Question 1

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

Accepted Answer

Switching from pegging the yuan against the dollar to linking its value to a basket of currencies allowed the yuan to appreciate in value slightly relative to the dollar. However, it did not have a dramatic impact on the trade imbalance between the US and China and did not significantly affect Chinese exports.

Question 2

Figure 19-5 
-Refer to Figure 19-5.Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which undervalues the yuan.Using the figure above,the equilibrium exchange rate would be ________ and Chinese exports to the United States would ________ in price.

Accepted Answer

The answer of Figure 19-5 
-Refer to Figure 19-5.Suppose the...

Question 3

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Accepted Answer

As foreign investors sell off their investments in Thailand, they will need to trade in their baht for dollars to convert their profits or proceeds. This creates an increase in the supply of baht in foreign exchange markets and a decrease in demand for the currency. In turn, this puts pressure on the value of the baht to decline.

Question 4

Destabilizing speculation refers to

Accepted Answer

Destabilizing speculation refers to the actions of investors who sell a country's currency in anticipation of buying it back later at a lower price. This can lead to a decrease in the value of the currency and economic instability in the affected country.

Question 5

China began pegging its currency,the yuan,to the dollar in 1994.Because the yuan has been ________ at the pegged exchange rate,the Chinese government ________ its reserves of dollars as the government purchased more ________ to maintain the pegged exchange rate.

Accepted Answer

If the yuan is undervalued at the pegged exchange rate, it means that the value of the yuan is artificially low compared to the dollar. As a result, the Chinese government would need to increase its reserves of dollars to maintain the pegged exchange rate. They do this by purchasing more dollars in the foreign exchange market.

Question 6

Figure 19-5 
-Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Accepted Answer

When U.S. consumers increase their demand for Chinese products, they need more yuan to purchase these goods. This increases the demand for yuan, shifting the demand curve to the right. At the pegged exchange rate, this results in a decrease in the surplus of Chinese yuan because more yuan are being demanded by U.S. consumers, reducing the excess supply of yuan at the pegged rate.

Question 7

Although the pegged exchange rate between the yuan and the dollar has undervalued the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would

Accepted Answer

Abandoning the peg could lead to an appreciation of the yuan, making Chinese exports more expensive and less competitive, potentially reducing exports and slowing economic growth.

Question 8

By 2012,Iceland's real GDP ________,and the real GDPs of Italy,Spain,Greece,and Ireland ________.

Accepted Answer

The answer of By 2012,Iceland's real GDP ________,and the real...

Question 9

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

Accepted Answer

To maintain a pegged exchange rate that is above the equilibrium exchange rate, a country must purchase surplus domestic currency at the pegged rate. This action increases demand for the domestic currency, helping to keep its value at the artificially high pegged rate.

Question 10

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Accepted Answer

Thailand's experience with pegging the baht to the dollar failed because the baht was overvalued, making Thai exports more expensive and reducing competitiveness. China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been undervalued, leading to trade imbalances and international pressure to allow the yuan to appreciate.

Question 11

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Accepted Answer

Foreigners selling off new investments in Thailand would have put downward pressure on the baht, making it more difficult to maintain its peg against the dollar. The other options, borrowing dollars from the International Monetary Fund, buying baht on the foreign exchange market, and increasing domestic interest rates, were all methods used to try to support the baht and maintain its peg against the dollar.

Question 12

Figure 19-5 
-Refer to Figure 19-5.The Chinese government pegs the yuan to the dollar,at one of the specified exchange rates on the graph,such that it overvalues its currency.Using the figure above,this would generate

Accepted Answer

The answer of Figure 19-5 
-Refer to Figure 19-5.The Chinese...

Question 13

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

Accepted Answer

The answer of During the Chinese experience with pegging the...

Question 14

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

Accepted Answer

Greater productivity growth in Spain implies a greater potential for economic growth and a more attractive investment destination, which increases demand for the euro compared to the U.S. dollar, leading to an increase in the euro's value relative to the dollar.

Question 15

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

Accepted Answer

Capital flight refers to the sudden outflow of large amounts of capital or assets from a country due to a loss of confidence in that country's economy or currency. In this case, foreign investors were selling off their investments in Thailand and exchanging the baht they received for dollars, resulting in a reduction in foreign investment in Thailand.

Question 16

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Accepted Answer

Countries whose industries competed with Chinese industry were affected by a yuan that was pegged to the dollar because the yuan was undervalued at the pegged exchange rate. As a result, the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely. This gave a competitive advantage to Chinese companies over foreign firms, which were not able to sell their goods in the Chinese market at a competitive price.

Question 17

Figure 19-5 
-Refer to Figure 19-5.Suppose the pegged exchange rate is $0.11/yuan.Because of safety concerns and numerous product recalls,U.S.consumers lower their demand for Chinese products.Using the figure above,this would

Accepted Answer

The answer of Figure 19-5 
-Refer to Figure 19-5.Suppose the...

Question 18

Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were ________ than they had planned while the Thai government continued trying to defend the peg,because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Accepted Answer

The baht had been pegged above the equilibrium exchange rate for the baht, so when the baht was allowed to float, it depreciated, making dollar-denominated debt more expensive to service.

Question 19

The currency adopted by most countries in ________ is referred to as the euro.

Accepted Answer

The euro is the currency adopted by most Western European countries, such as Germany, France, Italy, and Spain, among others.

Question 20

One reason that Iceland recovered from the financial crisis which began in 2007 more quickly than did countries like Greece,Spain,and Italy is that Iceland does not use the euro,and the value of its currency was able to ________ versus the euro,which increased its ________.

Accepted Answer

Iceland's currency, the krona, was able to decline in value compared to the euro, making Icelandic exports more competitive and attractive to buyers. This helped boost Iceland's economy and aided in its recovery from the financial crisis. However, a decline in currency value can also make imports more expensive, which is why option B is not the correct choice. Option C and D suggest a rise in the value of the krona, which would actually make Icelandic exports more expensive and less competitive, hindering the country's recovery.

Quiz 19: The International Financial System

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

Figure 19-5 -Refer to Figure 19-5.Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which undervalues the yuan.Using the figure above,the equilibrium exchange rate would be and Chinese exports to the United States would in price.

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Destabilizing speculation refers to

China began pegging its currency,the yuan,to the dollar in 1994.Because the yuan has been at the pegged exchange rate,the Chinese government its reserves of dollars as the government purchased more to maintain the pegged exchange rate.

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Although the pegged exchange rate between the yuan and the dollar has undervalued the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would

By 2012,Iceland's real GDP ,and the real GDPs of Italy,Spain,Greece,and Ireland .

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Figure 19-5 -Refer to Figure 19-5.The Chinese government pegs the yuan to the dollar,at one of the specified exchange rates on the graph,such that it overvalues its currency.Using the figure above,this would generate

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.11/yuan.Because of safety concerns and numerous product recalls,U.S.consumers lower their demand for Chinese products.Using the figure above,this would

Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were than they had planned while the Thai government continued trying to defend the peg,because the baht had been pegged the equilibrium exchange rate for the baht.

The currency adopted by most countries in ________ is referred to as the euro.

One reason that Iceland recovered from the financial crisis which began in 2007 more quickly than did countries like Greece,Spain,and Italy is that Iceland does not use the euro,and the value of its currency was able to versus the euro,which increased its .

Quiz 19: The International Financial System

Under pressure from Japan,the United States and Europe,China announced it switched from pegging the yuan against the dollar to linking the value of the yuan to a 'basket' of currencies.The result of this change was

Figure 19-5 -Refer to Figure 19-5.Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which undervalues the yuan.Using the figure above,the equilibrium exchange rate would be ________ and Chinese exports to the United States would ________ in price.

As foreign investors began to sell off investments they had made in Thailand,they traded in their baht for dollars.The result of this was

Destabilizing speculation refers to

China began pegging its currency,the yuan,to the dollar in 1994.Because the yuan has been ________ at the pegged exchange rate,the Chinese government ________ its reserves of dollars as the government purchased more ________ to maintain the pegged exchange rate.

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.14/yuan and U.S.consumers increase their demand for Chinese products.Using the figure above,this would

Although the pegged exchange rate between the yuan and the dollar has undervalued the yuan,China has been reluctant to abandon the peg for fear that abandoning the peg would

By 2012,Iceland's real GDP ________,and the real GDPs of Italy,Spain,Greece,and Ireland ________.

If a country sets a pegged exchange rate that is above the equilibrium exchange rate,how can the country maintain the peg?

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?

Figure 19-5 -Refer to Figure 19-5.The Chinese government pegs the yuan to the dollar,at one of the specified exchange rates on the graph,such that it overvalues its currency.Using the figure above,this would generate

During the Chinese experience with pegging the yuan to the dollar,the yuan was undervalued.As a result,

All else being equal,if the rate of growth in productivity in Spain is greater than the rate of growth in productivity in the United States,the euro

When foreign investors in Thailand began to realize that Thailand could not maintain its peg to the dollar indefinitely,they began to sell off their investments in Thailand and exchange the baht they received for dollars.This reduction in investment by foreigners is termed

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

Figure 19-5 -Refer to Figure 19-5.Suppose the pegged exchange rate is $0.11/yuan.Because of safety concerns and numerous product recalls,U.S.consumers lower their demand for Chinese products.Using the figure above,this would

Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were ________ than they had planned while the Thai government continued trying to defend the peg,because the baht had been pegged ________ the equilibrium exchange rate for the baht.

The currency adopted by most countries in ________ is referred to as the euro.

One reason that Iceland recovered from the financial crisis which began in 2007 more quickly than did countries like Greece,Spain,and Italy is that Iceland does not use the euro,and the value of its currency was able to ________ versus the euro,which increased its ________.

Figure 19-5 -Refer to Figure 19-5.Suppose the Chinese government decides to abandon pegging the yuan to the dollar at a rate which undervalues the yuan.Using the figure above,the equilibrium exchange rate would be and Chinese exports to the United States would in price.

China began pegging its currency,the yuan,to the dollar in 1994.Because the yuan has been at the pegged exchange rate,the Chinese government its reserves of dollars as the government purchased more to maintain the pegged exchange rate.

By 2012,Iceland's real GDP ,and the real GDPs of Italy,Spain,Greece,and Ireland .

Thailand's experience with pegging the baht to the dollar failed because the baht was relative to the dollar,and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been relative to the dollar.

Firms in Thailand that had borrowed dollars while the baht was pegged to the dollar faced interest payments that were than they had planned while the Thai government continued trying to defend the peg,because the baht had been pegged the equilibrium exchange rate for the baht.

One reason that Iceland recovered from the financial crisis which began in 2007 more quickly than did countries like Greece,Spain,and Italy is that Iceland does not use the euro,and the value of its currency was able to versus the euro,which increased its .