978-1259723223 Test Bank TBChap041 Part 6

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subject Words 5261
subject Authors Campbell McConnell, Sean Flynn, Stanley Brue

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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
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41-102
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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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41-103
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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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41-104
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
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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
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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
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226.
Refer to the graph. If Canadian investors buy more U.S. financial and real assets, then
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227.
Refer to the graph. If U.S. citizens flock to Canada for summer vacations and buy more
Canadian goods and services, then the
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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
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41-110
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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
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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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41-112
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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41-113
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
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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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41-115
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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?
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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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41-117
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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?
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41-118
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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?
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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
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41-120
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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

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