Multiple Choice Questions:
1. Suppose that the dollar rises from 100 to 125 yen. As a result?
a. Exports to Japan will likely increase.
b. Japanese tourists will be more likely to visit the United States.
c. U.S. businesses will be less likely to use Japanese shipping lines to transport their products.
d. U.S. consumers will be more likely to buy Japanese-made automobiles.
2. Other things being constant, which of the following will most likely cause the dollar to appreciate on the exchange rate market?
a. Higher domestic interest rates
b. Higher interest rates abroad
c. Expansionary domestic monetary policy
d. Reduced inflation abroad
3. A depreciation in the U.S. dollar would?
a. Discourage foreigners from making investments in the United States.
b. Discourage foreign consumers from buying U.S. goods.
c. Reduce the number of dollars it would take to buy a Swiss franc.
d. Encourage foreigners to buy more U.S. goods.
4. If the exchange rate between euros and dollars were 2 euros per dollar, when an American purchased a good valued at 80 euros, its cost in dollars would be?
a. $160.
b. $80.
c. $40.
d. None of the above.
5. Suppose that the exchange rate between Mexican pesos and dollars is 8 pesos per dollar. If the exchange rate goes to 10 pesos per dollar, it would tend to?
a. Increase U.S. exports to Mexico.
b. Decrease U.S. exports to Mexico.
c. Increase Mexican exports to the United States.
d. Decrease Mexican exports to the United States.
e. Do both b and c.
6. If a dollar is cheaper in terms of a foreign currency than the equilibrium exchange rate, a ___________ exists at the current exchange rate that will put ___________ pressure on the exchange value of a dollar?
a. Surplus of dollars; downward.
b. Surplus of dollars; upward.
c. Shortage of dollars; downward.
d. Shortage of dollars; upward.
7. In foreign exchange markets, the supply of dollars is determined?
a. by the level of U.S. imports and the demand for foreign assets by U.S. citizens and the U.S. government.
b. Solely by the level of U.S. merchandise exports.
c. Solely by the level of U.S. merchandise imports.
d. Solely by the levels of U.S. merchandise exports and merchandise imports.
e. By the level of U.S. exports and the demand for U.S. assets by foreigners.
8. In foreign exchange markets, the effect of an increase in the demand for dollars on the value of the dollar is the same as that of?
a. An increase in the supply of foreign currencies.
b. A decrease in the supply of foreign currencies.
c. A decrease in the demand for dollars.
d. None of the above.
9. If the demand by foreigners for U.S. government securities increased, other things being equal, it would tend to?
a. Increase the exchange value of the dollar and increase U.S. merchandise exports.
b. Increase the exchange value of the dollar and decrease U.S. merchandise exports.
c. Decrease the exchange value of the dollar and increase U.S. merchandise exports.
d. Decrease the exchange value of the dollar and decrease U.S. merchandise exports.