Unit 4 Chapter 29 Quiz Exchange Rates and International Capital Flows

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

A. a hard peg policy. B. purchasing power parity. C. depreciation. D. a floating exchange rate. ''D''

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

A. aggregate supply B. aggregate demand C. direct investments D. portfolio investments ''B''

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. monetary policy D. the tools of demand and supply ''D''

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

A. euro. B. U.S. dollar. C. Chinese yuan. D. British pound. ''B''

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 ''B''

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

A. internationally traded goods across countries B. using another currency C. taking a management responsibility D. the exchange rate market. "C"

If the Canadian dollar is strengthening, then:

A. it has been unpegged from other currencies. B. Canada has adopted a hard peg policy. C. Canada has purchasing power parity. D. it has appreciated in terms of other currencies. ''D''

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 ''B''

If 20 Mexican pesos could buy $2.00 U.S. dollars in 2006 and $1 U.S. dollar 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. ''C''

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. ''A''