ECO 201 Chapter 16

In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013?

2009: .71 dollars, 2013: 1.11 dollars

In 2010, 1 Swiss franc cost .56 British pounds and in 2012 it cost .51 British pounds. How much would 1 British pound purchase in Swiss francs in 2010 and 2012?

2010: 1.79 francs, 2012: 1.96 francs

________________________ equalizes the prices of internationally traded goods across countries.

Purchasing power parity

If the U.S. dollar weakens, which of the following parties will benefit?

U.S firms selling in Europe

What do the economies of Greece, Ireland and Germany all share?

a common currency

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:

a floating exchange rate.

One of the following groups is not participating in the foreign exchange markets. Which one?

an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

Which of the following denotes a common misunderstanding about exchange rates?

an appreciating currency must be better than a depreciating currency

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies.

Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________.

taking a management responsibility

If a nation merges its currency with another nation to create a single currency, what must it give up?

the ability to determine its own nationally-oriented monetary policy

When Mataeo buys Euros through _______________, he will use his U.S. dollars to pay for them.

the foreign exchange market

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _______________

the tools of demand and supply

Which of the following is an example of a pegged currency?

Chinese yuan

A stronger euro is less favorable for:

American tourists traveling in France.

The most commonly traded currency in foreign exchange markets is the:

U.S. dollar.

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

weakening; less

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits.

swings in exchange rates

Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets?

French franc