Question 1

The rule that governs a country's policy towards its exchange rate is known as:

Accepted Answer

The rule that governs a country's policy towards its exchange rate is known as the exchange rate regime. A country's exchange rate regime refers to the way it manages its currency in relation to foreign currencies and the foreign exchange market. This can include fixed exchange rate systems, floating exchange rate systems, or some combination of the two. Therefore, option C is the best choice. Options A and B refer specifically to exchange rate systems, which are a part of the exchange rate regime, but not the overarching rule that governs it. Option D is not a commonly used or recognized term in the field of international finance.

Question 2

Use the following to answer questions:
The value of a euro goes from C$1.25 to C$1.50.
-(Scenario: Exchange Rates)Refer to Scenario: Exchange Rates.The value of a euro goes from C$1.25 to C$1.50.French exports to Canada will:

Accepted Answer

When the value of a euro increases relative to the Canadian dollar, French exports to Canada will become more expensive.

Question 3

A system in which exchange rates are set by government policy is a _____ system.

Accepted Answer

A fixed exchange rate system is one in which governments set a specific exchange rate between their currency and other currencies. This is in contrast to a floating exchange rate system, where exchange rates are determined by market forces.

Question 4

Government purchases or sales of currency in the foreign exchange market constitute:
I.a floating exchange rate regime.
II.foreign exchange controls.
III.exchange market intervention.

Accepted Answer

Government purchases or sales of currency in the foreign exchange market constitute exchange market intervention, which is the act of interfering with the exchange rate of a currency. This does not necessarily imply the use of foreign exchange controls or a floating exchange rate regime.

Question 5

Foreign exchange reserves are:
I.stocks of foreign currency.
II.gold and silver.
III.bonds of foreign governments.

Accepted Answer

Foreign exchange reserves refer to the stocks of foreign currency that a country holds to ensure stability in the exchange rate and provide a cushion for international transactions. While gold and silver may sometimes be held as reserves, it is not a necessary component. Bonds of foreign governments are not typically considered foreign exchange reserves.

Question 6

A rule governing policy for the exchange rate is:
I.the terms of trade.
II.an exchange rate regime.

Accepted Answer

The rule governing policy for the exchange rate is an exchange rate regime, which refers to the system used by a country to manage its currency in relation to other currencies. Terms of trade refer to the ratio between the prices of a country's exports and imports and are not a policy for the exchange rate. Therefore, option A is incorrect. Since an exchange rate regime is mentioned, option B is correct. Option C is incorrect as it includes the incorrect statement that terms of trade are a rule governing policy for the exchange rate. Option D is also incorrect as both I and II are rules governing policy for the exchange rate.

Question 7

Use the following to answer questions:
The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50,it should _____ interest rates,which will _____ capital inflows of gizmos.

Accepted Answer

Increasing interest rates will attract more foreign capital, increasing demand for the gizmo and raising its exchange rate.

Question 8

Use the following to answer questions:
The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.If Gizmovia uses exchange market intervention to increase the value of its currency to $0.50,it should _____ gizmos and _____ dollars in the foreign exchange market.

Accepted Answer

In order to increase the value of its currency, Gizmovia needs to buy gizmos and sell dollars in the foreign exchange market. By buying more gizmos, the demand for the currency increases, causing its value to increase, while selling dollars decreases the supply of dollars in the market, making it more valuable relative to the gizmo. Therefore, choice C, buy gizmos and sell dollars, is the correct answer.

Question 9

Fixed exchange rates are determined by the:

Accepted Answer

Fixed exchange rates are determined by the policies of the domestic government, as they set the exchange rate at a certain level and maintain it through interventions in the foreign exchange market. The forces of demand and supply in the foreign exchange market may influence the exchange rate in the short run, but the government will take actions to maintain the fixed rate. The forces of demand and supply in the domestic money market may also have an impact on the exchange rate, but they are not the determinant factor for fixed exchange rates.

Question 10

Use the following to answer questions:
The value of a euro goes from C$1.25 to C$1.50.
-(Scenario: Exchange Rates)Refer to Scenario: Exchange Rates.The exchange rate for the dollar has changed from:

Accepted Answer

The answer of Use the following to answer questions:
The value...

Question 11

A fixed exchange rate is:

Accepted Answer

A fixed exchange rate is set by the government, which means that the value of a currency is fixed against another currency. The government can set this rate and maintain it through various means such as buying or selling currencies in the foreign exchange market.

Question 12

The nominal exchange rate is:
I.the evaluation and ranking of different global stock exchanges.
II.the price of a country's money in terms of another country's money.

Accepted Answer

The nominal exchange rate is the price of one country's currency in terms of another country's currency. It is not related to the evaluation or ranking of global stock exchanges, so option I is incorrect.

Question 13

Use the following to answer questions:
The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50,it should _____ interest rates,which will _____ capital outflows of gizmos.

Accepted Answer

If Gizmovia wants to maintain the exchange rate of its currency, it can increase interest rates to encourage foreign investors to invest in the country which will lead to a decrease in capital outflows of gizmos. This will increase the demand for the gizmo and consequently its exchange rate, bringing it closer to the desired level of $0.50. Therefore, option D (increase;decrease) is the correct answer.

Question 14

Use the following to answer questions:
The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.At the target rate of $0.50:

Accepted Answer

At the target rate of $0.50, the quantity of gizmos demanded is less than the quantity supplied, resulting in a surplus of gizmos.

Question 15

Licensing systems that limit the right of individuals to buy foreign currency are:
I.floating exchange rate regimes.
II.foreign exchange controls.
III.exchange market interventions.

Accepted Answer

Foreign exchange controls limit the right of individuals to buy foreign currency, whereas floating exchange rate regimes and exchange market interventions do not necessarily do so.

Question 16

Use the following to answer questions:
The value of a euro goes from C$1.25 to C$1.50.
-If the Canadian dollar depreciates,other things being equal:

Accepted Answer

If the Canadian dollar depreciates, it means that its value falls in relation to other currencies. Therefore, option C is the correct answer. The other options are not necessarily affected by a depreciation of the Canadian dollar.

Question 17

Use the following to answer questions:
The value of a euro goes from C$1.25 to C$1.50.
-(Scenario: Exchange Rates)Refer to Scenario: Exchange Rates.In Canada,exports will _____ and imports will _____.

Accepted Answer

When the value of a euro increases, it becomes more expensive for Canadians to buy goods from Europe, so imports will decrease. At the same time, it becomes cheaper for Europeans to buy goods from Canada, so exports will increase.

Question 18

Use the following to answer questions:
The value of a euro goes from C$1.25 to C$1.50.
-(Scenario: Exchange Rates)Refer to Scenario: Exchange Rates.In Germany,exports to Canada will _____ and imports from Canada will _____.

Accepted Answer

As the euro appreciates against the Canadian dollar (from C$1.25 to C$1.50), German goods become more expensive for Canadian buyers, leading to a decrease in exports to Canada. Conversely, Canadian goods become cheaper for German buyers, leading to an increase in imports from Canada.

Question 19

Use the following to answer questions:
The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50,it should _____ interest rates by _____ the money supply.

Accepted Answer

To increase the exchange rate of the gizmo, Gizmovia needs to decrease the supply of its currency. This can be achieved through a contractionary monetary policy, which involves increasing interest rates to reduce demand for money and thus the supply of money in the economy. Therefore, the correct answer is to increase interest rates by decreasing the money supply, which is given in option D.

Question 20

A floating exchange rate is:

Accepted Answer

A floating exchange rate is determined by the market, meaning it is subject to the forces of supply and demand. The value of a currency fluctuates based on various factors such as interest rates, economic growth, political stability, and global events. Unlike a fixed or pegged exchange rate, there is no set value for a floating exchange rate, allowing the currency to adjust to market changes more easily.

Quiz 18: International Macroeconomics

The rule that governs a country's policy towards its exchange rate is known as:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.The value of a euro goes from C$1.25 to C$1.50.French exports to Canada will:

A system in which exchange rates are set by government policy is a _____ system.

Government purchases or sales of currency in the foreign exchange market constitute: I.a floating exchange rate regime. II.foreign exchange controls. III.exchange market intervention.

Foreign exchange reserves are: I.stocks of foreign currency. II.gold and silver. III.bonds of foreign governments.

A rule governing policy for the exchange rate is: I.the terms of trade. II.an exchange rate regime.

Fixed exchange rates are determined by the:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.The exchange rate for the dollar has changed from:

A fixed exchange rate is:

The nominal exchange rate is: I.the evaluation and ranking of different global stock exchanges. II.the price of a country's money in terms of another country's money.

Use the following to answer questions: The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40. -(Scenario: Gizmovia) Refer to Scenario: Gizmovia.At the target rate of $0.50:

Licensing systems that limit the right of individuals to buy foreign currency are: I.floating exchange rate regimes. II.foreign exchange controls. III.exchange market interventions.

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -If the Canadian dollar depreciates,other things being equal:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Canada,exports will _ and imports will _.

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Germany,exports to Canada will _ and imports from Canada will _.

A floating exchange rate is:

Quiz 18: International Macroeconomics

The rule that governs a country's policy towards its exchange rate is known as:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.The value of a euro goes from C$1.25 to C$1.50.French exports to Canada will:

A system in which exchange rates are set by government policy is a _____ system.

Government purchases or sales of currency in the foreign exchange market constitute: I.a floating exchange rate regime. II.foreign exchange controls. III.exchange market intervention.

Foreign exchange reserves are: I.stocks of foreign currency. II.gold and silver. III.bonds of foreign governments.

A rule governing policy for the exchange rate is: I.the terms of trade. II.an exchange rate regime.

Fixed exchange rates are determined by the:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.The exchange rate for the dollar has changed from:

A fixed exchange rate is:

The nominal exchange rate is: I.the evaluation and ranking of different global stock exchanges. II.the price of a country's money in terms of another country's money.

Use the following to answer questions: The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40. -(Scenario: Gizmovia) Refer to Scenario: Gizmovia.At the target rate of $0.50:

Licensing systems that limit the right of individuals to buy foreign currency are: I.floating exchange rate regimes. II.foreign exchange controls. III.exchange market interventions.

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -If the Canadian dollar depreciates,other things being equal:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Canada,exports will _____ and imports will _____.

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Germany,exports to Canada will _____ and imports from Canada will _____.

A floating exchange rate is:

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Canada,exports will _ and imports will _.

Use the following to answer questions: The value of a euro goes from C$1.25 to C$1.50. -(Scenario: Exchange Rates) Refer to Scenario: Exchange Rates.In Germany,exports to Canada will _ and imports from Canada will _.