Chapter: The International Monetary System: Order or Disorder?
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1. Everything else equal, one can expect the euro to appreciate relative to the dollar if
a. Americans decrease their travel to Germany.
b. the Germans add to their holdings of U.S. Treasury bills.
c. Americans purchase land in Germany and build factories.
d. American exports to Germany increase.
2. If inflation in the United States is higher than in Japan, what will happen to the exchange rate between the U.S. dollar and the Japanese yen?
a. The dollar and yen will both depreciate.
b. The dollar and yen will both appreciate.
c. The dollar will depreciate and the yen will appreciate.
d. The dollar will appreciate and the yen will depreciate.
3. Of the graphs in the figure below, which one shows the effects of an economic boom in the United States and a depreciation of the dollar?
a. This would reflect a depression in one of the U.S. trading partners.
b. In a boom, Americans would buy more imports and supply more dollars.
c. This would reflect a boom in one of America's trading partners.
d. This would reflect a recession in the U.S. and a decrease in American imports.
e. Enter answer choice e
4. If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?
a. Supply of dollars will increase, causing appreciation of the dollar.
b. Supply of euros will increase, causing appreciation of the euro.
c. Demand for dollars will increase causing appreciation of the dollar.
d. Demand for dollars will decrease, causing depreciation of the dollar.
5. Which of the following do most economists consider to be the most basic measure of a nation's international transactions?
a. balance on current account.
b. balance on capital account.
c. balance of merchandise trade.
d. balance on long-term capital.
6. Under the gold standard,
a. each nation had discretion over its monetary policy.
b. trade-deficit nations had less control over their money supply than trade-surplus nation
c. trade-surplus nations had less control over their money supply than trade-deficit nations
d. no nation had control over its domestic monetary policy.
7. A deficit nation in a fixed exchange rate system can improve it balance of payments by
a. increasing its money supply.
b. increasing its interest rates.
c. increasing its level of real GDP.
d. increasing aggregate demand.
8. Of the graphs in the figure below, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?
a. Enter answer choice a
b. Enter answer choice b
c. Enter answer choice c
d. Enter answer choice d
9. The decline in the value of the dollar from 1985 to 1988 was beneficial to
a. American tourists travelling to Europe.
b. Firms importing goods into America.
c. American exporting businesses.
d. Foreigners holding U.S. government bonds.
10. Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased
a. balance of payments surpluses.
b. runs on their currencies.
c. balance of payments deficits.
d. Both b and c.
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