Question 1

If the dollar-pound exchange rate is $1.00 per pound,then a shirt priced at 25 pounds will cost an American
A) $25
B) $50
C) $26
D) $27
E) an amount that cannot be calculated without additional information.

Accepted Answer

Since the exchange rate is $1.00 per pound, a shirt priced at 25 pounds will cost 25 * $1.00 = $25.

Question 2

What does the demand curve for British pounds tell us?
A) The quantity of pounds people will want to sell at each different exchange rate
B) The quantity of pounds people will want to buy at each level of output
C) The quantity of pounds people will want to buy at each different exchange rate
D) The quantity of pounds people will want to sell in each different time period
E) The quantity of pounds people will want to buy at each different interest rate.

Accepted Answer

The demand curve for British pounds shows the quantity of pounds that people will want to buy at each different exchange rate, indicating the relationship between the price (exchange rate) of pounds and the quantity of pounds demanded.

Question 3

If the dollars per peso exchange rate fell,
A) few firms would want to relocate to Mexico
B) the demand for pesos would fall
C) more Americans would travel to Mexico
D) Americans would buy fewer Mexican goods
E) the demand for pesos curve would shift inward

Accepted Answer

When the dollars per peso exchange rate falls, it means that the US dollar can buy more pesos than before, making it cheaper for Americans to spend money in Mexico. This typically encourages more Americans to travel to Mexico as their money has more purchasing power, making vacations and purchases in Mexico more affordable.

Question 4

In a foreign exchange market,one country's currency is exchanged for another's.

Accepted Answer

This statement is true. The foreign exchange market involves the exchange of one country's currency for another's. It is also commonly referred to as the forex market or currency market.

Question 5

Which of the following changes would cause a movement along the U.S.demand curve for a foreign currency?
A) An increase in U.S.real GDP
B) A fall in U.S.real GDP
C) A rise in the U.S.interest rate
D) A change in the exchange rate
E) An expectation that the exchange rate is going to fall.

Accepted Answer

A change in the exchange rate would cause a movement along the demand curve for a foreign currency, as it directly affects the price of that currency in relation to the U.S. dollar. The other options listed could potentially affect the demand for a foreign currency, but they would shift the entire demand curve rather than causing a movement along it.

Question 6

Which of the following best describes the foreign exchange market? It is a market where one country's
A) exports are traded for another country's imports
B) currency is traded for that of another
C) goods are traded for another country's services
D) imports are traded for another country's exports
E) services are traded for another country's goods

Accepted Answer

The foreign exchange market is where currencies are traded for one another. This includes buying and selling currencies for various purposes, such as international trade or investment.

Question 7

If the dollar-pound exchange rate is $2.00 per pound,then a shirt priced at 25 pounds will cost an American
A) $25
B) $50
C) $26
D) $27
E) an amount that cannot be calculated without additional information.

Accepted Answer

Given the exchange rate of $2.00 per pound, to find the cost in dollars of a shirt priced at 25 pounds, you multiply 25 pounds by $2.00, which equals $50.

Question 8

A decrease in the price of a foreign currency is represented graphically as
A) rightward movement along the demand curve for that currency
B) an upward shift of the demand curve
C) a downward shift of the demand curve
D) a horizontal line
E) a vertical line

Accepted Answer

A decrease in the price of a foreign currency would lead to a rightward movement along the demand curve for that currency, as it becomes cheaper for holders of the domestic currency to purchase more of the foreign currency.

Question 9

If the dollar-peso exchange rate is 0.01 dollars per peso,what is the rate of pesos per dollar?
A) 1 peso/dollar
B) 10 pesos/dollar
C) 0.1 peso/dollar
D) 1,000 pesos/dollar
E) 100 pesos/dollar

Accepted Answer

The answer of If the dollar-peso exchange rate is 0.01...

Question 10

In the market for euros,Americans want to buy euros
A) only to buy goods from European firms
B) primarily to buy services from European firms
C) only to buy European assets
D) only to buy European goods and assets
E) to buy European goods,services,and assets

Accepted Answer

Americans may want to buy euros to purchase goods, services, and assets from Europe.

Question 11

To an American,the demand curve for euros tells
A) that Americans do not want to purchase euros
B) how many euros Americans would want to buy in a given time period,at each different exchange rate
C) the real interest rate on foreign currency over time
D) how many Americans are willing to buy euros
E) how many euros have been purchased during a given time period

Accepted Answer

The demand curve for euros illustrates the quantity of euros that Americans would want to purchase at different exchange rates, given a specific time period. Therefore, choice B is the correct answer.

Question 12

If you know the number of euros that can be exchanged for one dollar,you can easily figure out the number of dollars needed to obtain one euro by finding the reciprocal of the exchange rate for dollars per euro.

Accepted Answer

Finding the reciprocal of the exchange rate for dollars per euro means flipping the ratio so that it shows euros per dollar. Since the inverse of a ratio is its reciprocal, this will provide the number of dollars needed to obtain one euro.

Question 13

The higher the price of a foreign currency,the more expensive that foreign country's goods and services are to individuals in the domestic economy.

Accepted Answer

This is because a higher foreign currency price means that each unit of domestic currency can buy less of the foreign currency, making imports from that country more expensive.

Question 14

The demand curve for a foreign currency
A) slopes upward
B) slopes downward
C) is horizontal
D) has a slope of 45 degrees
E) is vertical

Accepted Answer

The demand curve for a foreign currency slopes downward because as the price of the foreign currency increases, the quantity demanded of the currency decreases, ceteris paribus. This is due to the fact that a higher price for the foreign currency makes it more expensive relative to the domestic currency, making foreign goods more expensive and reducing demand for them.

Question 15

If the dollars per euro exchange rate increased,
A) Americans would purchase fewer European goods
B) more U.S.firms would want to relocate to Europe
C) more American tourists would travel to Europe
D) the demand for euros would increase
E) Europeans would become more highly respected

Accepted Answer

The answer of If the dollars per euro exchange rate...

Question 16

Which of the following is a reason why an American would demand British pounds?
A) To purchase British real estate
B) To purchase Japanese semiconductors
C) To purchase French government bonds
D) To purchase stocks on the New York Stock Exchange
E) To purchase a ticket to see a British film in the U.S.

Accepted Answer

An American would demand British pounds to purchase British real estate because transactions in the UK require the local currency, which is the British pound. Purchasing assets or services in another country typically requires the currency of that country to complete the transaction.

Question 17

If we know that the exchange rate is 0.8 dollars per euro,then we know that the exchange rate of euros per dollars is
A) 0.8
B) 1.8
C) 1.25
D) less than 1.0
E) 5

Accepted Answer

To find the exchange rate of euros per dollars, we take the reciprocal of the given exchange rate of dollars per euro.

Reciprocal of 0.8 = 1/0.8 = 1.25

Therefore, the exchange rate of euros per dollars is 1.25.

Question 18

If the pound-dollar exchange rate is 2 pounds per dollar,what is the rate of dollars per pound?
A) 4 dollars/pound
B) 2 dollars/pound
C) 5 dollars/pound
D) 0.50 dollars/pound
E) 2.50 dollars/pound

Accepted Answer

To find the rate of dollars per pound, we need to take the reciprocal of the given exchange rate. Reciprocal of 2 pounds per dollar is 0.5 dollars per pound, which is option D.

Question 19

The exchange rate is
A) the rate at which one currency is traded for another
B) always constant
C) the tax a foreign nation imposes to change its currency into dollars
D) irrelevant to those who do not travel to foreign countries
E) controlled by the Federal Reserve

Accepted Answer

The exchange rate is the rate at which one currency can be traded for another. It fluctuates based on supply and demand in the foreign exchange market.

Question 20

The lower the price of a foreign currency,the more expensive that foreign country's goods and services are to individuals in the domestic economy.

Accepted Answer

The opposite is true. The lower the price of a foreign currency, the cheaper that foreign country's goods and services are to individuals in the domestic economy.

Quiz 29: Exchange Rates and Macroeconomic Policy

If the dollar-pound exchange rate is $1.00 per pound,then a shirt priced at 25 pounds will cost an American

What does the demand curve for British pounds tell us?

If the dollars per peso exchange rate fell,

In a foreign exchange market,one country's currency is exchanged for another's.

Which of the following changes would cause a movement along the U.S.demand curve for a foreign currency?

Which of the following best describes the foreign exchange market? It is a market where one country's

If the dollar-pound exchange rate is $2.00 per pound,then a shirt priced at 25 pounds will cost an American

A decrease in the price of a foreign currency is represented graphically as

If the dollar-peso exchange rate is 0.01 dollars per peso,what is the rate of pesos per dollar?

In the market for euros,Americans want to buy euros

To an American,the demand curve for euros tells

If you know the number of euros that can be exchanged for one dollar,you can easily figure out the number of dollars needed to obtain one euro by finding the reciprocal of the exchange rate for dollars per euro.

The higher the price of a foreign currency,the more expensive that foreign country's goods and services are to individuals in the domestic economy.

The demand curve for a foreign currency

If the dollars per euro exchange rate increased,

Which of the following is a reason why an American would demand British pounds?

If we know that the exchange rate is 0.8 dollars per euro,then we know that the exchange rate of euros per dollars is

If the pound-dollar exchange rate is 2 pounds per dollar,what is the rate of dollars per pound?

The exchange rate is

The lower the price of a foreign currency,the more expensive that foreign country's goods and services are to individuals in the domestic economy.