978-1259723223 Test Bank TBChap041 Part 6

T opic: Flexible Exchange Rates

211.

If the exchange rate is $1 = 0.7841 euro, then a box of French truffles priced at 20 euros

would cost an American buyer (excluding taxes and other fees)

212.

If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro is

213.

An increase in the dollar price of the British pound will

41-102

written consent of McGraw-Hill Education.

Blooms: Understand

Di ff ic ul t y: 02 Medium

Learning Objective: 41–03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

214.

If the U.S. dollar appreciates relative to the British pound, then

215.

If the Canadian dollar price of United States dollars increases from C$0.80 to C$1.00, it

can be concluded that

216.

In equilibrium, if $1 = 0.5 pound sterling and 1 pound sterling = 40 Swiss francs, the

exchange rate between dollar and franc will be

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written consent of McGraw-Hill Education.

B. 1 franc = $0.20.

C. $1 = 80 francs.

D. $1 = 20 francs.

217.

When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1

pound, we say that the dollar has

218.

The exchange rate for the Mexican peso changes from $1 = 5 pesos to $1 = 6 pesos. This

change will lead to

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Test Bank: II

T op i c : Flexible Exchange Rates

219.

All else being equal, an increased demand for U.S. products in the European Union will

create a

220.

In the dollar-euro market, an increased demand for European products among U.S. buyers

will create an increase in

221.

In a graph showing the market supply and demand for British pounds in terms of U.S.

dollars, the demand-for-pounds curve is downsloping because

222.

In a graph showing the market supply and demand for British pounds in terms of U.S.

dollars, the supply-of-pounds curve is upsloping because

223.

Consider the currency market for British pounds and U.S. dollars. A decrease in the supply

of British pounds results in

224.

Consider the currency market for British pounds and U.S. dollars. An increase in the

demand for British pounds results in

225.

Consider the currency market for British pounds and U.S. dollars. An increase in the supply

of British pounds

226.

Refer to the graph. If Canadian investors buy more U.S. financial and real assets, then

227.

Refer to the graph. If U.S. citizens flock to Canada for summer vacations and buy more

Canadian goods and services, then the

228.

Refer to the graph. Higher inflation in the United States relative to that in Canada, ceteris

paribus, will cause a(n)

229.

Other things being equal, an increase in the U.S. rate of inflation is likely to cause an

increase in the

41-110

written consent of McGraw-Hill Education.

Ac c e ss i bil i ty: Keyboard Navigation

Blooms: Understand

Di ff ic ul t y: 02 Medium

Learning Objective: 41–03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

230.

Which of the following statements is correct?

231.

A currency depreciation in the foreign exchange market will

232.

United States exports, international tourism in the United States, and foreign capital inflow

into the United States all give rise to

233.

When the U.S. dollar decreases in value relative to foreign currencies, the

234.

All of the following would add to the demand for U.S. dollars except

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that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

235.

Other things being equal, which of the following is a necessary consequence of a

depreciation of the U.S. dollar against other currencies?

236.

Other things being equal, the international value of foreign currencies will increase against

the U.S. dollar if

237.

When real interest rates in other countries rise relative to that in the U.S., other things being

equal, we would expect the U.S. dollar to

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D.

deflate.

238.

If Japanese autos surge in popularity in the United States, then this event is most likely to

cause the Japanese yen to

239.

If the U.S. national income grows much faster than that of Canada, this would tend to make

the U.S. dollar

240.

If there is a recession in the United Kingdom and a reduction in British imports, and an

economic boom in the United States and an increase in U.S. imports, then these events are most

likely to cause the British pound to

241.

If real interest rates rise in the United Kingdom relative to the United States, then this event

is most likely to cause the British pound to

242.

If currency speculators believe South Korea will have much lower inflation in the future

than the United States, then this event is most likely to cause the South Korean won to

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written consent of McGraw-Hill Education.

AACSB: Knowledge Application

Ac c e ss i bil i ty: Keyboard Navigation

Blooms: Understand

Di ff ic ul t y: 02 Medium

Learning Objective: 41–03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

243.

An increase in the income of country A relative to the income of country B will usually

lead to an increase in country

244.

Which of the following would tend to raise the value of the U.S. dollar in foreign exchange

markets?

245.

Which of the following is not a major disadvantages of a flexible exchange-rate system?

246.

Suppose that a U.S. firm converts dollars into pounds in order to invest in a British

enterprise in the U.K. A year later, the return on the investment is 12 percent in terms of pounds.

If, during that period, the dollar appreciated against the pound, then the return on the investment

in dollar terms would be

247.

According to the purchasing power parity theory, exchange rates will eventually adjust such

that they equalize the various

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written consent of McGraw-Hill Education.

Ac c e ss i bil i ty: Keyboard Navigation

Blooms: Understand

Di ff ic ul t y: 02 Medium

Learning Objective: 41-03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Learning Objective: 41–04 Describe the differences between flexible and fixed exchange rates,

including how changes in foreign exchange reserves bring about automatic changes in the

domestic money supply under a fixed exchange rate.

Test Bank: II

T op i c : Flexible Exchange Rates

248.

A market basket of goods costs $350 in the United States and 200 pounds in the United

Kingdom. According to the purchasing power parity theory, the exchange rate should move

toward

249.

Assume that Japan and the United States are engaged in a system of flexible exchange rates.

If more people in the United States decide to purchase Japanese cars, what effect will this have

on the market for yen?

41-118

written consent of McGraw-Hill Education.

Learning Objective: 41–03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

Type: Graph

250.

Assume that Japan and the United States are engaged in a system of flexible exchange rates.

If more Japanese tourists decide to visit the United States for their vacations,

251.

Assume that Japan and the United States are engaged in a system of flexible exchange rates.

Refer to the graph. One U.S. dollar will purchase how many Japanese yen?

252.

Assume that Japan and the United States are engaged in a system of flexible exchange rates.

Refer to the graph. An increase in the supply of yen will result in

41-120

written consent of McGraw-Hill Education.

Learning Objective: 41–03 Discuss how exchange rates are determined in currency markets

that have flexible exchange rates.

Test Bank: II

T op i c : Flexible Exchange Rates

Type: Graph

253.

Assume that Japan and the United States are engaged in a system of flexible exchange rates.

Refer to the graph. An increase in the demand for yen will result in