SSEIN3 Exchange Rates Test Review

The price of one nation's currency in terms of another nation's currency is called

• Exchange rate

• Fiscal policy

• Monetary policy

• Discount rate

$1 = 10.34 pesos. Shelby traveled to Mexico to a resort and took $100 in currency. When she exchanged into pesos, she received:

• 1034 pesos

• 900 pesos

• 103 pesos

• 10.3 pesos

When the dollar "falls" compared to other countries, which group benefits the most?

• Those who export products overseas.

• Those who import products overseas.

• Those who have large cash savings on hand.

• Those who speculate and trade in currencies.

An exchange rate is used to

• determine the price of one country's currency in terms of another country's currency.

• promote the argument supporting free trade.

• promote the use of subsidies on foreign goods.

• determine the price of one country's imports in terms of another country's imports.

1 U.S. Dollar = 0.50 Euro. 1 Mexican Peso = 0.10 U.S. Dollar. In this situation, you can conlcude that 1 Euro would be traded for

• 20 Mexican pesos

• 10 Mexican pesos

• 5 Mexican pesos

• 1 Mexican peso

Travis takes two trips to Ecuador. On his first trip, he finds that one U.S. dollar is worth 25,000 Ecuadorian Sucre. On his return trip, he finds that the dollar is now worth 26,000 Ecuadorian Sucre. What is a LIKELY result of this change in exchange rates?

• American imports to Ecuador increase.

• American exports to Ecuador increase.

• There is not enough information to answer.

• Ecuadorians invest more in infrastructure.

If the demand for British pounds increases,

• The dollar price of the British pound will increase.

• The dollar price of the British pound will decrease.

• The trade balance between the two nations will be out of equilibrium.

• The exchange rate between dollars and pounds will be out of equilibrium.

An increase in Mexico's demand for United States' goods would cause the value of the dollar to

• Depreciate because the United States would be buying more Mexican pesos.

• Appreciate because Mexico would be selling more United States dollars.

• Appreciate because the price level in the United States would increase.

• Appreciate because Mexico would be purchasing more United States dollars.

When the dollar "rises" compared to other currencies, this means

• it takes fewer dollars to equal a unit of foreign currency.

• it takes more dollar to equal a unit of foreign currency.

• the value of a unit of foreign currency is harder to measure in dollars.

• the value of a dollar is harder to measure, compared to foreign currencies.

Mexico is experiencing high inflation while Canada is enjoying a steady GDP and stable inflation. What should happen in the foreign exchange market?

• a depreciation of Mexico's currency.

• a decrease in the supply of Mexico's currency.

• a decrease in the demand for Canada's currency.

• An increase in the supply for Canada's currency.