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TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 4:52 AM
DATE MODIFIED:
7/7/2016 4:55 AM
150. If the Federal Reserve decreases interest rates in the United States relative to interest rates in other countries, then in
the foreign exchange market
a.
the demand for dollars increases and the supply of dollars increases
b.
the demand for dollars increases and the supply of dollars decreases
c.
the demand for dollars decreases and the supply of dollars increases
d.
the demand for dollars decreases and the supply of dollars decreases
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 4:55 AM
DATE MODIFIED:
7/7/2016 4:57 AM
151. If the Federal Reserve increases interest rates in the United States relative to interest rates in other countries, then in
the foreign exchange market
a.
the demand for dollars increases and the supply of dollars increases
b.
the demand for dollars increases and the supply of dollars decreases
c.
the demand for dollars decreases and the supply of dollars increases
d.
the demand for dollars decreases and the supply of dollars decreases
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 4:57 AM
DATE MODIFIED:
7/7/2016 5:00 AM
152. In the foreign exchange market, the exchange value of the U.S. dollar will depreciate if
a.
b.
c.
d.
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Page 62
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:00 AM
DATE MODIFIED:
7/7/2016 5:02 AM
153. Suppose that $1 will buy 0.8 Swiss francs in 2015 and 0.9 francs in 2016. This change would have occurred as a
result of
a.
an increase in the demand for dollars in the foreign exchange market
b.
a decrease in the demand for dollars in the foreign exchange market
c.
an increase in the supply of dollars in the foreign exchange market
d.
no change in the supply of dollars in the foreign exchange market
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:02 AM
DATE MODIFIED:
7/7/2016 5:04 AM
154. A decrease in the U.S. demand for automobile imports will cause the supply curve of dollars to ______ and result in
a (an)
a.
increase; appreciation of the dollar
b.
increase; depreciation of the dollar
c.
decrease; appreciation of the dollar
d.
decrease; depreciation of the dollar
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
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DATE CREATED:
7/7/2016 5:04 AM
DATE MODIFIED:
7/7/2016 5:06 AM
155. Which of the following will result in a depreciation of the U.S. dollar against the Mexican peso?
a.
an increase in the Mexican demand for U.S. imports
b.
a decrease in the Mexican demand for U.S. imports
c.
a decrease in the U.S. demand for Mexican imports
d.
no change in the U.S. demand for Mexican imports
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forecasting Foreign Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 5:06 AM
DATE MODIFIED:
7/7/2016 5:08 AM
156. An increase in the British demand for exports of American steel will ______ the demand for U.S. dollars and result
in a (an) ______ of the dollar.
a.
increase; appreciation
b.
increase; depreciation
c.
decease; appreciation
d.
decrease; depreciation
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:08 AM
DATE MODIFIED:
7/7/2016 5:10 AM
157. British investors will expect that the U.S. dollar will appreciate against the pound in the future if there are
expectations that
a.
the U.S. price level will increase relative to the British price level
b.
U.S. labor productivity will increase relative to British labor productivity
c.
the U.S. demand for British imports will increase
d.
U.S. tariffs on British imports will decline
ANSWER:
b
POINTS:
1
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Page 64
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Productivity and growth
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:10 AM
DATE MODIFIED:
7/7/2016 5:12 AM
158. In the foreign exchange market, a decrease in the world demand for Japanese exports
a.
shifts the demand curve for yen leftward that causes the yen to depreciate
b.
shifts the demand curve for yen leftward that causes the yen to appreciate
c.
shifts the demand curve for yen rightward that causes the yen to depreciate
d.
shifts the demand curve for yen rightward that causes the yen to appreciate
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:13 AM
DATE MODIFIED:
7/7/2016 5:14 AM
159. Due to increased air travel, suppose that Saudi Arabian Airlines purchases 40 jetliners from Airbus, a European firm.
This results in
a.
a decrease in the demand curve (leftward shift) for euro
b.
an increase in the demand curve (rightward shift) for euro
c.
a decrease in the supply curve (leftward shift) of euro
d.
an increase in the supply curve (rightward shift) of euro
ANSWER:
b
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:15 AM
DATE MODIFIED:
7/7/2016 5:16 AM
160. Hyundai Inc is a South Korean company that manufactures automobiles. If Hyundai purchases sheet steel from U.S.
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Page 65
Steel Inc.,
a.
the demand for dollars increases and the dollar appreciates against the won
b.
the demand for dollars increases and the dollar depreciates against the won
c.
the demand for dollars decreases and the dollar appreciates against the won
d.
the demand for dollars decreases and the dollar depreciates against the won
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:16 AM
DATE MODIFIED:
7/7/2016 5:19 AM
161. The U.S. interest rate minus the foreign interest rate is called the U.S. interest rate differential. The U.S. interest rate
differential would increase if
a.
the U.S. interest rate decreases and the foreign interest rate remains constant
b.
the U.S. interest rate decreases and the foreign interest rate increases
c.
the U.S. interest rate increases and the foreign interest rate increases
d.
the U.S. interest rate increases and the foreign interest rate decreases
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:19 AM
DATE MODIFIED:
7/7/2016 5:21 AM
162. Suppose that the interest rate in Great Britain increases while the interest rate in the United States remains constant.
As a result,
a.
the demand curve for pounds decreases and the pound depreciates against the dollar
b.
the demand curve for pounds increases and the pound depreciates against the dollar
c.
the demand curve for pounds increases and the pound appreciates against the dollar
d.
the demand curve for pounds decreases and the pound appreciates against the dollar
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
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Page 66
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 5:21 AM
DATE MODIFIED:
7/7/2016 5:23 AM
163. Suppose that the exchange value of the dollar equals 2 British pounds. If in San Francisco a computer costs $1,000
and in London it costs 2,000 pounds, then
a.
British consumers will buy computers in San Francisco
b.
Americans will buy computers in London
c.
purchasing power parity prevails
d.
purchasing power parity does not prevail
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 5:24 AM
DATE MODIFIED:
7/7/2016 5:25 AM
164. When The Economist magazine runs articles using the Big Mac hamburger to value exchange rates, it is using the
principle of
a.
exchange arbitrage
b.
market expectations
c.
purchasing power parity
d.
interest rate parity
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:26 AM
DATE MODIFIED:
7/7/2016 5:28 AM
165. The theory of purchasing power parity states that changes in the nominal exchange rate arise from differences in
______ among countries
a.
nominal interest rates
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Page 67
b.
real interest rates
c.
inflation rates
d.
productivity rates
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:28 AM
DATE MODIFIED:
7/7/2016 5:30 AM
166. Which of the following does not explain long-run movements in exchange rates?
a.
productivity differences among nations
b.
price level differences among nations
c.
barriers to trade (tariffs and quotas) among nations
d.
interest rate differences among nations
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 5:30 AM
DATE MODIFIED:
7/7/2016 5:32 AM
167. The law of one price would least likely apply to
a.
steel
b.
oil
c.
corn
d.
computers
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
Copyright Cengage Learning. Powered by Cognero.
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KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 5:32 AM
DATE MODIFIED:
7/7/2016 5:34 AM
168. A relatively high rate of inflation in the United States will result in
a.
an appreciation of the dollar against foreign currencies in the long run
b.
a depreciation of the dollar against foreign currencies in the long run
c.
an appreciation of the dollar against foreign currencies in the short run
d.
a depreciation of the dollar against foreign currencies in the short run
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:35 AM
DATE MODIFIED:
7/7/2016 5:37 AM
169. Suppose that trade barriers and transportation costs are nonexistent. If the exchange rate is 0.9 Swiss francs per
dollar, then according to the law of one price, a refrigerator that costs $1,000 in the United States will cost
a.
1,900 francs in Switzerland
b.
900 francs in Switzerland
c.
1,300 francs in Switzerland
d.
1,000 francs in Switzerland
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:37 AM
DATE MODIFIED:
7/7/2016 5:39 AM
170. According to the theory of purchasing power parity, if the price level in France rises by 6 percent and the price level
in the United States rises by 4 percent, then the dollar will
a.
appreciate by 2 percent against the euro in the short run
b.
depreciate by 2 percent against the euro in the short run
c.
appreciate by 2 percent against the euro in the long run
d.
depreciate by 2 percent against the euro in the long run
ANSWER:
c
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POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:39 AM
DATE MODIFIED:
7/7/2016 5:41 AM
171. If Americans develop stronger preferences for Canadian natural gas, the likely result is
a.
the exchange value of the U.S. dollar will fall relative to the exchange value of the Canadian dollar
b.
the exchange value of the U.S. dollar will rise relative to the exchange value of the Canadian dollar
c.
the price of Canadian natural gas will decline when measured in terms of the Canadian dollar
d.
the price of Canadian natural gas will remain constant when measured in terms of the Canadian dollar
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:42 AM
DATE MODIFIED:
7/7/2016 5:44 AM
172. In the long run, exchange rates are mainly determined by
a.
the difference between short-run interest rates in each county
b.
the rate at which a country’s currency exchanges for silver or gold
c.
agreements among governments in the major banking countries of the world
d.
market fundamentals such as productivity levels or price levels in various countries
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 5:45 AM
DATE MODIFIED:
7/7/2016 5:46 AM
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Page 70
173. If the rate of growth in labor productivity in the United States increases relative to the rate of growth in labor
productivity in other countries
a.
the dollar’s exchange value depreciates against other currencies
b.
the dollar’s exchange value remains constant against other currencies
c.
Americans are willing to pay more U.S. dollars per unit of foreign currency
d.
Americans are willing to pay fewer U.S. dollars per unit of foreign currency
ANSWER:
d
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
DATE CREATED:
7/7/2016 5:47 AM
DATE MODIFIED:
7/7/2016 5:49 AM
174. If American consumers increase their demand for Mercedes Benz automobiles, manufactured in Germany
a.
the U.S. dollar’s exchange value appreciates against the euro
b.
the U.S. dollar’s exchange value remains constant against the euro
c.
Americans are willing to pay fewer U.S. dollars for the euro
d.
Americans are willing to pay more U.S. dollars for the euro
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:49 AM
DATE MODIFIED:
7/7/2016 5:51 AM
175. If the United States reduces its tariffs on the import of natural gas
a.
the dollar’s exchange value depreciates
b.
the dollar’s exchange value appreciates
c.
natural gas becomes more expensive for Americans
d.
natural gas prices do not change for Americans
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:51 AM
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Page 71
DATE MODIFIED:
7/7/2016 6:52 AM
176. When evaluating the financial investments in the home country and a foreign country, investors generally consider
a.
labor productivity levels and rates of technological development
b.
budget surpluses or deficits of the home country and foreign country
c.
domestic and foreign interest rates and expected fluctuations in the exchange rate
d.
domestic and foreign price levels and the expected fluctuations in the exchange rate
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:53 AM
DATE MODIFIED:
7/7/2016 5:56 AM
177. Concerning exchange rate forecasting, ______ are common sense models that require the gathering of a wide array
of political and economic data and the interpretation of these data in terms of the timing, direction, and magnitude of
exchange rate changes.
a.
judgmental forecasts
b.
technical forecasts
c.
fundamental forecasts
d.
econometric forecasts
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forecasting Foreign Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 5:56 AM
DATE MODIFIED:
7/7/2016 5:58 AM
178. If investors anticipate that the exchange value of the euro will appreciate against the dollar in the future, the current
exchange value of the euro will appreciate against the dollar.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
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Page 72
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 5:59 AM
DATE MODIFIED:
7/7/2016 6:01 AM
179. If investors anticipate that the exchange value of the euro will depreciate against the dollar in the future, the current
exchange value of the euro will appreciate against the dollar.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:01 AM
DATE MODIFIED:
7/7/2016 6:03 AM
180. If short-term interest rates rise in Germany, the exchange value of the dollar will appreciate against the euro in the
long run.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:03 AM
DATE MODIFIED:
7/7/2016 6:05 AM
181. A rise in the expected rate of inflation in Canada will cause the exchange value of the Canadian dollar to depreciate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
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Page 73
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:05 AM
DATE MODIFIED:
7/7/2016 6:06 AM
182. If the interest rate in Japan increases, investors increase their demand for yen and the yen’s exchange value
appreciates.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forecasting Foreign Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:08 AM
DATE MODIFIED:
7/7/2016 6:10 AM
183. The law of one price does not hold for differentiated products such as automobiles.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:10 AM
DATE MODIFIED:
7/7/2016 6:11 AM
184. According to the purchasing power parity theory, if the inflation rate in Mexico is greater than the inflation rate in
Switzerland, the nominal exchange value of the peso will appreciate against the franc.
a.
True
b.
False
ANSWER:
False
POINTS:
1
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Page 74
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:12 AM
DATE MODIFIED:
7/7/2016 6:13 AM
185. The theory of purchasing power parity broadens the law of one price to a group of goods.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:14 AM
DATE MODIFIED:
7/7/2016 6:15 AM
186. If apples sell for $50 per box in the United States and 2000 pesos per box in Mexico, the law of one price asserts that
you should be able to exchange $1 for 25 pesos.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Inflation Rates, Purchasing-Power-Parity, and Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:15 AM
DATE MODIFIED:
7/7/2016 6:17 AM
187. If American consumers increase their demand for British goods, they are willing to pay fewer U.S. dollars per British
pound.
a.
True
b.
False
ANSWER:
False
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Page 75
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 6:17 AM
DATE MODIFIED:
7/7/2016 6:19 AM
188. In the long run, exchange rates are mainly determined by economic fundamentals such as productivity levels of
different countries.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
What Determines Exchange Rates?
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:19 AM
DATE MODIFIED:
7/7/2016 6:20 AM
189. In the short run, exchange rates are determined by the rate at which a country’s currency exchanges for silver and
gold.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
What Determines Exchange Rates?
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:21 AM
DATE MODIFIED:
7/7/2016 6:22 AM
190. If the rate of growth of labor productivity in the United States rises relative to the rate of growth of labor productivity
in other countries, the dollar’s exchange value will depreciate.
a.
True
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Page 76
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:22 AM
DATE MODIFIED:
7/7/2016 6:24 AM
191. For a country that imposes trade barriers, such as tariffs and quotas, the exchange value of its currency tends to
appreciate in the long run.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Long Run Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:25 AM
DATE MODIFIED:
7/7/2016 6:26 AM
192. The nominal interest rate equals the real interest rate minus the inflation rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:27 AM
DATE MODIFIED:
7/7/2016 6:28 AM
193. A country’s market fundamentals include economic variables such as productivity, inflation, consumer preferences,
and real interest rates.
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Page 77
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Measuring the economy
TOPICS:
What Determines Exchange Rates?
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:31 AM
DATE MODIFIED:
7/7/2016 6:32 AM
194. According to the safe-haven effect, investors may be willing to sacrifice an amount of return if an economy offers
them a low risk repository for their funds.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:32 AM
DATE MODIFIED:
7/7/2016 6:34 AM
195. In recent decades, the safe-haven effect has applied to the United States, with a long history of stable government,
relatively stable economy, and large and efficient financial markets.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Efficiency and equity
TOPICS:
Determining Short Run Exchange Rates: The Asset Market Approach
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:34 AM
DATE MODIFIED:
7/7/2016 6:36 AM
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Page 78
196. The volatility of exchange rates is reinforced by the phenomenon of overshooting, in which exchange rates
depreciate or appreciate more in the long run than in the short run.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Exchange Rate Overshooting
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:37 AM
DATE MODIFIED:
7/7/2016 6:38 AM
197. For the British pound, exchange rate overshooting is explained by the long run supply schedule of pounds being
more inelastic than the short run supply schedule of pounds.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: The role of money
TOPICS:
Exchange Rate Overshooting
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:38 AM
DATE MODIFIED:
7/7/2016 6:40 AM
198. Concerning exchange rate forecasting, judgmental forecasts are common sense models that rely on a wide array of
political and economic data.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forecasting Foreign Exchange Rates
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:40 AM
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Page 79
DATE MODIFIED:
7/7/2016 6:41 AM
199. Exchange rates are volatile in the short run because expectations about the variables that affect exchange rates
change frequently.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Introduction
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 6:42 AM
DATE MODIFIED:
7/7/2016 6:43 AM