = 5000 pesos. To find the price of the raincoat in dollars, we can divide the peso price by the exchange rate: 700 pesos ÷ 10 pesos/$1 = $70.

Question 8

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the dollar will __________.

Accepted Answer

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, it means that the dollar is undervalued and the yen is overvalued. Therefore, the dollar will appreciate, and the yen will depreciate until the exchange rate reaches $0.008 = 1 yen, which is the equilibrium exchange rate. The dollar price of a yen will increase because it will take more dollars to purchase one yen at the higher exchange rate.

Question 9

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

Accepted Answer

If the equilibrium exchange rate is $0.01 = 1 yen but the current exchange rate is $0.009 = 1 yen, then the yen is undervalued relative to the dollar (because it takes fewer dollars to buy one yen than it should at equilibrium). In response to this, demand for yen will increase and the supply of yen for sale will decrease, causing the price of yen in dollars to increase (appreciate) until it reaches the equilibrium rate of $0.01 = 1 yen.

Question 10

As the dollar price of the Mexican peso falls, the __________ Mexican goods will be for Americans to purchase and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

Accepted Answer

As the dollar price of the Mexican peso falls, Mexican goods become less expensive for Americans, leading to an increase in the quantity of Mexican goods purchased by Americans, and thus more pesos will be demanded.

Question 11

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

Accepted Answer

When $0.10 equals 1 peso, the peso is stronger relative to the dollar compared to the other options, meaning the Mexican buyer would get more for their money when purchasing American goods.

Question 12

An American computer is priced at $1,200. If the exchange rate between the U.S. dollar and the Japanese yen is $0.01 per yen, the equivalent price of the computer in yen is approximately __________ yen.

Accepted Answer

The answer of An American computer is priced at $1,200....

Question 13

Suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market)the demand for U.S. dollars will __________ and the supply of dollars will __________.

Accepted Answer

When prices in the United States rise relative to France, this means that the purchasing power of the US dollar has decreased relative to the French franc. As a result, people will be less willing to hold US dollars and there will be a decreased demand for US dollars. At the same time, French francs will become more attractive to Americans, resulting in an increased supply of dollars as Americans sell off their dollars to buy francs. Therefore, the demand for US dollars will decrease while the supply of dollars will increase.

Question 14

In a foreign exchange market diagram with pesos per dollar on the vertical axis, the quantity of __________ would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the __________ curve.

Accepted Answer

The answer of In a foreign exchange market diagram with...

Question 15

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the yen will __________.

Accepted Answer

If the current exchange rate is $0.009 = 1 yen, it means that the yen is overvalued in relation to the equilibrium rate of $0.007 = 1 yen. Therefore, the flexibility of exchange rates would lead to a decrease in the dollar price of a yen (since fewer dollars would be required to purchase one yen), and the yen would depreciate (since it becomes less valuable in terms of other currencies).

Question 16

Suppose that an American-made pair of blue jeans has a price of $80. If the exchange rate is $0.095 = 1 peso, then a Mexican consumer would have to pay approximately __________ pesos to purchase the blue jeans, but if the exchange rate is $0.085 = 1 peso, then a Mexican consumer would have to pay _________ pesos to purchase the blue jeans.

Accepted Answer

If $1 = 0.095 pesos, then $80 = 0.095 x 80 = 7.60 pesos. 
If $1 = 0.085 pesos, then $80 = 0.085 x 80 = 6.80 pesos.
Therefore, the Mexican consumer would have to pay approximately 842 pesos when the exchange rate is $0.095 = 1 peso, and only 7.60 pesos when the exchange rate is $0.085 = 1 peso.

Question 17

Suppose that the exchange rate between the U.S. dollar and the Mexican peso is 1 peso = $0.11.  If the U.S. dollar price per Mexican peso changes to 1 peso =$0.10, the peso is said to have __________ and the dollar to have __________.

Accepted Answer

When the U.S. dollar price per Mexican peso changes from 1 peso = $0.11 to 1 peso = $0.10, it means that the peso has depreciated (we can buy fewer dollars with each peso) and the dollar has appreciated (it now takes fewer dollars to buy one peso).

Question 18

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable. We would expect that the result would be that in the foreign exchange market ___________________________,  ​ceteris paribus ​.

Accepted Answer

When prices in Japan increase relative to prices in the United States, the value of the yen relative to the dollar decreases because it now takes more yen to buy the same amount of goods. This leads to the dollar appreciating and the yen depreciating in the foreign exchange market, assuming all other factors remain constant (ceteris paribus).

Question 19

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market)the demand for U.S. dollars will __________ and the supply of U.S. dollars will __________.

Accepted Answer

The answer of Suppose that prices in France increase by...

Question 20

If the average income per U.S. worker decreases while that of Japanese workers remains unchanged, then the demand curve for Japanese yen will shift __________, which will cause the equilibrium exchange rate of the dollar price per yen to __________, which is the same thing as saying that the dollar will __________.

Accepted Answer

The answer of If the average income per U.S. worker...

Quiz 21: International Finance

Which of the following exchange rates between the dollar and the peso would an American buyer of Mexican goods most prefer?

The more dollars that must be given up to buy one British pound, the American goods are for the British and the American goods the British will buy; thus __ dollars will be demanded.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen but currently the exchange rate is $0.0089 = 1 yen, then a __________ exists.

The U.S. dollar has depreciated relative to the Japanese yen if it takes

In a foreign exchange market diagram with dollars per peso on the vertical axis, the quantity of would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the curve.

Suppose that prices in the United States rise relative to prices in Japan. We expect that

Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be and the price of the raincoat in dollars will be .

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, then with flexible exchange rates the dollar price of a yen will , and the dollar will .

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will and the yen will .

As the dollar price of the Mexican peso falls, the Mexican goods will be for Americans to purchase and the Mexican goods Americans will buy; thus __ pesos will be demanded.

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

An American computer is priced at $1,200. If the exchange rate between the U.S. dollar and the Japanese yen is $0.01 per yen, the equivalent price of the computer in yen is approximately __________ yen.

Suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market) the demand for U.S. dollars will and the supply of dollars will .

In a foreign exchange market diagram with pesos per dollar on the vertical axis, the quantity of would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the curve.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will , and the yen will .

Suppose that the exchange rate between the U.S. dollar and the Mexican peso is 1 peso = $0.11. If the U.S. dollar price per Mexican peso changes to 1 peso =$0.10, the peso is said to have and the dollar to have .

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable. We would expect that the result would be that in the foreign exchange market ___________________________, ceteris paribus .

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will and the supply of U.S. dollars will .

If the average income per U.S. worker decreases while that of Japanese workers remains unchanged, then the demand curve for Japanese yen will shift , which will cause the equilibrium exchange rate of the dollar price per yen to , which is the same thing as saying that the dollar will __.

Quiz 21: International Finance

Which of the following exchange rates between the dollar and the peso would an American buyer of Mexican goods most prefer?

The more dollars that must be given up to buy one British pound, the __________ American goods are for the British and the __________ American goods the British will buy; thus __________ dollars will be demanded.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen but currently the exchange rate is $0.0089 = 1 yen, then a __________ exists.

The U.S. dollar has depreciated relative to the Japanese yen if it takes

In a foreign exchange market diagram with dollars per peso on the vertical axis, the quantity of __________ would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the __________ curve.

Suppose that prices in the United States rise relative to prices in Japan. We expect that

Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be __________ and the price of the raincoat in dollars will be __________.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the dollar will __________.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

As the dollar price of the Mexican peso falls, the __________ Mexican goods will be for Americans to purchase and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer?

An American computer is priced at $1,200. If the exchange rate between the U.S. dollar and the Japanese yen is $0.01 per yen, the equivalent price of the computer in yen is approximately __________ yen.

Suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market) the demand for U.S. dollars will __________ and the supply of dollars will __________.

In a foreign exchange market diagram with pesos per dollar on the vertical axis, the quantity of __________ would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the __________ curve.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the yen will __________.

Suppose that the exchange rate between the U.S. dollar and the Mexican peso is 1 peso = $0.11. If the U.S. dollar price per Mexican peso changes to 1 peso =$0.10, the peso is said to have __________ and the dollar to have __________.

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable. We would expect that the result would be that in the foreign exchange market ___________________________, ​ceteris paribus ​.

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will __________ and the supply of U.S. dollars will __________.

The more dollars that must be given up to buy one British pound, the American goods are for the British and the American goods the British will buy; thus __ dollars will be demanded.

In a foreign exchange market diagram with dollars per peso on the vertical axis, the quantity of would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the curve.

Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be and the price of the raincoat in dollars will be .

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, then with flexible exchange rates the dollar price of a yen will , and the dollar will .

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will and the yen will .

As the dollar price of the Mexican peso falls, the Mexican goods will be for Americans to purchase and the Mexican goods Americans will buy; thus __ pesos will be demanded.

Suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market) the demand for U.S. dollars will and the supply of dollars will .

In a foreign exchange market diagram with pesos per dollar on the vertical axis, the quantity of would be on the horizontal axis, and the U.S. demand for Mexican goods would help to determine the curve.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will , and the yen will .

Suppose that the exchange rate between the U.S. dollar and the Mexican peso is 1 peso = $0.11. If the U.S. dollar price per Mexican peso changes to 1 peso =$0.10, the peso is said to have and the dollar to have .

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable. We would expect that the result would be that in the foreign exchange market ___________________________, ceteris paribus .

Suppose that prices in France increase by 8 percent while prices in the United States remain relatively stable. We would expect that (on the foreign exchange market) the demand for U.S. dollars will and the supply of U.S. dollars will .