Chapter 22 Test Bank Key
1. The exchange rate is the
A. Opportunity cost at which goods are produced domestically.
2. The exchange rate is the price of
3. When a Japanese businesswoman traveling in the United States asks, “How many U.S. dollars can I get for
these yen?” she wants to know the
4. The demand for U.S. dollars originates from all of the following except
A. Foreign demand for U.S. exports.
5. The U.S. demand for foreign currency arises from speculation and the
A. U.S. demand for foreign goods, services, and financial assets.
6. The demand for dollars in the foreign exchange market
A. Is represented by a point in a diagram of foreign exchange supply and demand.
7. Which of the following generates a demand for dollars in the foreign exchange market?
A. Transfers of money by foreign workers in the United States to relatives abroad.
8. The demand for U.S. dollars in the foreign exchange market is determined by all of the following except
A. Foreign demand for American exports.
9. Which of the following generates demand for foreign currencies?
10. Which of the following generates demand for foreign currencies?
11. When foreigners buy U.S. dollars because they are a more stable currency than the currencies in
their countries, they are generating a
12. The supply of U.S. dollars originates from
A. Demand by foreigners for U.S.-produced goods.
13. Which of the following generates a supply of U.S. dollars?
14. The U.S. desire for foreign currency represents
15. The supply of U.S. dollars is determined by all of the following except
16. When foreign countries buy wheat grown in the United States, they are generating
17. When foreigners come to the United States as tourists, they are generating a
18. When Americans buy Mercedes-Benz automobiles made in Germany, they are generating a
19. When American companies buy office buildings in Australia, they are generating a
A. Supply of U.S. dollars and a demand for a foreign currency.
20. When reality show participants travel through foreign countries, they are generating a
A. Demand for U.S. dollars and a demand for a foreign currency.
21. Changes in the value of the euro affect the economies of
A. Only those countries using the euro as currency.
22. When the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, this is an indication
that
A. It would take 100 yen to purchase $1.
23. A change in the exchange rate for a country’s currency alters the prices of
A. Exports only.
24. An increase in the price of the U.S. dollar in terms of euros will cause, ceteris paribus,
25. If one euro is equal to 0. 60 U.S. dollars, what would be the euro price of a car that costs
26. Suppose a U.S. firm purchases some English china. The china costs 1,000 British pounds. At the
exchange rate of $1. 45 = 1 pound, the dollar price of the china is
A. $250.
27. Suppose a bottle of wine produced in France sells for 35 euros. If the exchange rate between euros and dollars
is € 1 = $1.30, how much will an American pay for the bottle of wine in America?
28. Suppose a men’s suit produced in Moldavia sells for 250 euros. If the exchange rate between euros and dollars
is € 1 = $1.38, how much will an American pay for the suit?
29. If the exchange rate between the U.S. dollar and Japanese yen changes from $1 = 100 yen to $1 = 90
yen, then
A. All Japanese producers and consumers will lose.
30. A summary record of a country’s international economic transactions in a given time period is the
A. Balance of payments.
31. Exports minus imports define a country’s
32. The trade balance for the United States equals
A. The difference between service exports and service imports.
33. The current account balance is equal to
34. The current account balance is equal to
A. Imports minus exports.
35. The capital account includes
A. Trade in goods.
36. The capital account balance is equal to the
A. Current account balance plus foreign purchases of U.S. assets.
37. Theoretically, the net balance of payments is
38. The net balance of payments is
A. The difference between exports and imports.
39. Under floating exchange rates, the capital account balance is equal to the negative of
40. In a floating exchange rate system, the capital account balance equals
A. The current account balance minus imports.
41. Which of the following does not involve exports and imports?
42. Except for a statistical error under flexible exchange rates, any current account deficit
43. Depreciation of the dollar refers to
A. A loss of foreign exchange reserves.
44. The depreciation of a country’s currency causes the price of imports to
45. If the U.S. dollar depreciates, in the long run the United States should experience a
46. A depreciation of the Korean won against the U.S. dollar will
47. Suppose that today 1 British pound exchanges for $1.60. If next week 1 pound exchanges for $1.70, it is
clear that
48. Generally speaking, a country whose currency depreciates will experience, as a result,
49. Which of the following groups would be aided by a depreciation of the American
50. A good time for an American to hold German stocks, ceteris paribus, is when
51. Which of the following could be responsible for the depreciation of a country’s currency?
A. The country expands its tourist industry.
52. Which of the following might cause a depreciation of the U.S. dollar versus the Japanese yen?
53. If speculators with Swiss francs believed the yen was going to depreciate against the dollar, they would most
likely: =
A. Purchase euros.
54. Appreciation of the dollar refers to
A. A loss of foreign exchange reserves.
55. American citizens planning a vacation abroad would welcome: =
A. Appreciation of the dollar.
56. When foreign residents increase their demand for U.S. dollars, ceteris paribus,
A. The dollar price of foreign currency will rise.
57. Import-competing industries in the United States are likely to resist
58. Generally speaking, a country whose currency appreciates will experience, as a result,
A. Reduced aggregate demand because of a decrease in exports.
59. Appreciation of the U.S. dollar can be caused
60. An increase in the U.S. trade deficit could be caused by
61. Which of the following events would result in a greater demand for U.S. dollars in the foreign exchange market,
ceteris paribus?
62. Ceteris paribus, if African countries experience a drought and purchase food from the United States,
the currencies of the African countries should
A. Appreciate, and the dollar should appreciate.
63. Ceteris paribus, if incomes increase faster in the United States than in less developed countries, then the
currencies of less developed countries should
64. Ceteris paribus, if interest rates in the United States rise relative to those abroad, then the surplus in the U.S.
capital account would
65. The quantity of foreign currency demanded or supplied by residents of any country depends mainly on
A. The exchange rate.
66. Exchange rates change because of relative
67. Places where foreign currencies are bought and sold are
68. A result of the Asian Crisis of 1997-1998 was
A. An increase in the value of the U.S. dollar relative to Southeast Asian currencies.
69. During the Asian Crisis of 1997-1998, U.S. hog farmers experienced decreased demand and lower prices
for their products because of
A. A decrease in the value of Southeast Asian currencies relative to the U.S. dollar.
70.
Ceteris paribus, an increase in the U.S. demand for Greek goods in Figure 36.1 will
71.
You have decided to purchase, directly from the French manufacturer, a helicopter that costs 800,000 euros. At
the equilibrium exchange rate between dollars and euros in Figure 36.1, this purchase will cost you
72.
At an exchange rate of $1 = € 1 in Figure 36.1, there is
73.
Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for
dollars given the following situation, ceteris paribus: The U.S. economy suddenly experiences a recession.
74.
Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for
dollars given the following situation, ceteris paribus: A sudden, unexpected surge in inflation in the United
States causes reduced purchases of U.S. goods by foreigners.
75.
Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market for
dollars given the following situation, ceteris paribus: The president of the United States decides to support the
dollar by purchasing dollars with U.S. holdings of foreign currencies.