Copyright Cengage Learning. Powered by Cognero.
Page 21
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 14.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
52. Refer to Table 14.1. Assume that Toyota Inc. imports steel from U.S. suppliers, whose costs are denominated in
dollars, while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen. If the yen’s
exchange value appreciates from 200 yen = $1 to 100 yen = $1, the dollar-equivalent cost of a Toyota automobile equals:
a.
$24,000
b.
$30,000
c.
$36,000
d.
$42,000
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 14.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
53. The lag that occurs between changes in relative prices and the quantities of goods traded is the
a.
Recognition lag
b.
Recovery lag
c.
Implementation lag
d.
Legislative lag
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:26 PM
Copyright Cengage Learning. Powered by Cognero.
Page 22
DATE MODIFIED:
6/22/2016 3:26 PM
54. The Marshall-Lerner condition illustrates
a.
b.
c.
d.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
55. The absorption approach to currency depreciation focuses on the
a.
Purchasing power of money
b.
Relative price effects
c.
Income effects
d.
Price elasticity of demand
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:
The Absorption Approach to Currency Depreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
56. Reversing balance of payments disequilibria may came at the expense of
a.
Economic relations with our trading partners
b.
Domestic recession
c.
Price inflation
d.
All of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
Copyright Cengage Learning. Powered by Cognero.
Page 23
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:
The Absorption Approach to Currency Depreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
Figure 14.1 US market for Imported Toyotas
57. In Figure 14.1, D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing
Toyotas. A shift in the marginal cost curve from MC0 to MC1 represents
a.
an appreciation of the dollar relative to the yen
b.
an appreciation of the yen relative to the dollar
c.
a depreciation of the dollar relative to the yen
d.
neither an appreciation nor a depreciation of the dollar relative to the yen
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 14.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
58. In Figure 14.1, D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing
Toyotas. Assume that Toyota behaves like a monopolist in the US market. A shift in the marginal cost curve from MC0
to MC1 leads to
a.
a complete pass-through ot the depreciation of the dollar
b.
a complete pass-through of the appreciation of the dollar
Copyright Cengage Learning. Powered by Cognero.
Page 24
c.
a partial pass-through of the depreciation of the dollar
d.
a partial pass-through of the appreciation of the dollar
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 14.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
Figure 14.2 The US Market for Imported Toyotas
59. In Figure 14.2, D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing
Toyotas. A shift in the marginal cost curve from MC0 to MC2 represents
a.
an appreciation of the dollar relative to the yen
b.
a depreciation of the yen relative to the dollar
c.
a depreciation of the dollar relative to the yen
d.
neither an appreciation nor a depreciation of the dollar relative to the yen
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 14.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
Copyright Cengage Learning. Powered by Cognero.
Page 25
DATE MODIFIED:
6/22/2016 3:26 PM
60. In Figure 14.2, D represents the US demand curve for Toyotas and MC0 represents the marginal cost of producing
Toyotas. Assume that Toyota behaves like a monopolist in the US market. A shift in the marginal cost curve from MC0
to MC2 leads to
a.
a complete pass-through ot the depreciation of the dollar
b.
a complete pass-through of the appreciation of the dollar
c.
a partial pass-through of the depreciation of the dollar
d.
a partial pass-through of the appreciation of the dollar
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 14.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
61. Currency devaluation is initiated by governmental policy rather than the free-market forces of supply and demand.
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:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
62. If a currency’s exchange rate is overvalued, a government would likely initiate actions to revalue the currency.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 26
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
63. If a currency’s exchange rate is undervalued, a government would likely initiate actions to devalue the currency.
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:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
64. The purpose of currency devaluation is to cause a depreciation in a currency’s exchange value.
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:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
65. The purpose of currency revaluation is to cause an appreciation in a currency’s exchange value.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 27
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Effects of Exchange Rate Changes on Costs and Prices
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
66. Assume that General Motors employs labor and materials, whose costs are denominated in dollars, in the production
of automobiles. If the dollar’s exchange value depreciates by 10 percent against the yen, the yen-denominated cost of a
GM vehicle rises by 10 percent.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
67. Assume that General Motors employs labor and materials, whose costs are denominated in dollars, in the production
of automobiles. If the dollar’s exchange value appreciates by 10 percent against the yen, the yen-denominated cost of a
GM vehicle falls by 10 percent.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
68. Appreciation of the dollar’s exchange value worsens the international competitiveness of Boeing Inc., whereas a dollar
depreciation improves its international competitiveness.
a.
True
b.
False
ANSWER:
True
Copyright Cengage Learning. Powered by Cognero.
Page 28
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
69. When manufacturing automobiles, suppose that General Motors uses labor and materials whose costs are denominated
in dollars and pounds respectively. If the dollar’s exchange value appreciates by 15 percent against the pound, the pound-
denominated cost of a GM vehicle rises by 15 percent.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
70. According to the absorption approach, currency devaluation best improves a country’s trade balance when its economy
is at maximum capacity.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
71. When manufacturing computer software, suppose that Microsoft Inc. uses labor and materials whose costs are
denominated in dollars and francs respectively. If the dollar’s exchange value depreciates 10 percent against the franc, the
Copyright Cengage Learning. Powered by Cognero.
Page 29
franc-denominated cost of the firm’s software falls by 10 percent.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
72. When producing jetliners, suppose that Boeing employs labor and materials whose costs are denominated in dollars
and marks respectively. If the dollar’s exchange value depreciates 20 percent against the mark, the mark-denominated cost
of a Boeing jetliner falls by an amount less than 20 percent.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
73. As yen-denominated costs become a larger portion of Ford’s total costs, a dollar appreciation results in a smaller
increase in the yen-denominated cost of a Ford auto than occurs when all input costs are dollar denominated.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
Copyright Cengage Learning. Powered by Cognero.
Page 30
DATE MODIFIED:
6/22/2016 3:26 PM
74. A depreciation of the dollar results in Whirlpool dishwashers becoming less competitive in Europe.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
75. By decreasing the relative production costs of U.S. companies, a dollar appreciation tends to lower U.S. export prices
in foreign-currency terms, which induces an increase in the amount of U.S. goods exported abroad.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
76. By increasing relative U.S. production costs, a dollar depreciation tends to increase U.S. export prices in foreign-
currency terms, which results in an increase in the quantity of U.S. goods exported abroad.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
Copyright Cengage Learning. Powered by Cognero.
Page 31
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
77. Suppose the exchange value of the franc rises against the currencies of Switzerland’s major trading partners. To
protect themselves from decreases in foreign sales caused by the mark’s appreciation, Swiss companies could shift
production to countries whose currencies had depreciated against the mark.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
78. In the early 1990s, the yen sharply appreciated against the dollar. To protect themselves from export reductions caused
by the yen’s appreciation, Japanese auto companies transferred increasing amounts of auto production from the United
States to Japan.
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:
Cost Cutting Strategies of Manufacturers in Response to Currency Appreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
79. The elasticity approach to currency depreciation emphasizes the income effects of depreciation.
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
Copyright Cengage Learning. Powered by Cognero.
Page 32
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
80. The elasticity approach to currency depreciation emphasizes the relative price effects of depreciation and suggests that
depreciation best improves a country’s trade balance when the elasticities of demand for the country’s imports and exports
are high.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
81. The absorption approach to currency devaluation deals with the income effects of devaluation while the elasticity
approach to devaluation deals with the price effects of devaluation.
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:
The Absorption Approach to Currency Depreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
82. According to the absorption approach, an increase in domestic expenditures must occur for currency devaluation to
promote balance of trade equilibrium.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
Copyright Cengage Learning. Powered by Cognero.
Page 33
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:
The Absorption Approach to Currency Depreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
83. The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money, and the
resulting impact on domestic expenditure levels.
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:
The Monetary Approach to Currency Depreciation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
84. According to the Marshall-Lerner condition, currency depreciation will worsen a country’s balance of trade if the
country’s elasticity of demand for imports plus the foreign demand elasticity for the country’s exports exceeds 1.0.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
85. The Marshall-Lerner condition asserts that if the sum of a country’s elasticity of demand for imports and the foreign
elasticity of demand for the country’s exports equals 1.0, a depreciation of the country’s currency will not affect its balance
of trade.
a.
True
b.
False
Copyright Cengage Learning. Powered by Cognero.
Page 34
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
86. Suppose the U.S. price elasticity of demand for imports equals 0.4 and the foreign demand elasticity for the U.S.
exports equals 0.2. According to the Marshall-Lerner condition, a depreciation of the dollar’s exchange value will improve
the U.S. balance of trade.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM
87. The Marshall-Lerner condition suggests that if the sum of a country’s elasticity of demand for imports and the foreign
elasticity of demand for the country’s exports exceeds 1.0, an appreciation of the country’s exchange rate will worsen its
balance of trade.
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:
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:26 PM
DATE MODIFIED:
6/22/2016 3:26 PM