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37) The U.S. interest rate has ________ on the supply of dollars and has ________ on the
demand for dollars.
A) no efect; no efect
B) no efect; an efect
C) an efect; no efect
D) an efect; an efect
E) an efect sometimes; an efect sometimes
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
38) In the foreign exchange market, the demand for dollars increases and the demand
curve shifts if the
A) U.S. interest rate diferential increases.
B) expected future exchange rate falls.
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
39) Everything else the same, in the foreign exchange market which of the following
increases the demand for U.S. dollars and shifts the demand curve rightward?
A) The Japanese interest rate rises.
B) The expected future exchange rate falls.
C) The U.S. interest rate rises.
D) The U.S. exchange rate rises.
E) The U.S. exchange rate falls.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
51
40) If the U.S. interest rate diferential rises, then the efect in the foreign exchange market
on the demand for dollars is that the
A) quantity of dollars demanded decreases.
B) quantity of dollars demanded increases.
C) demand for dollars increases.
D) demand for dollars decreases.
E) demand for dollars does not change and the quantity of dollars demanded also does not
change.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
41) When the U.S. interest rate diferential ________, the demand for dollars ________ and the
demand curve for dollars shifts rightward.
A) rises; decreases
B) rises; increases
C) falls; increases
D) falls; decreases
E) rises; does not change
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
42) If the U.S. interest rate rises relative to the interest rate in other countries, then the
supply of dollars ________ and the demand for dollars ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
52
43) In the foreign exchange market, an increase in the supply of dollars could be the result
of
A) an increase in the U.S. interest rate diferential.
B) an increase in the expected future exchange rate.
C) a decrease in the U.S. interest rate diferential.
D) an increase in the exchange rate.
E) a decrease in the exchange rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
44) If the interest rate rises in the United States relative to other nations, then in the
foreign exchange market the demand for dollars ________ and the supply of dollars ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
45) Suppose interest rates in foreign countries increase relative to the U.S. interest rate. As
a result, there is ________ the demand curve for dollars.
A) an upward movement along
B) a downward movement along
C) a leftward shift of
D) a rightward shift of
E) neither a movement along nor a shift of
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
53
46) When the U.S. interest rate ________ relative to foreign interest rates, the supply of
dollars ________ and the supply curve of dollars shifts rightward.
A) rises; decreases
B) rises; increases
C) falls; increases
D) falls; decreases
E) rises; does not change
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
47) If the U.S. interest rate diferential decreases, then in the foreign exchange market the
A) quantity supplied of dollars decreases.
B) quantity supplied of dollars increases.
C) supply of dollars decreases.
D) supply of dollars increases.
E) demand for dollars increases.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
48) ________ increases the supply of dollars in the foreign exchange market.
A) An increase in the exchange rate
B) A decrease in the exchange rate
C) A fall in the interest rate in the U.S. relative to the interest rate in other countries
D) A rise in the expected future exchange rate
E) A rise in the interest rate in the U.S. relative to the interest rate in other countries
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
54
49) If the U.S. interest rate diferential decreases, then in the foreign exchange market the
A) quantity demanded of dollars decreases.
B) quantity demanded of dollars increases.
C) demand for dollars decreases.
D) demand for dollars increases.
E) supply of dollars decreases.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
50) The ________ the expected future exchange rate, the greater is the expected proit from
holding dollars and so the ________.
A) lower; supply curve of dollars shifts rightward
B) higher; demand curve for dollars shifts leftward
C) higher; demand curve for dollars shifts rightward
D) lower; demand curve for dollars shifts leftward
E) higher; supply curve of dollars shifts rightward
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
51) If people expect the future exchange rate for dollars will be lower, then in the foreign
exchange market the current
A) quantity demanded of dollars decreases.
B) quantity demanded of dollars increases.
C) demand for dollars decreases.
D) demand for dollars increases.
E) supply of dollars decreases.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
55
52) The ________ the expected future exchange rate, the greater is the expected proit from
holding dollars and so the ________.
A) lower; supply curve of dollars shifts rightward
B) higher; demand curve for dollars shifts leftward
C) higher; supply curve of dollars shifts leftward
D) lower; demand curve for dollars shifts leftward
E) higher; supply curve of dollars shifts rightward
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
53) In the foreign exchange market, which of the following shifts the demand curve for
dollars rightward?
A) The expected future exchange rate rises.
B) The expected future exchange rate falls.
C) The current exchange rate falls.
D) The current exchange rate rises.
E) None of the above answers is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
54) In the foreign exchange market, which of the following shifts the supply curve of
dollars leftward?
A) The expected future exchange rate rises.
B) The expected future exchange rate falls.
C) The current exchange rate rises.
D) The current exchange rate falls.
E) None of the above answers is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
56
55) If the expected future U.S. exchange rate falls, then in the foreign exchange market the
current
A) quantity supplied of dollars decreases.
B) quantity supplied of dollars increases.
C) supply of dollars decreases.
D) supply of dollars increases.
E) demand for dollars increases.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
56) The expected future exchange rate has ________ on the supply of dollars and has
________ on the demand for dollars.
A) no efect; no efect
B) no efect; an efect
C) an efect; no efect
D) an efect; an efect
E) an efect sometimes; an efect sometimes
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
57) If the expected future exchange rate decreases, then the supply of dollars ________ and
the demand for dollars ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
57
58) If the equilibrium exchange rate of the dollar is 1.10 euros per dollar and currently the
exchange rate is 0.90 euros per dollar, then there is a ________ of dollars that leads to
________.
A) surplus; a rise in the exchange rate
B) shortage; the demand curve for dollars shifting rightward
C) surplus; the supply curve of dollars shifting leftward
D) shortage; a rise in the exchange rate
E) shortage; the supply curve of dollars shifting rightward
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
59) The equilibrium exchange rate is 0.70 euros per dollar. At this exchange rate, the
quantity demanded equals the quantity supplied and is $1.3 trillion a day. If the exchange
rate is now 0.80 euros per dollar, then
A) there is a shortage of dollars and the exchange rate falls.
B) there is a surplus of dollars and the exchange rate rises.
C) there is no change.
D) there is a surplus of dollars and the exchange rate falls.
E) there is a shortage of dollars and the exchange rate rises.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
60) The equilibrium exchange rate is 0.70 euros per dollar. At this exchange rate, the
quantity demanded equals the quantity supplied and is $1.3 trillion a day. If the exchange
rate is now 0.60 euros per dollar, then
A) there is a shortage of dollars and the exchange rate rises.
B) there is a surplus of dollars and the exchange rate rises.
C) there is a shortage of dollars and the exchange rate falls.
D) there is a surplus of dollars and the exchange rate falls.
E) there is no change.
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
58
61) Exchange rate changes are
A) not very volatile because of ofsetting changes in demand and supply.
B) very volatile because of government intervention in the market.
C) not very volatile because of government intervention.
D) very volatile because supply and demand changes reinforce each other.
E) infrequent because the exchange rate rarely changes.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
62) In the foreign exchange market, the exchange rate is volatile because the
A) demand for dollars changes more frequently than the supply of dollars.
B) supply of dollars changes more frequently than the demand for dollars.
C) factors that inluence the supply of dollars also inluence the demand for dollars.
D) both the demand curve for dollars and the supply curve of dollars are very lat.
E) None of the above is related to the volatility of the exchange rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
63) The exchange rate is volatile because
A) when a relevant factor changes, demand and supply tend to change in opposite
directions.
B) when a relevant factor changes, demand and supply tend to change in the same
direction.
C) the demand curve is vertical.
D) the supply curve is vertical.
E) the demand curve and the supply curve are horizontal.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
59
64) The exchange rate can be very volatile, yet the quantity of dollars traded might not
change much because
A) there is only limited quantity of dollars in the foreign exchange market.
B) the Fed is constantly intervening by buying and selling dollars.
C) supply of dollars and the demand for dollars often change in opposite directions.
D) supply of dollars and the demand for dollars often change in the same directions.
E) both the demand curve for dollars and the supply curve of dollars are horizontal.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
65) In the foreign exchange market, an increase in the U.S. interest rate leads to ________ in
the exchange rate because the supply of dollars ________.
A) a rise; increases
B) a rise; decreases
C) a fall; increases
D) a fall; decreases
E) no change; does not change
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
66) When the U.S. interest rate rises, the demand for U.S. dollars ________ and the exchange
rate ________.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls
E) does not change; rises
Skill: Level 3: Using models
Section: Checkpoint 19.2
Status: Old
AACSB: Analytical thinking
60
