QUESTION 1
In a fixed exchange rate system
amarket forces and the country’s stock of gold determine its exchange rate
ba central bank affects the value of a currency by changing its foreign exchange reserves
cthe International Monetary Fund determines exchange rates
dmarket forces play a role in determining the fixed value of a currency
QUESTION 2
The price of one nation’s currency in terms of the currency of another nation is called the
adiscount rate
bexchange rate
cIMF rate
dfed funds ratio
QUESTION 6
A country’s balance of payments shows a
asummary record of international financial assistance received by the country
bsummary record of a country’s economic transactions with foreign residents and governments over a year
cdetailed record of the import and export of services for the country
ddetailed record of the country’s imports
QUESTION 7
An appreciation of the US dollar relative to the Japanese yen causes
athe quantity demanded of US dollars to increase because the Japanese want to buy more US goods
ba lower dollar-price of Japanese goods which induces the US to increase their purchasing of Japanese goods
cthe US to buy less Japanese goods, causing the US to depreciate
dthe Japanese to buy more US goods, causing the dollars to appreciate further
QUESTION 9
Flexible exchange rates exist when
agovernments and central banks spend foreign reserves to prop up an exchange rate at a certain level
bexchange rates are determined by forces of supply and demand
cspeculators bet that a currency will soon be depreciated
dno one knows what the true value of a currency is
QUESTION 10
The total of all economic transactions between a nation and the rest of the world is referred to as the
abalance of power
bbalance of payments
cbalance of trade
dexchange rate
QUESTION 13
A nation’s foreign exchange reserves consist mainly of
athe legal currency of that nation
bgovernment securities of that nation
cexcess reserves held by its banks
dcurrencies of other nations
QUESTION 16
Any transaction that leads to a payment by a country’s residents or government is a(n)
aasset
bdebt
cdeficit item
dsurplus item
QUESTION 18
The term “flexible exchange rates” refers to
aa situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand
bthe increase in the exchange value of one nation’s currency in terms of an other nation
ca nation in which households, firms, and governments buy and sell national currencies
dthe decrease in the exchange value of one nation’s currency in terms of another nation
QUESTION 3
If an exporter wants to limit the effect of possible changes in the exchange rate on the value of her exports, then she can adopt a strategy known as
ahedging
bfloating
cappreciating
dspeculating