Question 1

Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 6 pesos per dollar, it would tend to:

Accepted Answer

When the exchange rate changes from 8 pesos per dollar to 6 pesos per dollar, the dollar has depreciated relative to the peso. This makes U.S. goods cheaper for Mexican consumers, likely increasing U.S. exports to Mexico.

Question 2

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, imports of Japanese goods into the United States will tend to:

Accepted Answer

When the exchange rate changes from 130 yen to the dollar to 150 yen to the dollar, the dollar has appreciated relative to the yen. This means that for each dollar, you can get more yen than before. As a result, Japanese goods become cheaper for American consumers, leading to an increase in imports of Japanese goods into the United States.

Question 3

If the exchange rate between yen and dollars were 120 yen per dollar, when a Japanese tourist buys a good valued at $600, its cost in yen would be:

Accepted Answer

To convert dollars to yen we need to multiply by the exchange rate:

$600 * 120 yen/$ = 72,000 yen

Therefore, the cost in yen would be 72,000 yen.

Question 4

Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 6 pesos per dollar, it would tend to:

Accepted Answer

When the exchange rate between the Mexican pesos and the dollar decreases, it means that the dollar can buy a larger amount of pesos. This makes Mexican goods cheaper for U.S. consumers, which leads to an increase in demand for Mexican goods and increases U.S. exports to Mexico. Thus, the correct answer is (B) to increase U.S. exports to Mexico.

Question 5

If the exchange rate between euros and dollars were 2 euros per dollar, when a French tourist buys a good valued at $80, its cost in euros would be:

Accepted Answer

At an exchange rate of 2 euros per dollar, to convert dollars to euros, you multiply the amount in dollars by the exchange rate. Therefore, $80 * 2 euros/dollar = 160 euros.

Question 6

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, the price of U.S. goods to Japanese importers will:

Accepted Answer

The price of U.S. goods to Japanese importers will rise because the yen has depreciated against the dollar, making U.S. goods more expensive for Japanese importers to buy.

Question 7

As the number of British pounds that exchange for a dollar rises on foreign currency markets:

Accepted Answer

When the number of British pounds that exchange for a dollar rises, it means the pound is weakening relative to the dollar. This makes U.S. goods more expensive in the UK, reducing British imports from the U.S. (A), and simultaneously makes British goods cheaper for Americans, encouraging exports to the U.S. (B). Both effects lead to (C), where U.S. goods appear more expensive in British stores.

Question 8

An increase in foreign demand for U.S. exports will ____ the demand for U.S. dollars and cause the U.S. dollar to ____ in value.

Accepted Answer

When there is an increase in foreign demand for U.S. exports, there is a higher demand for U.S. dollars to purchase these exports. This increased demand for U.S. dollars leads to an appreciation in the value of the U.S. dollar.

Question 9

If the Federal Reserve was to buy U.S. dollars on the foreign exchange market, a likely result will be:

Accepted Answer

When the Federal Reserve buys U.S. dollars on the foreign exchange market, it increases the demand for the currency, leading to an increase in its value. Therefore, at least a temporary increase in the exchange value of the U.S. dollar is a likely result. Option (a) is incorrect because the dollar supply curve does not shift in this situation. Option (b) is incorrect because the exchange value of the dollar is likely to increase, not decline.

Question 10

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, imports of British goods into the U.S. tend to:

Accepted Answer

If the exchange rate increases to $3 for 1 pound, it means that the dollar has appreciated and is now stronger than before. This makes British goods more expensive for American consumers, leading to a decrease in demand for British imports and consequently, a fall in the imports.

Question 11

A decrease in foreign demand for U.S. exports will ____ the demand for U.S. dollars and cause the U.S. dollar to ____ in value.

Accepted Answer

If there is a decrease in foreign demand for U.S. exports, it means that there will be fewer people wanting to buy U.S. goods and therefore fewer people needing to buy U.S. dollars to pay for those goods. This will decrease the demand for U.S. dollars and cause the value of the U.S. dollar to depreciate.

Question 12

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate, a ____ exists at the current exchange rate that will put ____ pressure on the exchange value of a dollar.

Accepted Answer

u200bWhen a dollar is more expensive than the equilibrium exchange rate, it means that the demand for dollars is lower than the supply at that price, creating a surplus of dollars. This surplus puts downward pressure on the exchange value of a dollar to move towards equilibrium.

Question 13

In foreign exchange markets, the demand for dollars is determined:

Accepted Answer

The demand for dollars in foreign exchange markets is determined by the level of U.S. exports and the demand for U.S. assets by foreigners. This is because foreigners need dollars to purchase U.S. goods and services, and also to invest in U.S. assets such as stocks, bonds or property. Therefore, the demand for dollars is closely tied to the level of U.S. economic activity and attractiveness of U.S. investments.

Question 14

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, exports of U.S. goods to Japan will tend to:

Accepted Answer

With a stronger yen, U.S. goods become relatively more expensive for Japanese consumers. Therefore, exports of U.S. goods to Japan are likely to fall.

Question 15

If the dollar appreciates relative to the yen, we would expect:

Accepted Answer

When the dollar appreciates relative to the yen, it means that each dollar can buy more yen. This makes Japanese goods cheaper for American consumers, potentially increasing Japanese exports to the U.S. Conversely, American goods become more expensive for Japanese consumers, likely decreasing Japanese imports from the U.S. Therefore, both the Japanese trade surplus with the U.S. could increase, and Japanese imports from the U.S. could decrease.

Question 16

Which of the following would cause a decrease in the exchange value of the U.S. dollar?

Accepted Answer

An increase in U.S. imports would lead to an increase in demand for foreign currencies, thus leading to a decrease in the exchange value of the U.S. dollar.

Question 17

In foreign exchange markets, the effect of an increase in the supply of dollars on the value of the dollar is the same as that of:

Accepted Answer

An increase in the supply of dollars typically leads to a depreciation of the dollar's value. This effect is similar to a decrease in the demand for dollars, as both situations increase the relative availability of dollars compared to foreign currencies. It is also akin to a decrease in the supply of foreign currencies, which would make foreign currencies scarcer relative to dollars, thus depreciating the dollar.

Question 18

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, the price of U.S. goods to British importers will:

Accepted Answer

When the exchange rate changes from $2.50 to $3 for 1 pound, it means that the pound has appreciated relative to the dollar. As a result, British importers need to spend fewer pounds to purchase the same amount of goods in dollars, making U.S. goods cheaper for them.

Question 19

Suppose that the exchange rate between Canadian dollars and U.S. dollars is $0.60 U.S. dollars per Canadian dollar. If the exchange rate goes to $0.50 U.S. dollars per Canadian dollar, it would tend to:

Accepted Answer

When the value of the Canadian dollar decreases relative to the U.S. dollar (from $0.60 to $0.50), U.S. goods become more expensive for Canadians, likely decreasing U.S. exports to Canada. Conversely, Canadian goods become cheaper for Americans, likely increasing Canadian exports to the U.S.

Question 20

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, exports of U.S. goods to Britain will tend to:

Accepted Answer

The answer of Suppose that the exchange rate between British...

Quiz 21: Financial Markets, Saving, and Investment

Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 6 pesos per dollar, it would tend to:

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, imports of Japanese goods into the United States will tend to:

If the exchange rate between yen and dollars were 120 yen per dollar, when a Japanese tourist buys a good valued at $600, its cost in yen would be:

Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 6 pesos per dollar, it would tend to:

If the exchange rate between euros and dollars were 2 euros per dollar, when a French tourist buys a good valued at $80, its cost in euros would be:

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, the price of U.S. goods to Japanese importers will:

As the number of British pounds that exchange for a dollar rises on foreign currency markets:

An increase in foreign demand for U.S. exports will the demand for U.S. dollars and cause the U.S. dollar to in value.

If the Federal Reserve was to buy U.S. dollars on the foreign exchange market, a likely result will be:

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, imports of British goods into the U.S. tend to:

A decrease in foreign demand for U.S. exports will the demand for U.S. dollars and cause the U.S. dollar to in value.

If a dollar is more expensive in terms of a foreign currency than the equilibrium exchange rate, a exists at the current exchange rate that will put pressure on the exchange value of a dollar.

In foreign exchange markets, the demand for dollars is determined:

Suppose that the exchange rate between Japanese yen and U.S. dollars is originally 130 yen to the dollar. If it then changes to 150 yen to the dollar, exports of U.S. goods to Japan will tend to:

If the dollar appreciates relative to the yen, we would expect:

Which of the following would cause a decrease in the exchange value of the U.S. dollar?

In foreign exchange markets, the effect of an increase in the supply of dollars on the value of the dollar is the same as that of:

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, the price of U.S. goods to British importers will:

Suppose that the exchange rate between Canadian dollars and U.S. dollars is $0.60 U.S. dollars per Canadian dollar. If the exchange rate goes to $0.50 U.S. dollars per Canadian dollar, it would tend to:

Suppose that the exchange rate between British pounds and U.S. dollars is originally $2.50 per pound. If it then changes to $3 for 1 pound, exports of U.S. goods to Britain will tend to: