04.03

Which of the following is true concerning the international value of the United States dollar?

It is determined by foreign and U.S. investors in the foreign exchange market.

Asume the U.S. dollar and the Canadian dollar are traded in flexible currency markets. Which of the following would cause the U.S. dollar to depreciate relative to the Canadian dollar?

Lower interest rates in the United States relative to Canada.

Which of the following would cause the U.S. dollar (USD) to appreciate as compared to the euro?

NOT European consumers boycott American goods or American consumers prefer to buy European goods

Suppose that Pier 1™ Imports purchases 20,000 Persian rugs from Morocco. The company would pay for the rugs with

NOT U.S. dollars

If the Chinese government sets the exchange rate at 4 yuan per 1 U.S. dollar, then the

NOT supply of the Chinese yuan will decrease

Suppose that the United States and China trade exclusively with each other. What will happen to the value of the U.S. dollar, ceteris paribus, if the price level in China rises faster than the price level in the United States?

NOT the value will not change

Suppose U.S. consumers decide they like foreign goods better than they like domestic goods. As a result of this change, which of the following is true? I. The demand for the U.S. dollar will increase. II. The demand for the U.S. dollar will decrease. III. U.S. exports will increase as a result of the changing value of the U.S. dollar. IV. U.S. exports will decrease as a result of the changing value of the U.S. dollar.

Not II and IV only

Suppose interest rates fall in the United States, but they don't fall in other nations. What is the impact on the flow of financial capital, the value of the U.S. dollar, and U.S. net exports (based on the changing value of the dollar)?

Not Inflow / Appreciate / Decrease

Suppose that the United States and China trade exclusively with each other. What will happen to the value of the U.S. dollar, ceteris paribus, if American produced tires are better than Chinese produced tires?

The U.S. dollar will appreciate.

Suppose that the United States and China trade exclusively with each other. What will happen to the value of the U.S. dollar, ceteris paribus, if Chinese interest rates rise significantly?

The U.S. dollar will depreciate.

If the demand for the Aruban florin increases relative to the U.S. dollar, then the

U.S. dollar will depreciate.

If actions of the Chinese government caused a shortage of domestic currency, then the exchange rate would be

above the market equilibrium and U.S. dollars per Chinese yuan will tend to fall.

Suppose Europeans began purchasing real asets in the United States. How would this impact the foreign exchange market for the euro and the U.S. dollar price of the euro? Supply of euro / U.S. dollar Price of euro

increase/decrease

Suppose the United States and Brazil sign a free trade agreement. If real interest rates increase in the United States but not in Brazil, which of the following will be true of Brazilian capital flow, exports, and the value of the Brazilian real? Capital Flow / Exports / Value of Brazilian Real

not inflow/increase/appreciate

If the Colombian government sets the exchange rate at 10 pesos per 1 U.S. dollar, then the

quantity supplied of Colombian Peso will decrease

When the international value of the U.S. dollar increases,

the U.S. trade deficit decreases.