WHSS Economics God Level: Exchange Rate

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

A. flow from the United States to foreign countries

B. flow from foreign countries to the United States

C. remain totally in foreign countries

D. remain totally in the United States

• A

• B

• C

• D

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

A. faster economic growth than Japan

B. higher future interest rates than Japan

C. more rapid money supply growth than japan

D. higher inflation rates than japan

• A

• B

• C

• D

If Japan runs current account deficit and exchange rates are floating?

A. Japanese exports become more expensive to foreign buyers

B. Japanese exports become less expensive for foreign buyers

C. Japanese imports become less expensive for German buyers

D. Japanese imports become more prestigious to German buyers

• A

• B

• C

• D

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

A. the Canadian current account balance is in surplus

B. the Swiss current account balance is in deficit

C. the Canadian current account balance is in equilibrium

D. the Swiss current account balance is in equilibrium

• A

• B

• C

• D

The high foreign exchange value of the U.S dollar in the early 1980s can best be explained by ?0

A. additional investment funds made available from overseas

B. lack of investor confidence in U.S fiscal policy

C. market expectations of rising inflation in the United States

D. American tourists overseas finding costs increasing

• A

• B

• C

• D

Relatively low real interest rates in the United States tend to ?

A. decrease the foreign demand for dollars causing the dollar to depreciate

B. decrease the foreign demand for dollars causing the dollar to appreciate

C. increase the foreign demand for dollars causing the dollar to depreciate

D. decrease the foreign demand for dollars causing the dollar to appreciate

• A

• B

• C

• D

If the exchange rate between Swiss francs and British pounds is 5 francs per pound, then the number of pounds that can be obtained for 200 francs equals ?

A. 20 pounds

B. 40 pounds

C. 60 pounds

D. 80 pounds

• A

• B

• C

• D

Which example of market expectations causes the dollar to depreciate against the yen – expectation that the U.S economy will have ?

A. faster growth than Japan

B. higher future interest rates than Japan

C. more rapid money supply growth than Japan

D. lower inflation rates than Japan

• A

• B

• C

• D

Given a system of floating exchange rates rising income in the United States would trigger a (an) ?

A. increasing in the demand for imports and an increasing in the demand for foreign currency

B. increase in the demand for imports and decrease in the demand for foreign currency

C. decrease in the demand for imports and an increase in the demand for foreign currency

D. decrease in the demand for imports and a decrease in the demand for foreign currency

• A

• B

• C

• D

The exchange value of the U.S dollar is primarily determined by ?

A. the rate of inflation in the United States

B. the number of dollars printed by the U.S government

C. the international demand and supply for dollars

D. the monetary value of gold held at Fort Knox, Kentucky

• A

• B

• C

• D