Question 1

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates,such as rates that are managed by the government to avoid wide swings.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions: 
-(Table: Balance of Payment) Refer to Table: Balance of Payments.The country's balance of payments on financial account is:

Accepted Answer

A)   $0.
B)   $375 billion.
C)   $355 billion.
D)   -$355 billion.E) A) and B)
F) None of the above

Question 3

A major drawback of a floating exchange rate is the:

Accepted Answer

A)   opportunity cost associated with the accumulation of foreign exchange reserves.
B)   uncertainty about the value of goods traded internationally.
C)   increased discipline on monetary policy.
D)   distorted incentives for the normal flow of imports and exports.E) All of the above
F) A) and B)

Question 4

A devaluation can help reduce shortages of domestic currency.

Accepted Answer

A) True 
 B)False

Question 5

To fix its exchange rate,a government can use:

Accepted Answer

A)   competition.
B)   exchange market intervention.
C)   speculation.
D)   arbitrage.E) A) and D)
F) A) and C)

Question 6

A country that contracts its money supply will MOST likely have a(n) :

Accepted Answer

A)   increase in the level of investment spending.
B)   increase in the demand for its currency in the foreign exchange market.
C)   increase in the supply of its currency in the foreign exchange market.
D)   lowering of its interest rate.E) A) and C)
F) B) and C)

Question 7

If a country's currency appreciates,all other things being equal,exports _____ and imports _____.

Accepted Answer

A)   increase;increase
B)   increase;decrease
C)   decrease;increase
D)   decrease;decreaseE) B) and C)
F) None of the above

Question 8

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

Accepted Answer

A) True 
 B)False

Question 9

A country with a fixed exchange rate regime:

Accepted Answer

A)   tends to increase uncertainty regarding the value of its currency.
B)   allows countries to use both fiscal and monetary policies to stabilize their economy.
C)   reduces a country's bias towards inflationary policies.
D)   reduces the amount of foreign currency a country must hold.E) B) and D)
F) C) and D)

Question 10

Suppose that a country has floated its currency and the central bank sets an expansionary monetary policy.Which outcome is likely to occur?

Accepted Answer

A)   Interest rates will fall,and capital will flow in.
B)   Interest rates will rise,and capital will flow out.
C)   Interest rates will fall,and capital will flow out.
D)   Its exchange rate will appreciate.E) A) and D)
F) A) and C)

Question 11

A _____ balance on the financial account means a _____.

Accepted Answer

A)   positive;financial account surplus
B)   negative;financial account surplus
C)   positive;financial account deficit
D)   positive;current account surplusE) B) and D)
F) None of the above

Question 12

Floating exchange rates lead to more stable conditions for international trade.

Accepted Answer

A) True 
 B)False

Question 13

All other things being equal,a recession in Mexico would cause Canadian exports to Mexico to increase and Canadian aggregate demand to increase.

Accepted Answer

A) True 
 B)False

Question 14

When the interest rate in Canada decreases as a result of expansionary monetary policy,investment spending _____ and consumption _____.

Accepted Answer

A)   increases;increases
B)   increases;decreases
C)   decreases;increases
D)   decreases;decreasesE) A) and C)
F) A) and D)

Question 15

The rule that governs a country's policy towards its exchange rate is known as:

Accepted Answer

A)   the fixed exchange rate system.
B)   the floating exchange rate system.
C)   the exchange rate regime.
D)   the rule of exchange.E) None of the above
F) A) and B)

Question 16

The behaviour of the financial accounts is determined in the international _____ market.

Accepted Answer

A)   goods and services
B)   loanable funds
C)   money
D)   stockE) None of the above
F) A) and B)

Question 17

Suppose that Canada and European Union are the only trading partners in the world.If Canada lowers import restrictions from the European Union,we would expect the:

Accepted Answer

A)   demand for euros to increase,appreciating the euro.
B)   demand for dollars to increase,appreciating the dollar.
C)   supply of dollars to increase,appreciating the dollar.
D)   supply of euros to increase,depreciating the euro.E) A) and B)
F) B) and C)

Question 18

The exchange rate is the _____ between countries.

Accepted Answer

A)   interest rate differential
B)   balance of trade differential
C)   relative price of currencies
D)   relative price of goldE) A) and B)
F) C) and D)

Question 19

Many of China's trading partners feel that the yuan is undervalued.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer questions:
Suppose that initially the nominal exchange rate was 40 rupees per dollar,but it is now 50 rupees per dollar.
-(Scenario: Exchange Rate between Canada and India) Refer to Scenario: Exchange Rate between Canada and India.If the nominal exchange rate is 50 rupees per dollar and the inflation rate in India is 25%,while the aggregate price level has remained unchanged in Canada,the real exchange rate between the Canadian dollar and the Indian rupee:

Accepted Answer

A)   remains unchanged at 40.
B)   remains unchanged at 50.
C)   increases from 40 to 50.
D)   increases by more than 25%.E) B) and C)
F) All of the above

Exam 18: International Macroeconomics

If a country's currency appreciates,all other things being equal,exports _ and imports _.

Correct Answer
verified

Many of China's trading partners feel that the yuan is undervalued.

Correct Answer
verified

All other things being equal,a recession in Mexico would cause Canadian exports to Mexico to increase and Canadian aggregate demand to increase.

Correct Answer
verified

Correct Answer
verified

Floating exchange rates lead to more stable conditions for international trade.

Correct Answer
verified

The behaviour of the financial accounts is determined in the international _____ market.

Correct Answer
verified

A country that contracts its money supply will MOST likely have a(n) :

Correct Answer
verified

Use the following to answer questions: -(Table: Balance of Payment) Refer to Table: Balance of Payments.The country's balance of payments on financial account is:

Correct Answer
verified

A devaluation can help reduce shortages of domestic currency.

Correct Answer
verified

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

Correct Answer
verified

The exchange rate is the _____ between countries.

Correct Answer
verified

A _ balance on the financial account means a _.

Correct Answer
verified

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates,such as rates that are managed by the government to avoid wide swings.

Correct Answer
verified

The rule that governs a country's policy towards its exchange rate is known as:

Correct Answer
verified

Suppose that a country has floated its currency and the central bank sets an expansionary monetary policy.Which outcome is likely to occur?

Correct Answer
verified

When the interest rate in Canada decreases as a result of expansionary monetary policy,investment spending _ and consumption _.

Correct Answer
verified

To fix its exchange rate,a government can use:

Correct Answer
verified

A major drawback of a floating exchange rate is the:

Correct Answer
verified

A country with a fixed exchange rate regime:

Correct Answer
verified

Suppose that Canada and European Union are the only trading partners in the world.If Canada lowers import restrictions from the European Union,we would expect the:

Correct Answer
verified

Exam 18: International Macroeconomics

If a country's currency appreciates,all other things being equal,exports _____ and imports _____.

Correct AnswerverifiedShow Answer

Many of China's trading partners feel that the yuan is undervalued.

Correct AnswerverifiedShow Answer

All other things being equal,a recession in Mexico would cause Canadian exports to Mexico to increase and Canadian aggregate demand to increase.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Floating exchange rates lead to more stable conditions for international trade.

Correct AnswerverifiedShow Answer

The behaviour of the financial accounts is determined in the international _____ market.

Correct AnswerverifiedShow Answer

A country that contracts its money supply will MOST likely have a(n) :

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Table: Balance of Payment) Refer to Table: Balance of Payments.The country's balance of payments on financial account is:

Correct AnswerverifiedShow Answer

A devaluation can help reduce shortages of domestic currency.

Correct AnswerverifiedShow Answer

Foreign exchange reserves are gold and silver that a government maintains to buy its currency in foreign exchange markets.

Correct AnswerverifiedShow Answer

The exchange rate is the _____ between countries.

Correct AnswerverifiedShow Answer

A _____ balance on the financial account means a _____.

Correct AnswerverifiedShow Answer

Some countries have exchange rate policies that lie somewhere between fixed and floating exchange rates,such as rates that are managed by the government to avoid wide swings.

Correct AnswerverifiedShow Answer

The rule that governs a country's policy towards its exchange rate is known as:

Correct AnswerverifiedShow Answer

Suppose that a country has floated its currency and the central bank sets an expansionary monetary policy.Which outcome is likely to occur?

Correct AnswerverifiedShow Answer

When the interest rate in Canada decreases as a result of expansionary monetary policy,investment spending _____ and consumption _____.

Correct AnswerverifiedShow Answer

To fix its exchange rate,a government can use:

Correct AnswerverifiedShow Answer

A major drawback of a floating exchange rate is the:

Correct AnswerverifiedShow Answer

A country with a fixed exchange rate regime:

Correct AnswerverifiedShow Answer

Suppose that Canada and European Union are the only trading partners in the world.If Canada lowers import restrictions from the European Union,we would expect the:

Correct AnswerverifiedShow Answer

If a country's currency appreciates,all other things being equal,exports _ and imports _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A _ balance on the financial account means a _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When the interest rate in Canada decreases as a result of expansionary monetary policy,investment spending _ and consumption _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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