Chapter 16 - Macroeconomics Quiz

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, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?

2010: .12 U.S. dollars; 2012: .15 U.S. dollars

Short run speculation in currencies can create ________________________, at least for a time, where an expected appreciation leads to a stronger currency and vice versa.

a self-fulfilling prophecy

The _____________ is an example of a large-scale common currency.

euro

Why would an expansionary monetary policy no longer be available to combat recession for a country that has pegged its exchange rate?

it would depreciate the country's exchange rate and break its hard peg

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

the foreign exchange market

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

In 2010, 100 Japanese yen purchased .88 U.S. dollars and in 2013, it purchased .93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?

2010: 113.6 yen, 2013: 107.5 yen

The foreign exchange value of the dollar is a price and whether a higher price is good or bad depends on where you are standing. Which of the following is the best option? a. A stronger dollar is good for U.S. imports and investments b. A weak dollar is good for U.S. Imports and investments c. A weak dollar is good for U.S. tourists going to other countries. d. A stronger dollar is good for U.S. exports

A stronger dollar is good for U.S. imports and investments

A stronger euro is less favorable for: a. German tourists traveling abroad. b. American tourists traveling in France. c. Canadian firms selling in Germany. d. Canadian investors with money investments in Germany.

American tourists traveling in France

Which of the following is an example of a pegged currency? a. U.S. dollar b. British pound c. Euro d. Chinese yuan

Chinese yuan

Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets? a. U.S. dollar b. British pound c. Japanese yen d. French franc

French franc

If the U.S. dollar weakens, which of the following parties will benefit? a. countries exporting to the U.S. b. Australian firms selling in the U.S. c. U.S firms selling in Europe d. Japanese investors who have money in the U.S.

U.S firms selling in Europe

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

U.S. dollar

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

If American Airlines were to purchase Malaysian Airlines, it would likely have ______________________________ in mind.

a longer-term horizon

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

Which of the following denotes a common misunderstanding about exchange rates? a. an appreciating currency must be better than a stronger currency b. a depreciating currency must be better than an appreciating currency c. a weaker currency must be better than a stronger currency d. an appreciating currency must be better than a depreciating currency

an appreciating currency must be better than a depreciating currency

If the U.S. government uses an expansionary monetary policy to reduce interest rates, then it will:

cause the exchange rate for U.S. currency to depreciate

A stronger British pound is beneficial for: a. U.S. exchange students studying in Britain with a U.S. scholarship. b. British firms selling goods and services in Canada. c. British investors who have invested money in Australia. d. exchange students with a British scholarship studying in Canada.

exchange students with a British scholarship studying in Canada

From a macroeconomic point of view, increases in ____________ are an addition to aggregate demand, while increases in ___________ are a subtraction from aggregate demand.

exports; imports

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange market

The _____________________________ is the largest market in the world economy.

foreign exchange market

If a government uses monetary policy to alter the exchange rate, then it cannot at the same time use monetary policy to address issues of ______________________.

inflation or recession

Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________.

interest rates; right

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies

If Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result? a. its imports will increase b. its exports will increase c. aggregate demand will increase d. trade deficit will decrease

its imports will increase

________________________ equalizes the prices of internationally traded goods across countries.

purchasing power parity

Governments that attempt to intervene in exchange rate markets through soft pegs or hard pegs:

risk causing even greater fluctuations in foreign exchange markets

Suppose the situation in which investors in the US are looking to Japan as a place where they should invest for a future high rate of return, while Japanese investors are looking to lower their investments in the US. The combined effect in the dollar exchange market will:

shift the supply curve out, the demand curve shifts in and the value of the dollar decreases

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

soft peg

A __________________________ policy in which the government almost never acts to intervene in the exchange rate market will look a great deal like a floating exchange rate.

soft peg exchange rate

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

swings in exchange rates

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

taking a management responsibility

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;

the Canadian dollar appreciated against the U.S. dollar

The Canadian dollar will most likely strengthen against the U.S. dollar if:

the Canadian inflation rate becomes extremely low

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:

the dollar depreciated against the yen

If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and 87 U.S. dollars in 2010, then:

the dollar strengthened against the peso

A soft peg policy typically allows the exchange rate to move up and down by relatively small amounts in _________________, but seeks to avoid extreme short-term fluctuations.

the short run

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

A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports .

tight; stimulates; reduces

A soft peg exchange rate may create additional _______________ as exchange rate markets try to anticipate when and how the government will intervene.

volatility

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

weakening; less

In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012?

2010: 1.79 dollars, 2012: 1.59 dollars

One of the following groups is not participating in the foreign exchange markets. Which one? a. Boston business firms trading goods and services with firms in France b. international investors buying bonds issued by a German car manufacturing firm c. an Iowa travel firm that arranges vacation tours for local seniors to Hawaii d. international investors buying part-ownership of a mining operation in Afghanistan

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

A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy.

exchange rate depreciation

Portfolio investments are often made based on beliefs about how _______________ are likely to move in the near future.

exchange rates or rates of return

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then:

exchange rates will have less reason to vary

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