worksheet exchange rates test 4

If the exchange rate between yen and dollars were 120 yen per dollar, when an American purchases a good valued at 600 yen, its cost in dollars would be: the dollar appreciates, it can be said that: a. $5. b. $600. c. $72,000. d. $120

$5

On May 16, 1999, the U.S. dollar was worth 1.50 Canadian dollars. How many U.S. dollars did it take to buy one Canadian dollar? a. .886 b. .735 c. .667 d. .596 e. .447

.667

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? a. 2010: .12 U.S. dollars; 2012: .15 U.S. dollars b. 2010: 1.2 U.S. dollars; 2012: 1.5 U.S. dollars c. 2010: .82 U.S. dollars; 2012: .66 U.S. dollars d. 2010: .15 U.S. dollars; 2012: .11 U.S. dollars

2010: .12 U.S. dollars; 2012: .15 U.S. 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? a. 2010: 1.79 francs, 2012: 1.96 francs b. 2010: 1.78 francs, 2012: 1.98 francs c. 2010: 1.71 francs, 2012: 2.00 francs d. 2010: 1.73 francs, 2012: 1.97 francs

2010: 1.79 francs, 2012: 1.96 francs

Which of the following examples would lead to a demand for German marks? a. Judy Potter, an American, wants to purchase a German automobile. b. Jim Potter, Judy's husband, wants to purchase German stocks. c. IBM, Judy's employer, wants to buy a small computer firm in Germany. d. All of the above.

All of the above.

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

American tourists traveling in France.

If the exchange rate between euros and dollars were 2 euros per dollar, when a French tourist buys a good valued at $80, its cost in euros would be: a. Euro 160. b. Euro 80. c. Euro 40. d. Euro 78

Euro 160

Can the U.S. dollar and the German Deutsche Mark both appreciate relative to each other? a. Yes, both countries can gain in this manner. b. Yes, provided the central banks agree to permit it. c. No, if one currency appreciates relative to another, the other depreciates. d. No, the citizens of the countries would not agree to it. e. Not enough information to tell.

No, if one currency appreciates relative to another, the other depreciates.

____________________________ equalizes the prices of internationally traded goods across countries. a. The foreign exchange rate B. A floating exchange rate c. Purchasing power parity d. An international parity rate

Purchasing power parity

The most commonly traded currency in foreign exchange markets is the: a. euro. b. U.S. dollar. c. Chinese yuan. d. British pound.

U.S. dollar.

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. low inflation rates b. high inflation rates c. aself-fulfillingprophecy d. a decrease in the supply side

a self-fulfilling prophecy

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

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

Which of the following would most likely cause a nation's currency to depreciate? a. an increase in domestic real interest rates b. an increase in exports coupled with a decline in imports c. an increase in the nation's inflation rate d. a balance of trade surplus

an increase in the nation's inflation rate

At any given moment there is one exchange rate: a. for all the world's currencies. b. for currencies in the free world. c. between every pair of currencies. d. established by the Federal Reserve System.

between every pair of currencie

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? a. 2010: 88 yen, 2013: 93 yen b. 2010: 100 yen, 2013: 114 yen c. 2010: 113.6 yen, 2013: 107.5 yen d. 2010: 112.4 yen, 2013: 105.3 yen

c. 2010: 113.6 yen, 2013: 107.5 yen

A decrease in foreign demand for U.S. exports will __________ the demand for U.S. dollars and cause the U.S. dollar to __________ in value. a. increase; appreciate b. increase; depreciate c. decrease; appreciate d. decrease; depreciate

decrease; depreciate

Under a system of flexible exchange rates, an increase in the foreign demand for the U.S. dollar in the foreign exchange market will cause the: a. dollar to appreciate b. dollar to depreciate. c. U.S. trade deficit to decrease. d. U.S. inflation rate to increase.

dollar to appreciate

The __________________ is an example of a large-scale common currency. a. euro b. dollar c. pound d. franc

euro

A central bank must be concerned about whether a large and unexpected will drive most of the country's existing banks into bankruptcy. a. exchange rate appreciation b. interest rate increase c. exchange rate depreciation d. increase in foreign investments

exchange rate depreciation

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then: a. foreign investment will increase significantly. b. exchange rates will have less reason to vary. c. domesticinvestmentsinforeignbusinesseswilldecrease. d. government will intervene to peg the nation's currency.

exchange rates will have less reason to vary.

From a macroeconomic point of view, increases in are an addition to aggregate demand, while increases in are a subtraction from aggregate demand. a. rates of return; exchange rates b. exchange rates; rates of return c. exports; imports d. imports; exports

exports; imports

People or firms use one currency to purchase another currency at the ________________. a. international currency exchange b. foreign exchange market c. foreign currency exchange d. international parity market

foreign exchange market

if the dollar appreciates, it can be said that: a. foreigners respect the United States more. b. other currencies depreciate. c. it increases in value within the United States. d. other currencies also appreciate. e. it takes more dollars to buy units of other currencies.

other currencies depreciate.

The exchange rate: a. states the price of one currency in terms of another currency. b. is the rate at which one country's money is flowing to a second country. c. is closely related to the concept of comparative advantage. d. is closely related to the concept of absolute advantage.

states the price of one currency in terms of another currency.

For firms engaged in international lending and borrowing, can have an enormous effect on profits. a. swings in exchange rates b. trade-offs and risks c. foreign portfolio investment d. foreign direct investment

swings in exchange rates

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then; a. the U.S. dollar appreciated against the Canadian dollar. b. the Canadian dollar weakened against the Canadian dollar. c. the U.S. dollar strengthened against the Canadian dollar. d. the Canadian dollar appreciated against the U.S. dollar.

the Canadian dollar appreciated against the U.S. dollar

If a nation merges its currency with another nation to create a single currency, what must it give up? a. the ability to purchase currency in foreign exchange markets b. the ability to determine its own nationally-oriented monetary policy c. the ability to fight recessions and control inflations d. the ability to sell currency in foreign exchange markets

the ability to determine its own nationally-oriented monetary policy

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then: a. the dollar depreciated against the yen. b. the dollar appreciated against the yen. c. the yen depreciated against the dollar. d. the yen weakened against the dollar.

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: a. the dollar depreciated against the peso. b. the peso appreciated against the dollar. c. the dollar strengthened against the peso. d. the peso strengthened against the peso.

the dollar strengthened against the peso

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with __________________ a. distinctive trade-offs and risks b. exchange rate policy c. monetarypolicy d. the tools of demand and supply

the tools of demand and supply

A depreciating U.S. dollar is________________because it is worth__________________ in terms of other currencies. a. strengthening; more b. weakening; less c. a problem for exporters; less d. beneficial to importers; more

weakening; less