7) Today, one U.S. dollar exchanges for 1.10 euros. The next morning the same dollar
exchanges for 1.07 euros. We can conclude that the dollar has ________ and the euro has
________.
A) appreciated; appreciated
B) depreciated; appreciated
C) depreciated; neither appreciated nor depreciated
D) appreciated; depreciated
E) depreciated; depreciated
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
8) In 2011, a dollar could be traded for 100 yen and in 2012 a dollar could be traded for 90
yen. Between these two years, the dollar has become ________ valuable and so the dollar
has ________.
A) less; appreciated against the yen
B) less; depreciated against the yen
C) more; appreciated against the yen
D) more; depreciated against the yen
E) more; appreciated against the dollar
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
9) If the exchange rate changes from 1.5 euros per dollar to 1.0 euro per dollar, the euro
has
A) depreciated against the dollar.
B) appreciated against the dollar.
C) fallen inversely in value.
D) depreciated against the euro.
E) appreciated against the euro.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
41
10) If the exchange rate changes from 1.00 euro per dollar to 1.10 euro per dollar, the
dollar has
A) depreciated against the euro.
B) appreciated against the euro.
C) fallen inversely in value.
D) appreciated against the dollar.
E) depreciated against the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
11) If the exchange rate changes from 1.00 euro per dollar to 1.10 euros per dollar, the
euro has
A) depreciated against the euro.
B) appreciated against the euro.
C) fallen inversely in value.
D) appreciated against the dollar.
E) depreciated against the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
12) If the exchange rate changes from 1.10 euros per dollar to 1.00 euro per dollar, the
dollar has
A) depreciated against the euro.
B) appreciated against the euro.
C) fallen inversely in value.
D) appreciated against the dollar.
E) depreciated against the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
42
13) When the U.S. dollar rises in value relative to the Mexican peso, the dollar has ________,
and when the dollar falls in value, it has ________.
A) appreciated; depreciated
B) grown; shrunken
C) depreciated; appreciated
D) been bullish; been bearish
E) grown; shrunk
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
14) If the dollar falls from 1.25 euros to 1.00 euro, then the dollar has ________ and the euro
has ________.
A) appreciated; appreciated
B) appreciated; depreciated
C) depreciated; appreciated
D) depreciated; depreciated
E) shrunk; grown
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
15) When the exchange rate between the U.S. dollar and the euro changes from 1.07 euros
per dollar to 0.93 euros per dollar, then the
A) euro has depreciated against the dollar.
B) U.S. dollar has depreciated against the euro.
C) U.S. dollar has appreciated against the euro.
D) euro has depreciated against the euro.
E) U.S. dollar has depreciated against the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
43
16) When the exchange rate between the U.S. dollar and the euro changes from 1.00 euro
per dollar to 1.30 euros per dollar, then the
A) euro has appreciated against the dollar.
B) U.S. dollar has depreciated against the euro.
C) U.S. dollar has appreciated against the euro.
D) euro has depreciated against the euro.
E) U.S. dollar has depreciated against the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
17) When a currency depreciates, its value has
A) remained constant against that of another currency.
B) fallen against another currency.
C) risen against another currency.
D) luctuated around a particular value.
E) been ixed against the value of another country.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
18) Which of the following is a factor in determining the demand for the dollar on the
foreign exchange market?
i. the exchange rate
ii. interest rates in the United States and other countries
iii. the expected future exchange rate
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
44
19) When the United States exports goods and services to France, there is an increase in
the
A) supply of dollars.
B) supply of French francs.
C) demand for dollars.
D) U.S. capital account balance.
E) U.S. oicial settlements account balance.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
20) If the exchange rate rises, the quantity of dollars demanded
A) increases and there is movement down along the demand curve for dollars.
B) does not change.
C) decreases and there is movement up along the demand curve for dollars.
D) decreases and there is movement down along the demand curve for dollars.
E) increases and there is movement up along the demand curve for dollars.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
21) On the foreign exchange market, an increase in a country’s exchange rate
A) decreases the quantity demanded of its currency and leads to a movement up along the
demand curve.
B) increases the quantity demanded of its currency and leads to a movement up along the
demand curve.
C) increases the quantity demanded of its currency and leads to a movement down along
the demand curve.
D) decreases the demand for its currency and shifts the demand curve rightward.
E) decreases the demand for its currency and shifts the demand curve leftward.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
45
22) If the exchange rate rises, then the quantity of dollars demanded ________ because with
the higher U.S. exchange rate, U.S. exports ________.
A) increases; increase
B) increases; decrease
C) decreases; increase
D) decreases; decrease
E) does not change; do not change
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
23) If the current exchange rate is 1.00 euro per dollar and the expected exchange rate at
the end of the month rises to 1.20 euros per dollar, then the demand for dollars ________
because people expect holding of dollars to become ________ proitable.
A) increases; more
B) increases; less
C) decreases; more
D) decreases; less
E) does not change; neither more nor less
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
24) When the exchange rate between the U.S. dollar and the euro changes from 1.30 euros
per dollar to 1.00 euro per dollar the dollar has ________ and U.S. goods have become
________ to people in Europe so that quantity of U.S. dollars demanded ________.
A) depreciated; cheaper; increases
B) depreciated; more expensive; decreases
C) depreciated; cheaper; decreases
D) appreciated; more expensive; decreases
E) appreciated; cheaper; increases
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
46
25) Which of the following statements about the foreign exchange market is correct?
A) The higher the expected future exchange rate, the smaller is the expected proit from
holding dollars and so the greater is the demand for dollars.
B) The lower the expected future exchange rate, the smaller is the expected proit from
holding dollars and so the greater is the demand for dollars.
C) The higher the expected future exchange rate, the smaller is the expected proit from
holding dollars and so the smaller is the demand for dollars.
D) The higher the expected future exchange rate, the greater is the expected proit from
holding dollars and so the greater is the demand for dollars.
E) The lower the expected future exchange rate, the greater is the expected proit from
holding dollars and so the greater is the demand for dollars.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
26) Which of the following are reasons why U.S. residents supply dollars to the foreign
exchange market?
i. to buy U.S. exports
ii. to buy foreign real estate
iii. to buy foreign bonds
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
27) If the exchange rate rises, the quantity of dollars supplied
A) increases, and there is movement up along the supply curve of dollars.
B) increases, and there is movement down along the supply curve.
C) decreases, and there is movement down along the supply curve.
D) does not change.
E) increases with movement down along the supply curve.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
47
28) If the exchange rate falls, the quantity of dollars supplied
A) increases, and there is movement up along the supply curve of dollars.
B) decreases, and there is movement down along the supply curve of dollars.
C) does not change.
D) increases, and there is movement down along the supply curve of dollars.
E) decreases, and there is movement up along the supply curve of dollars.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
29) In the foreign exchange market, the
A) quantity of dollars supplied increases as the exchange rate increases and the supply of
dollars does not change.
B) quantity of dollars supplied increases as the exchange rate decreases and the supply of
dollars does not change.
C) supply of dollars increases as the exchange rate increases and the quantity of dollars
supplied does not change.
D) supply of dollars decreases as the exchange rate increases and the quantity of dollars
supplied does not change.
E) both the quantity of dollars supplied and the supply of dollars increases as the exchange
rate increases.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
30) As the exchange rate ________, the quantity supplied of U.S. dollars ________.
A) rises; increases
B) falls; increases
C) falls; remains the same because it is the supply of U.S. dollars decreases so that the
supply curve shifts leftward
D) rises; decreases
E) rises; remains the same because it is the supply of U.S. dollars increases so that the
supply curve shifts rightward
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
48
31) The quantity of U.S. dollars supplied in the foreign exchange market is
A) ixed at any given exchange rate.
B) positively related to the exchange rate.
C) negatively related to the exchange rate.
D) unrelated to the exchange rate.
E) the same as the quantity of for U.S. dollars demanded.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
32) In the foreign exchange market, an increase in the exchange rate leads to
A) an increase the quantity of dollars supplied and a movement along the supply curve of
dollars.
B) an increase in the quantity of dollars demanded and a movement along the demand
curve for dollars.
C) an increase the quantity of dollars supplied and no movement along the supply curve of
dollars.
D) an increase in the quantity of dollars demanded and no movement along the demand
curve for dollars.
E) a decrease the quantity of dollars supplied and a movement along the supply curve of
dollars.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
33) When the exchange rate between the U.S. dollar and the euro changes from 1.30 euros
per dollar to 1.00 euro per dollar the dollar has ________ and European goods have become
________ to people in the United States so that quantity of U.S. dollars supplied ________.
A) depreciated; cheaper; increases
B) depreciated; more expensive; decreases
C) depreciated; cheaper; decreases
D) appreciated; more expensive; decreases
E) appreciated; cheaper; increases
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
49
34) As the U.S. exchange rate ________, the price of U.S. imports increases and the quantity
supplied of dollars ________.
A) falls; increases
B) rises; increases
C) falls; decreases
D) rises; decreases
E) falls; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
35) Other things remaining the same, as U.S. imports increase, the quantity of
A) U.S. dollars demanded increases.
B) foreign currency demanded decreases.
C) U.S. dollars supplied decreases.
D) foreign currency demanded increases.
E) foreign currency supplied increases.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
36) In the foreign exchange market, the demand for dollars decreases and the demand
curve shifts leftward if the
A) U.S. interest rate diferential increases.
B) expected future exchange rate rises.
C) U.S. interest rate diferential decreases.
D) U.S. exchange rate rises.
E) U.S. exchange rate falls.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
50