Which of the following is a potential negative effect of a weak dollar?

• Cheaper imports

• Increased costs for international tourists in the U.S.

• Higher demand for U.S. exports

• Lower inflation rates

What is an exchange rate?

• The price of one country's goods in another country

• The value of one currency in terms of another currency

• The rate at which countries trade with each other

• The difference between domestic and international trade tariffs

A fixed exchange rate system means that:

• The value of a currency is determined by market forces

• The value of a currency is pegged to another currency or a basket of currencies

• The value of a currency is volatile and fluctuates freely

• The government does not intervene in foreign exchange markets

Which of the following is an example of a floating exchange rate system?

• The U.S. dollar against the euro

• The Saudi riyal pegged to the U.S. dollar

• The Chinese yuan pegged to a basket of currencies

• The gold standard used by some countries in the 20th century

If investors expect the U.S. dollar to appreciate in the future, what is likely to happen to demand for the dollar?

• Demand for the dollar will decrease

• Demand for the dollar will remain unchanged

• Demand for the dollar will increase

• Demand for the dollar will fluctuate randomly

If the Japanese yen depreciates against the U.S. dollar, which of the following is likely to happen?

• Japanese products become cheaper for U.S. consumers

• Japanese products become more expensive for U.S. consumers

• The Japanese government will reduce trade restrictions

• U.S. goods become cheaper for Japanese consumers

A fixed exchange rate means that a country’s currency value is determined by market forces of supply and demand. True or False

If a country’s currency depreciates against others, it can stimulate exports as the goods become cheaper for foreign buyers. True or False

Which of the following factors can lead to currency depreciation?

• Political instability

• Increased foreign investment

• High interest rates

• Strong economic growth

What effect does a strong currency typically have on a country's exports?

• Exports become cheaper for foreign buyers

• Exports remain unaffected

• Exports become more expensive for foreign buyers

• Exports increase due to higher demand