Stuıdy Questions
Chapter 18
1)
The ratio of a country's exports to its GDP
must:
(a) be less than one.
(b) be greater than one.
(c) equal the ratio of imports to GDP.
(d) be larger than the ratio of imports to GDP.
(e) none of the above
2)
Which of the following best defines the real
exchange rate?
(a) the price of domestic currency in terms of
foreign currency
(b) the price of foreign currency in terms of
domestic currency
(c) the price of foreign goods in terms of
domestic goods
(d) the price of foreign bonds in terms of
domestic bonds
(e) none of the above
3)
5)
7)
8)
When the U.S. has a current account surplus,
we know that it is also:
(a) running a balanced trade account.
(b) borrowing from the rest of the world.
(c) suffering from negative investment
income.
(d) lending to the rest of the world.
(e) none of the above
1
2
4
8
100
Suppose the U.S. one-year interest rate is 3%
per year, while a foreign country has a oneyear interest rate of 5% per year. Ignoring risk
and transaction costs, a U.S. investor should
invest in foreign bonds as long as the expected
yearly rate of depreciation of the foreign
currency is:
(a)
(b)
(c)
(d)
(e)
9)
$.93.
$.96.
$1.04.
$1.07.
$1.10.
If the price level in Turkey is 10.0, the price
level in the U.S. is 20.0, and it costs 2 YTL to
buy one dollar, then the real exchange rate
between the U.S. and Turkey is:
(a)
(b)
(c)
(d)
(e)
Suppose that over the past decade, Turkish
inflation is greater than that in Japan. Further
assume that during this same period, the TYL
appreciates relative to the Japanese yen. Given
this information:
(a) the real exchange rate must decrease.
(b) the real exchange rate remains unchanged.
(c) the real exchange rate can increase or
remain the same, but not decrease.
(d) the real exchange rate can decrease or
remain the same, but not increase.
(e) the real exchange rate must increase.
Assume that the interest rate in a foreign
country is 7% and that the foreign
currency is expected to depreciate by 3%
during the year. For each dollar that a U.S.
resident invests in foreign bonds, he/she
can expect to get back an approximate
total of:
(a)
(b)
(c)
(d)
(e)
When YTL appreciates, we know that:
(a) Turkish goods are less expensive to
foreigners.
(b) foreign goods are less expensive to
Turkish citizens.
(c) YTL is less expensive to foreigners.
(d) foreign goods are more expensive to
Turkish citizens.
(e) none of the above
4)
6)
less than 1%.
greater than 5%.
less than 2%.
greater than 2%.
less than 5%.
Which of the following expressions represents
the real exchange rate (ε)? (P* is the price level in
foreign country)
(a)
(b)
(c)
(d)
(e)
EP*/P
E
EP*
E/P
none of the above
Stuıdy Questions
Chapter 18
10)
An increase in the real exchange rate indicates
that:
14)
(a) domestic goods are now relatively
cheaper.
(b) foreign goods are now relatively cheaper.
(c) foreign goods are now relatively more
expensive.
(d) domestic currency is more expensive
relative to foreign currency.
(e) both A and C
11)
Which of the following events will cause the
smallest change in the real exchange rate (ε)?
(a) the domestic currency is expected to
depreciate by 3%.
(b) individuals will only hold foreign bonds.
(c) the domestic currency is expected to
appreciate by 3%.
(d) individuals will only hold domestic bonds.
15)
(a) a 6% drop in E and a 6% reduction in P*
(b) a 2% increase in E and a 4% increase in P
(c) a 6% increase in the domestic price level
(P) and a 6% reduction in P*
(d) a 6% drop in E and a 6% increase in
the foreign price level (P*)
(e) a 3% increase in E
12)
Which of the following events will cause the
largest real depreciation for the domestic
economy?
(a) a 6% reduction in E and a 6% reduction in
P*
(b) a 6% increase in the domestic price level
(P) and a 6% reduction in P*
(c) a 6% reduction in E and a 6% increase in
the foreign price level (P*)
(d) a 2% increase in E and a 2% increase in P
(e) a 3% increase in E
13)
Suppose you have one YTL with which you
wish to purchase U.S. (one-year) bonds in
period t. Which of the following expressions
represents the amount of YTL you will receive
in one year (i.e., period t+1) from purchasing
U.S. bonds in period t? (i* is the interest rate on US
bonds and i is the interest rate on Turkish bonds.)
(a)
(b)
(c)
(d)
(e)
i
(1 + i*)Et/Et+1
(1 + i*)Et+1/Et
1 + i*
none of the above
Suppose individuals are indifferent between
holding domestic or foreign bonds. Also
assume that the domestic interest rate is 10%
and that the foreign interest rate is 7%. Given
this information, we would expect that:
For this question, assume that the domestic
interest rate is 6% and that the foreign interest
rate 4%. And finally, assume that the domestic
currency is expected to appreciate by 3%
during the coming year. Given this
information, we know that:
(a) individuals will only hold foreign bonds.
(b) the interest parity condition holds.
(c) individuals will be indifferent about
holding domestic or foreign bonds.
(d) individuals will only hold domestic
bonds.
16)
Suppose the domestic interest rate is 6% and
that the foreign interest rate is 3%. And finally,
assume that the domestic currency is expected
to depreciate by 4% during the coming year.
Given this information, we know that:
(a) individuals will be indifferent about
holding domestic or foreign bonds.
(b) individuals will only hold foreign bonds.
(c) the interest parity condition holds.
(d) individuals will only hold domestic bonds.