Final- review chapter 9
The data in the table above are the U.S. balance of payments. The current account balance is:
$140 billion
If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is:
6 south african goods per US good
suppose china airlines wants to purchase a French airbus. the price is 95 million euro. if the exchange rate is 1 euro per 9 yuan, the price of this airplane to china is
855 million yaun
Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is:
950 million yuan
In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________.
Increases; C
Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the:
U.S. dollar depreciates by 2 percent a year
Using the table above, if the current market value of the dollar is 125 francs:
all three investors hold dollars
using the table above, if the current market value of the dollar is 70 francs
all three investors hold dollars
According to purchasing power parity, a rise in inflation in the United States relative to the rest of the world will lead to:
an exchange rate depreciation
Which of the following will lead to an appreciation of the U.S. dollar against the British pound?
an increase in British demand for U.S. imports
Which of the following will lead to an appreciation of the U.S. dollar against the British pound?
an increase in British demand for US imports
the demand curve for US dollars slopes downward because as the dollar ____ US goods become ____ expensive to foreign residents.
appreciate;more
Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has ________ against the dollar and the dollar has ________ against the peso.
appreciated;depreciated
last year the exchange rate between US dollars and Mexican pesos was 10 pesos per dollar. today it is 11 pesos per dollar. Here, the dollar ____ against the peso and the peso ____ against the dollar.
appreciated;depreciated
in the foreign exchange market, the supply curve for dollars slopes upwards because:
as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports
Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can:
buy dollars
Suppose Mitsubishi Bank (a Japanese bank) expects the exchange rate to be 125 yen per U.S. dollar at the end of the year. If today's exchange rate is 120 yen per U.S. dollar, Mitsubishi bank:Suppose Mitsubishi Bank (a Japanese bank) expects the exchange rate to be 125 yen per U.S. dollar at the end of the year. If today's exchange rate is 120 yen per U.S. dollar, Mitsubishi bank:
buys US dollars today because it expects profit from buying US dollars and holding them
In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed:
can sell dollars
The term "foreign currency" refers to foreign:
coins, notes, and bank deposits
Which of the following exchange rate policies uses a target exchange rate, but allows the target to change?
crawling peg
If the world real interest rate falls, then a country that is an international lender
decreases the amount of its lending
in the foreign exchange market, an increase in the world demand for US exports shifts the:
demand curve for US dollars rightward
when a good is imported into the US, a ____ is created.
demand for foreign currencies and a supply of dollars
when people who are holding the money of some other country want to exchange it for US dollars, they ____ US dollars and _____ that other country's money.
demand;supply
Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will:
depreciate 4%
if 100 japanese yen buy more US dollars today than yesterday, the dollar has _____ and the yen has _____.
depreciated;appreciated
A small country is an international borrower and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international borrowing ________.
does not change; decreases
A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________.
does not change; increases
A factor determining the supply of U.S. dollars in the foreign exchange market is the:
excepted future exchange rate
If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was a:
flexible exchange rate
the lower the exchange rate today ceterius paribus, the:
greater is the expected profit from buying US dollars today and holding them
If the Fed wants to depreciate the dollar against the yen, the Fed will
increase the supply of dollars by buying yen
with everything else the same, in the foreign exchange market the:
larger the value of US exports, the greater is the quantity of dollars demanded
when the US exchange rate rises, foreign goods become ___ and US imports ____.
less expensive; increase
when the US exchange rate falls, US goods become ____ to foreign residents and US exports _____
less expensive;increase
In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed:
must violate both interest rate parity and purchasing power parity
In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when
people expect that the dollar will appreciate
in the figure above, the shift in the demand curve for US dollars from D0 to D2 could occur when:
people expect that the dollar will depreciate
In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as ________.
point E
Arbitrage in the foreign exchange market, international loans markets, and goods markets results in:
purchasing power parity, interest rate parity and law of one price
the higher the exchange rate today, the:
smaller is the expected profit from buying US dollars today and holding them
the demand for mexican tomatoes by an american food grocery chain creates a
supply of US dollars
The table above gives some of the entries in the national income and product accounts. The government sector has a ________, and the private sector has a ________.
surplus of $50 billions surplus of $25 billion
If the People's Bank of China adopted a flexible exchange rate policy
the US dollar would depreciate
In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when:
the US interest rate differential increases
Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result:
the demand curve for European euros and the supply curve for indian rupees both shift rightward
if the european central bank increases interest rates:
the demand curve for European euros shifts rightward and the supply curve of the european euros shifts leftward
if the fed reserve increases interest rates:
the demand curve for US dollars shifts rightward and the supply curve of US dollars shifts leftward
31) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when:
the expected future exchange rate falls
In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when:
the expected future exchange rate rises
A country's balance of payments accounts records:
the international trading, borrowing, and lending positions of a country over a period of time
