Mod 6.4: Policies, Economic Conditions, and the Foreign Exchange

The United States has which of the following exchange rate regimes?

• fixed

• floating

• fixed, but adjusted frequently

• fixed, but managed

• floating within a target zone

An increase in the supply of a currency with a floating exchange rate will cause which of the following?

• an increase in the demand for the currency

• appreciation of the currency

• depreciation of the currency

• the government to buy more of the currency

• the government to buy less of the currency

Monetary policy that increases the interest rate will do which of the following? (CHOOSE 2)

• appreciate the domestic currency

• depreciate the domestic currency

• decrease imports

• increase exports

• prevent inflation

Select the correct analogy:

• appreciation : gratitude :: depreciation : thanksgiving

• inflation : exports :: disinflation : imports

• devaluation : depreciation :: revaluation : appreciation

• depreciation : current account :: appreciation : capital and financial account

• exports : tariffs :: imports : quotas

Unlike a quota, a tariff can:

• protect domestic employment opportunities

• raise prices for domestic consumers

• raise prices for foreign consumers

• provide a source of revenue for governments

• protect natural resources

Which of the following would be the likely result of a protective tariff on imported bananas?

• Net exports would decrease

• Domestic production of bananas would increase

• The banana market would be more efficient

• Consumers would pay lower prices for domestic bananas

• More bananas would be sold