Chapters 41/42 Currency (Need a Calculator)

Chapters 41/42 Currency (Need a Calculator)

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Multiple Choice

What is an exchange rate?

• The rate at which goods are exchanged between two countries

• The price of one nation's currency in terms of another's

• How many US dollars you can exchange for RMB at Travelex

• The price of goods in terms of a foreign currency

Multiple Choice

What is a decrease in the value of a currency?

• appreciation

• depreciation

• exchange rate

• inflation

Multiple Choice

How is an exchange rate determined?

• The forces of supply and demand

• Government/the Federal Reserve Bank

• Whatever sellers of goods are willing to take

• Investors decide the value of the currency they wish to invest

Multiple Choice

What is the difference between a fixed rate exchange system (devaluation/revaluation) and a floating rate system (depreciation/appreciation)?

• Currency never appreciates vs can appreciate

• Doesn't exist vs does exist

• Never changing vs always changing

• Government sets rate vs market sets rate

Multiple Choice

When the exchange rate for the Mexican peso changes from 10 pesos to the dollar to 9 pesos to the dollar, then

• the peso has appreciated and the dollar has appreciated.

• the peso has depreciated and the dollar has appreciated.

• the peso has appreciated and the dollar has depreciated.

• the peso has depreciated and the dollar has depreciated.

Multiple Choice

You are a UK business that exports to the US market. If the £1 goes from being equal to $1.25 to $1.50, what will happen to your exports to the US?

• Exports to US will become cheaper and increase

• Exports to US will become more expensive and decrease

• Exports to US will stay the same

• Exports to US will become cheaper and decrease

• None of the answers

Multiple Choice

If the exchange rate is £1 = $1.25, what is $2250 equivalent to in £ pounds?

• £2813

• £2250

• £1800

• None of the answers

Multiple Choice

If the Mexican Peso depreciates in relation to the Chinese Yuan, how is Mexico affected?

• Mexico has less purchasing power in Chinese currency

• Mexico benefits from increased purchasing power

• Mexico would have more Chinese investors

• They would be invaded by China

Multiple Choice

Why do changing exchange rates help one country and hurt the other?

• One side loses purchasing power and the other gains it

• Takes money away from one side and gives it to the other

• Causes war between the two countries

• One country's government introduces tariffs to protect local industries

Multiple Choice

Whats the relationship between the value of a country's exports and the value of its imports?

• Trade Surplus

• Depreciation

• Trade Deficit

• Appreciation

• Balance of Payments

Multiple Choice

When the US$ exchange rate falls it will usually

• help to reduce a US trade deficit.

• increase the foreign price of US exports.

• reduce the price of US imports.

• reduce US inflation

Multiple Choice

In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43 Singapore dollars = 1 US dollar.

How would this affect the import and export for Singapore?

• decrease/decrease

• decrease/increase

• increase/decrease

• increase/increase

Multiple Choice

If the US $ were to appreciate in relation to the Euro, what effect would this have?

• European consumers would have more purchasing power in US

• US consumers can buy more English goods and services for fewer $$

• US consumers can buy more European goods and services for fewer $$

• European tourists to the US will spend less $$

Multiple Choice

If the dollar appreciates relative to the British pound,

• British dishes will become cheaper to American tourists

• American wheat will become cheaper in Great Britain.

• British dishes will become more expensive to American tourists

• no change will occur.

Multiple Choice

If US businesses demand more Chinese currency, which way will the demand curve shift?

• Right

• Left

• Stay the same

• None of the answers

Multiple Choice

Change £500 into Australian Dollars.

If necessary, round your answer to 2 decimal places...

• 880

• 287.01

• 640

• 390.63

Multiple Choice

Change £500 into Swiss Francs.

If necessary, round your answer to 2 decimal places...

• 610

• 409.84

• 815

• 306.75

Multiple Choice

Why do changing exchange rates help one country and hurt the other?

• One side loses purchasing power and the other gains it

• Takes money away from one side and gives it to the other

• Causes war between the two countries

• One country's government introduces tariffs to protect local industries

Multiple Choice

If the US $ were to appreciate in relation to the Euro, what effect would this have?

• European consumers would have more purchasing power in US

• US consumers can buy more European goods and services for fewer $$

• US consumers can buy more English goods and services for fewer $$

• European tourists to the US will spend more $$

Multiple Choice

How does inflation rate affect currency value/exchange rate?

• Higher inflation leads to depreciating currency & vice versa

• Increasing inflation leads to more favourable exchange rates

• Higher inflation leads to currency appreciation

• Lower inflation leads to more favourable exchange rate

Multiple Choice

The currency exchange rate of the South African rand for the Botswana pula fell by 5.7% between August 2014 and August 2015. What would be the immediate effect of this?

• Botswana’s level of protection would fall.

• Botswana’s tourists travelling to South Africa would find it less expensive

• South Africa’s imports would be cheaper.

• South Africa’s tourists travelling to Botswana would receive more pula per rand