Chapter 06: Government Influence on Exchange Rates
1. To force the value of the pound to appreciate against the dollar, the Federal Reserve should:
a. sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell
dollars for pounds in the foreign exchange market.
b. sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should sell
dollars for pounds in the foreign exchange market.
c. sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should not
intervene.
d. sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell
pounds for dollars in the foreign exchange market.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 7:58 AM
DATE MODIFIED:
9/29/2016 7:59 AM
2. A weak dollar is normally expected to cause:
a. high unemployment and high inflation in the U.S.
b. high unemployment and low inflation in the U.S.
c. low unemployment and low inflation in the U.S.
d. low unemployment and high inflation in the U.S.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 7:59 AM
DATE MODIFIED:
9/29/2016 8:01 AM
3. A strong dollar is normally expected to cause:
a. high unemployment and high inflation in the U.S.
b. high unemployment and low inflation in the U.S.
c. low unemployment and low inflation in the U.S.
d. low unemployment and high inflation in the U.S.
ANSWER:
b
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 1
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Easy
Multiple Choice
False
INFM.MADU.15.06.04
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/29/2016 8:01 AM
9/29/2016 8:03 AM
4. To force the value of the British pound to depreciate against the dollar, the Federal Reserve should:
a. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds
in the foreign exchange market.
b. sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds
in the foreign exchange market.
c. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars
in the foreign exchange market.
d. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars
in the foreign exchange market.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:03 AM
DATE MODIFIED:
9/29/2016 8:05 AM
5. Consider two countries that trade with each other, called X and Y. According to the text, inflation in Country X will
have a greater impact on inflation in Country Y under the ____ system. Now, consider two other countries that trade with
each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under
the ____ system.
a. floating rate; fixed rate
b. floating rate; floating rate
c. fixed rate; fixed rate
d. fixed rate; floating rate
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
Copyright Cengage Learning. Powered by Cognero.
Page 2
Chapter 06: Government Influence on Exchange Rates
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/29/2016 8:05 AM
9/29/2016 8:07 AM
6. A primary result of the Bretton Woods Agreement was:
a. the establishment of the European Monetary System (EMS).
b. establishing specific rules for when tariffs and quotas could be imposed by governments.
c. establishing that exchange rates of most major currencies were to be allowed to fluctuate 1% above or below
their initially set values.
d. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without
boundaries (although the central banks did have the right to intervene when necessary).
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/29/2016 8:07 AM
DATE MODIFIED:
9/29/2016 8:08 AM
7. A primary result of the Smithsonian Agreement was:
a. the establishment of the European Monetary System (EMS).
b. establishing that exchange rates of most major countries were to be allowed to fluctuate 2.25% above or below
their initially set values.
c. establishing specific rules for when tariffs and quotas could be imposed by governments.
d. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without
boundaries (although the central banks did have the right to intervene when necessary).
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/29/2016 8:08 AM
DATE MODIFIED:
9/29/2016 8:10 AM
8. Under a fixed exchange rate system:
Copyright Cengage Learning. Powered by Cognero.
Page 3
Chapter 06: Government Influence on Exchange Rates
a. a foreign exchange market does not exist.
b. central bank intervention in the foreign exchange market is not necessary.
c. central bank intervention in the foreign exchange market is often necessary.
d. central bank intervention in the foreign exchange market is not allowed.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/29/2016 8:14 AM
DATE MODIFIED:
9/29/2016 8:16 AM
9. Under a managed float exchange rate system, the Fed may attempt to stimulate the U.S. economy by ____ the dollar.
Such an adjustment in the dollar's value should ____ the U.S. demand for products produced by major foreign countries.
a. weakening; increase
b. weakening; decrease
c. strengthening; increase
d. strengthening; decrease
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:16 AM
DATE MODIFIED:
9/29/2016 8:18 AM
10. The value of the Canadian dollar, Japanese yen, and Australian dollar with respect to the U.S. dollar are part of a:
a. pegged system.
b. fixed system.
c. managed float system.
d. crawling peg system.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 4
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/29/2016 8:19 AM
9/29/2016 8:20 AM
11. The interest rate of a country with a currency board:
a. is less stable than it would be without a currency board.
b. is typically below the interest rate of the currency to which it is tied.
c. will move in tandem with the interest rate of the currency to which it is tied.
d. is completely independent of the interest rate of the currency to which it is tied.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:21 AM
DATE MODIFIED:
9/29/2016 8:23 AM
12. The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates
against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from
Country Z.
a. more; more
b. less; less
c. more; less
d. less; more
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:23 AM
DATE MODIFIED:
9/29/2016 8:25 AM
13. Assume Countries A, B, and C produce goods that are substitutes of each other and that these countries engage in
trade with each other. Assume that Country A's currency floats against Country B's currency, and that Country C's
Copyright Cengage Learning. Powered by Cognero.
Page 5
Chapter 06: Government Influence on Exchange Rates
currency is pegged to B's. If A's currency depreciates against B, then A's exports to C should ____, and A's imports from
C should ____.
a. decrease; increase
b. decrease; decrease
c. increase; decrease
d. increase; increase
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:33 AM
DATE MODIFIED:
9/29/2016 8:34 AM
14. Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market, but does
not adjust for the resulting change in the money supply. This is an example of:
a. pegged intervention
b. indirect intervention
c. nonsterilized intervention
d. sterilized intervention
e. pegged intervention AND sterilized intervention
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/29/2016 8:34 AM
DATE MODIFIED:
5/19/2018 4:22 AM
15. If the Fed desires to weaken the dollar without affecting the dollar money supply, it should:
a. exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars.
b. exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars.
c. exchange dollars for foreign currencies, and buy existing Treasury securities with dollars.
d. exchange foreign currencies for dollars, and buy existing Treasury securities with dollars.
ANSWER:
a
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 6
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Moderate
Multiple Choice
False
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/29/2016 8:38 AM
9/29/2016 8:39 AM
16. Which of the following is an example of direct intervention in foreign exchange markets?
a. lowering interest rates
b. increasing the inflation rate
c. exchanging dollars for foreign currency
d. imposing barriers on international trade
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/29/2016 8:39 AM
DATE MODIFIED:
5/19/2018 4:23 AM
17. A strong dollar places ____ pressure on inflation, which in turn places ____ pressure on the dollar.
a. upward; upward
b. downward; upward
c. upward; downward
d. downward; downward
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:21 AM
DATE MODIFIED:
9/30/2016 12:23 AM
Copyright Cengage Learning. Powered by Cognero.
Page 7
Chapter 06: Government Influence on Exchange Rates
18. The Fed may use a stimulative monetary policy with least concern about causing inflation if the dollar's value is
expected to:
a. remain stable
b. strengthen
c. weaken
d. None of these will have an impact on inflation.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:23 AM
DATE MODIFIED:
5/19/2018 4:23 AM
19. A weaker dollar places ____ pressure on U.S. inflation, which in turn places ____ pressure on U.S. interest rates,
which places ____ pressure on U.S. bond prices.
a. upward; downward; upward
b. upward; downward; downward
c. upward; upward; downward
d. downward; upward; upward
e. downward; downward; upward
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:25 AM
DATE MODIFIED:
9/30/2016 12:27 AM
20. The euro is the currency:
a. adopted in all western European countries as of 1999.
b. adopted in all eastern European countries as of 1999.
c. adopted in all European countries as of 1999.
d. None of these are correct.
ANSWER:
d
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 8
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Easy
Multiple Choice
False
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 12:27 AM
5/19/2018 4:24 AM
21. The euro has not been adopted by:
a. Slovenia.
b. the U.K.
c. Germany.
d. France.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:29 AM
DATE MODIFIED:
9/30/2016 12:31 AM
22. The exchange rate mechanism (ERM) refers to the method of linking ____ currencies to each other within boundaries.
a. Latin American
b. European
c. Asian
d. North American
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:32 AM
DATE MODIFIED:
9/30/2016 12:34 AM
Copyright Cengage Learning. Powered by Cognero.
Page 9
Chapter 06: Government Influence on Exchange Rates
23. Countries that have adopted the euro must agree on a single ____ policy.
a. monetary
b. fiscal
c. worker compensation
d. foreign relations
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:34 AM
DATE MODIFIED:
9/30/2016 12:36 AM
24. Countries that have adopted the euro tend to have very similar ____.
a. interest rates
b. inflation rates
c. income tax rates
d. budget deficits
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:36 AM
DATE MODIFIED:
9/30/2016 12:38 AM
25. The risk-free interest rates among countries that have adopted the euro should:
a. not necessarily be similar to risk-free rates in other countries.
b. equal the U.S. risk-free rate.
c. equal the risk-free rates in other European countries.
d. equal the risk-free rates in Asian countries.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 10
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 12:38 AM
9/30/2016 12:40 AM
26. Which of the following is true regarding the euro?
a. Exchange rate risk between participating European currencies is completely eliminated, encouraging more
trade and capital flows across European borders.
b. It allows for more consistent economic conditions across countries.
c. It prevents each country from conducting its own monetary policy.
d. All of these are true.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:41 AM
DATE MODIFIED:
5/19/2018 4:24 AM
27. It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to
reduce unemployment. Which of the following is an appropriate action given this scenario?
a. weaken the dollar
b. strengthen the dollar
c. buy dollars with foreign currency in the foreign exchange market
d. implement a tight monetary policy
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:45 AM
DATE MODIFIED:
5/19/2018 4:25 AM
28. It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to
reduce inflation. Which of the following is an appropriate action given this scenario?
Copyright Cengage Learning. Powered by Cognero.
Page 11
Chapter 06: Government Influence on Exchange Rates
a. sell dollars for foreign currency
b. buy dollars with foreign currency
c. lower interest rates
d. None of these are correct.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:52 AM
DATE MODIFIED:
5/19/2018 4:27 AM
29. To strengthen the dollar using sterilized intervention, the Fed would ____ dollars and simultaneously ____ Treasury
securities.
a. buy; sell
b. sell; buy
c. buy; buy
d. sell; sell
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 12:54 AM
DATE MODIFIED:
9/30/2016 12:55 AM
30. As foreign exchange activity has grown, a given degree of central bank intervention has become:
a. more effective
b. more frequent
c. less effective
d. None of these are correct.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 12
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 12:56 AM
5/19/2018 4:28 AM
31. When using indirect intervention, a central bank is likely to focus on:
a. inflation.
b. interest rates.
c. income levels.
d. expectations of future exchange rates.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 12:59 AM
DATE MODIFIED:
9/30/2016 1:01 AM
32. Which of the following countries was probably the least affected (directly or indirectly) by the Asian crisis?
a. Thailand
b. Indonesia
c. Russia
d. China
e. Malaysia
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:01 AM
DATE MODIFIED:
5/19/2018 4:29 AM
33. Which of the following is NOT true regarding Thailand?
a. Thailand was one of the slowest growing countries before the Asian crisis.
Copyright Cengage Learning. Powered by Cognero.
Page 13
Chapter 06: Government Influence on Exchange Rates
b. High levels of spending and low levels of saving placed upward pressure on prices of real estate, products, and
on Thailand's local interest rate.
c. Thailand's baht was linked to the dollar prior to July 1997, which made Thailand an attractive site for foreign
investors.
d. Thai banks provided many loans that were very risky in their attempt to make use of all of their funds.
e. All of these are true.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:04 AM
DATE MODIFIED:
5/19/2018 4:30 AM
34. China's yuan is presently:
a. allowed to fluctuate freely without any central bank intervention.
b. allowed to fluctuate but with central bank intervention.
c. pegged to the dollar.
d. pegged to the euro.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:07 AM
DATE MODIFIED:
9/30/2016 1:09 AM
35. During the period 1944-1971, the U.S. used a ____ system.
a. euro exchange rate
b. fixed
c. dirty float
d. flexible
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
Copyright Cengage Learning. Powered by Cognero.
Page 14
Chapter 06: Government Influence on Exchange Rates
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
False
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 1:12 AM
9/30/2016 1:14 AM
36. Which of the following are examples of currency controls?
a. import restrictions
b. prohibition of remittance of funds
c. ceilings on granting credit to foreign firms
d. All of these are correct.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:17 AM
DATE MODIFIED:
5/19/2018 4:30 AM
37. From a financial management perspective, which of the following is true regarding the introduction of the Euro?
a. U.S.-based MNCs are not subject to exchange rate risk when they have transactions in euros.
b. The euro is pegged to all other European currencies.
c. Transactions costs decline for MNCs that conduct transactions within Europe.
d. The euro replaced the British pound.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:20 AM
DATE MODIFIED:
9/30/2016 1:22 AM
38. Which of the following countries have NOT adopted the euro?
a. Germany
Copyright Cengage Learning. Powered by Cognero.
Page 15
Chapter 06: Government Influence on Exchange Rates
b. Italy
c. Switzerland
d. France
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
c
1
Easy
Multiple Choice
False
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 1:30 AM
5/19/2018 4:31 AM
39. Which of the following are true about the Southeast Asian currency crisis?
a. It was preceded by several years of large capital inflows to Asia.
b. It was preceded by a five-year recession in Asia.
c. Asian interest rates declined during the crisis.
d. Asian exchange rates were pegged to the Japanese yen to resolve the crisis.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:33 AM
DATE MODIFIED:
9/30/2016 1:35 AM
40. Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it
would under a freely floating exchange rate system.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
Copyright Cengage Learning. Powered by Cognero.
Page 16
Chapter 06: Government Influence on Exchange Rates
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Bloom's: Comprehension
9/30/2016 1:35 AM
9/30/2016 1:37 AM
41. An advantage of a fixed exchange rate system is that governments are not required to constantly intervene in the
foreign exchange market to maintain exchange rates within specified boundaries.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 1:37 AM
DATE MODIFIED:
9/30/2016 1:39 AM
42. Under the system known as the "dirty" float, official boundaries for the exchange rate exist, but they are wider than
they are under a fixed exchange rate system.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:39 AM
DATE MODIFIED:
9/30/2016 1:41 AM
43. Under a pegged exchange rate system, the home currency's value is pegged to a foreign currency.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 17
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 1:43 AM
9/30/2016 1:44 AM
44. A major advantage of the euro is the complete elimination of exchange rate risk on transactions between participating
European countries, which encourages more trade and capital flows within Europe.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:45 AM
DATE MODIFIED:
9/30/2016 1:47 AM
45. The European countries conforming to the euro are completely insulated from movements in the euro's value with
respect to other currencies.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:47 AM
DATE MODIFIED:
9/30/2016 1:49 AM
46. The establishment of the euro allows for more consistent economic conditions across countries but eliminates the
power of any individual European country to solve local economic problems with its own unique monetary policy.
a. True
b. False
ANSWER:
a
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 18
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Easy
Multiple Choice
False
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 1:49 AM
9/30/2016 1:51 AM
47. The Asian crisis is generally believed to have started in Japan.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:51 AM
DATE MODIFIED:
9/30/2016 1:53 AM
48. A possible reason why China was less affected by the Asian crisis is that its government exerts more influence on
financial flows than the governments of other Asian countries.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:54 AM
DATE MODIFIED:
9/30/2016 1:56 AM
49. Currency devaluation can boost a country's exports, but currency revaluation can increase foreign competition.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero.
Page 19
Chapter 06: Government Influence on Exchange Rates
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
Easy
Multiple Choice
False
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 1:56 AM
9/30/2016 1:58 AM
50. Market forces are the determinant of exchange rates in a freely floating exchange rate system.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 1:58 AM
DATE MODIFIED:
9/30/2016 2:00 AM
51. If a government wishes to stimulate its economy in the form of increased foreign demand for its country's products, it
could attempt to weaken its currency.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 2:01 AM
DATE MODIFIED:
9/30/2016 2:02 AM
52. In a sterilized exchange rate arrangement, a country's home currency value is pegged to a foreign currency or to some
Copyright Cengage Learning. Powered by Cognero.
Page 20
Chapter 06: Government Influence on Exchange Rates
unit of account.
a. True
b. False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
Easy
Multiple Choice
False
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.03
Bloom's: Knowledge
9/30/2016 2:03 AM
9/30/2016 2:04 AM
53. The Bank of England is responsible for setting the monetary policy for the European countries participating in the
euro.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:05 AM
DATE MODIFIED:
9/30/2016 2:07 AM
54. The Fed's indirect method of intervention is to trade dollars for or against other currencies.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:07 AM
Copyright Cengage Learning. Powered by Cognero.
Page 21
Chapter 06: Government Influence on Exchange Rates
DATE MODIFIED:
9/30/2016 2:10 AM
55. China is commonly criticized for keeping the yuan's value at superficially high levels.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:21 AM
DATE MODIFIED:
9/30/2016 2:31 AM
56. The Bretton Woods Agreement created a system under which exchange rates are determined by market forces without
intervention by various governments.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:31 AM
DATE MODIFIED:
9/30/2016 2:32 AM
57. Nonsterilized intervention is intervention by a central bank in the foreign exchange market without adjusting for the
change in money supply.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
Copyright Cengage Learning. Powered by Cognero.
Page 22
Chapter 06: Government Influence on Exchange Rates
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 2:34 AM
9/30/2016 2:36 AM
58. The euro is pegged to other currencies of European countries that have not adopted the euro.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:37 AM
DATE MODIFIED:
9/30/2016 2:38 AM
59. The Smithsonian Agreement was an agreement to allow currencies of major countries to float without any barriers.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:39 AM
DATE MODIFIED:
9/30/2016 2:40 AM
60. An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to
increase the value of the yen vs. the dollar.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 23
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Application
9/30/2016 2:40 AM
9/30/2016 2:42 AM
61. A strong home currency can harm exports; exporters typically benefit from a weaker home country currency.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:43 AM
DATE MODIFIED:
9/30/2016 2:44 AM
62. An advantage of freely floating exchange rates is that a country with floating exchange rates is more insulated from
unemployment problems in other countries.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:45 AM
DATE MODIFIED:
9/30/2016 2:46 AM
63. All European countries now use the euro as their currency.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
Copyright Cengage Learning. Powered by Cognero.
Page 24
Chapter 06: Government Influence on Exchange Rates
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Multiple Choice
False
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 2:47 AM
9/30/2016 2:49 AM
64. A country with a currency board does not have control over its local interest rates.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:49 AM
DATE MODIFIED:
9/30/2016 2:56 AM
65. Dollarization refers to the replacement of local currency with U.S. dollars.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 2:57 AM
DATE MODIFIED:
9/30/2016 2:59 AM
66. A country with fixed exchange rates often faces constraints on growth.
a. True
b. False
ANSWER:
a
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 25
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Easy
Multiple Choice
False
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 2:59 AM
9/30/2016 3:01 AM
67. The Bretton Woods Agreement called for the establishment of a single European currency.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 3:02 AM
DATE MODIFIED:
9/30/2016 3:03 AM
68. The European Central Bank is responsible for monetary policy in all countries that adopted the euro as its currency.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 3:04 AM
DATE MODIFIED:
9/30/2016 3:05 AM
69. A currency peg is insulated from economic or political conditions, such that the exchange rate in the market will only
change if the country's government breaks the peg and sets a new exchange rate.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero.
Page 26
Chapter 06: Government Influence on Exchange Rates
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
Easy
Multiple Choice
False
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 3:06 AM
9/30/2016 3:08 AM
70. If foreign investors fear that a peg may be broken because of fund outflows from that country, they may attempt to
purchase more of that currency before the peg is broken.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 3:08 AM
DATE MODIFIED:
9/30/2016 3:11 AM
71. Normally, when a pegged exchange rate is broken because of a crisis in that country, there is downward pressure on
the local currency of that country.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 3:11 AM
DATE MODIFIED:
9/30/2016 3:13 AM
Copyright Cengage Learning. Powered by Cognero.
Page 27
Chapter 06: Government Influence on Exchange Rates
72. Which one of the following is a disadvantage of a fixed exchange rate system:
a. Importers are insulated from the risk that the currency will appreciate over time.
b. Management of an MNC is less difficult.
c. The government might change the value of the currency.
d. Exporters are insulated from the risk that the currency will depreciate over time.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 3:14 AM
DATE MODIFIED:
9/30/2016 3:16 AM
73. The Smithsonian Agreement called for a devaluation of the U.S. dollar by about ____ percent.
a. 2.25
b. 6
c. 10
d. 8
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 3:16 AM
DATE MODIFIED:
9/30/2016 3:18 AM
74. Which of the following did NOT occur as a result of Bretton Woods Agreement?
a. Each currency was valued in terms of gold.
b. Values of all currencies were fixed with respect to each other.
c. Currencies were allowed to fluctuate no more than 1% above or below the initially set rates.
d. The United States experienced no balance-of-trade deficits.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 28
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 3:18 AM
5/19/2018 4:33 AM
75. Assume that Japan and the United States frequently trade with each other. Under the freely floating exchange rate
system, high inflation in the U.S. will place ____ pressure on Japanese yen, ____ the amount of Japanese yen available for
sale, and result in ____ inflation in Japan.
a. upward; reduce; unchanged
b. upward; increase; higher
c. downward; reduce; unchanged
d. downward; increase; higher
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Application
DATE CREATED:
9/30/2016 3:21 AM
DATE MODIFIED:
9/30/2016 3:23 AM
76. Which one is NOT a disadvantage of a freely floating exchange rate system?
a. It can adversely affect a country that has high unemployment.
b. It can adversely affect a country that has high inflation.
c. The government may intervene to change the value of a given currency.
d. The exchange rate risk is high and may be costly to manage.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:30 AM
DATE MODIFIED:
5/19/2018 4:34 AM
77. A "dirty" float represents a system of:
Copyright Cengage Learning. Powered by Cognero.
Page 29
Chapter 06: Government Influence on Exchange Rates
a. freely floating exchange rates.
b. fixed exchange rates.
c. floating exchange rates, but the central bank can manipulate the currency.
d. fixed exchange rates, but the central bank can manipulate the currency.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:32 AM
DATE MODIFIED:
9/30/2016 4:35 AM
78. If a U.S. firm plans to frequently purchases goods from Hong Kong over the next several years, it does not have to
worry about exchange rate risk.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.App.
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:35 AM
DATE MODIFIED:
9/30/2016 4:37 AM
79. If the French government wants to decrease inflation in France, it will exchange foreign currency for euros.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
Copyright Cengage Learning. Powered by Cognero.
Page 30
Chapter 06: Government Influence on Exchange Rates
DATE CREATED:
DATE MODIFIED:
9/30/2016 4:37 AM
9/30/2016 4:39 AM
80. The European Central Bank is located in:
a. London.
b. Denmark.
c. Luxembourg.
d. Frankfurt.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:39 AM
DATE MODIFIED:
9/30/2016 4:41 AM
81. Which of the following is NOT true regarding the eurozone?
a. Members cannot set unique monetary policy individually.
b. Members cannot apply their own fiscal policies.
c. Members have to agree on the ideal monetary policy.
d. Its creation allowed for greater political union among its members.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:42 AM
DATE MODIFIED:
5/19/2018 4:34 AM
82. Assuming no credit risk, the interest rates among countries in the eurozone should be similar.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
Copyright Cengage Learning. Powered by Cognero.
Page 31
Chapter 06: Government Influence on Exchange Rates
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
False
INFM.MADU.15.06.02
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 4:47 AM
9/30/2016 4:49 AM
83. Which of the following is NOT a reason for devaluation of a currency?
a. high inflation
b. to reduce balance-of-trade deficit
c. to decrease the amount of imports
d. high unemployment
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 4:49 AM
DATE MODIFIED:
5/19/2018 4:35 AM
84. Which of the following is the most likely reason for revaluation of a currency?
a. to reduce inflation
b. to stimulate the local economy
c. to increase the amount of exports
d. to increase balance-of-trade surplus
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 5:02 AM
DATE MODIFIED:
5/19/2018 4:36 AM
85. To weaken the dollar using sterilized intervention, the Fed will ____ U.S. dollars and simultaneously ____ Treasury
securities.
Copyright Cengage Learning. Powered by Cognero.
Page 32
Chapter 06: Government Influence on Exchange Rates
a. buy; sell
b. sell; sell
c. sell; buy
d. buy; sell
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
b
1
Moderate
Multiple Choice
False
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 5:04 AM
9/30/2016 5:06 AM
86. The monetary policy implemented by the European Central Bank always results in favorable effects on all countries in
the eurozone.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 5:06 AM
DATE MODIFIED:
9/30/2016 5:08 AM
87. If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should:
a. exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars.
b. exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars.
c. exchange dollars for foreign currencies, and buy existing Treasury securities with dollars.
d. exchange foreign currencies for dollars, and buy existing Treasury securities with dollars.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
Copyright Cengage Learning. Powered by Cognero.
Page 33
Chapter 06: Government Influence on Exchange Rates
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 5:08 AM
9/30/2016 5:10 AM
88. Assume that the Fed intervenes by exchanging dollars for euros in the foreign exchange market. This will cause an
____ U.S. dollars and an ____ euros.
a. inward shift in demand for; outward shift in supply of
b. inward shift in demand for; inward shift in supply of
c. outward shift in supply of; outward shift in demand for
d. outward shift in supply of; inward shift in demand for
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:15 AM
DATE MODIFIED:
9/30/2016 5:16 AM
89. If the Fed ____ the interest rates when inflationary expectations remain unchanged, the most likely result is that the
value of dollar will ____ and the economy may ____.
a. increases; appreciate; weaken
b. decreases; appreciate; weaken
c. increases; depreciate; strengthen
d. decreases; appreciate; strengthen
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:17 AM
DATE MODIFIED:
9/30/2016 5:18 AM
90. A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency.
a. True
b. False
Copyright Cengage Learning. Powered by Cognero.
Page 34
Chapter 06: Government Influence on Exchange Rates
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
Moderate
Multiple Choice
False
INFM.MADU.15.06.04
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 5:19 AM
9/30/2016 5:20 AM
91. A common way to reduce inflation is to weaken the value of the domestic currency.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:22 AM
DATE MODIFIED:
9/30/2016 5:23 AM
92. If a speculator expects that the Fed will intervene by exchanging dollars for Japanese yen, she would most likely ____
to capitalize on this intervention.
a. purchase yen put options
b. sell yen futures contracts
c. purchase yen call options
d. buy U.S. Treasury bonds
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Application
DATE CREATED:
9/30/2016 5:25 AM
DATE MODIFIED:
9/30/2016 5:26 AM
Copyright Cengage Learning. Powered by Cognero.
Page 35
Chapter 06: Government Influence on Exchange Rates
93. If a speculator expects that the Fed will intervene by exchanging euros for U.S. dollars, she would most likely ____ to
capitalize on this intervention.
a. purchase euro put options
b. purchase euro futures contracts
c. purchase yen call options
d. sell U.S. Treasury bonds
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Application
DATE CREATED:
9/30/2016 5:27 AM
DATE MODIFIED:
9/30/2016 5:31 AM
94. If the Fed decides to weaken the dollar utilizing unsterilized intervention, it should be aware that this action may
backfire because it will increase money supply and thus increase inflation.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:32 AM
DATE MODIFIED:
9/30/2016 5:34 AM
95. A strong dollar places ____ pressure on U.S. inflation, which in turn places ____ pressure on U.S. interest rates, which
in turn place ____ pressure on U.S. bond prices.
a. downward; upward; upward
b. downward; downward; upward
c. upward; upward; downward
d. upward; downward; upward
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
Copyright Cengage Learning. Powered by Cognero.
Page 36
Chapter 06: Government Influence on Exchange Rates
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
False
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 5:35 AM
9/30/2016 5:36 AM
96. The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency appreciates
against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from
Country Z.
a. more; more
b. more; less
c. less; less
d. less; more
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Application
DATE CREATED:
9/30/2016 5:37 AM
DATE MODIFIED:
9/30/2016 5:39 AM
97. If the Bank of England announces that it will start to frequently intervene in order to reduce the fluctuations of British
pound, the premiums on call and put options will increase.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:39 AM
DATE MODIFIED:
9/30/2016 5:41 AM
98. Under the ____________ from 1979-1992 (before the euro existed), the currencies of many European countries were
currencies of most of these member countries were allowed to fluctuate by no more than 2.25 percent (6 percent
Copyright Cengage Learning. Powered by Cognero.
Page 37
Chapter 06: Government Influence on Exchange Rates
for some currencies) from the initially established values.
a. European Monetary System (EMS)
b. snake agreement
c. Maastricht Treaty
d. Bretton Woods agreement
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 5:41 AM
DATE MODIFIED:
5/19/2018 4:36 AM
99. Direct intervention is usually more effective than indirect intervention.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:44 AM
DATE MODIFIED:
9/30/2016 5:45 AM
100. Currency devaluations have the potential to reduce unemployment, while currency revaluations have the potential to
reduce inflation.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
Copyright Cengage Learning. Powered by Cognero.
Page 38
Chapter 06: Government Influence on Exchange Rates
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Bloom's: Comprehension
9/30/2016 5:46 AM
9/30/2016 5:48 AM
101. Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it
would under a freely floating exchange rate system.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:49 AM
DATE MODIFIED:
9/30/2016 5:51 AM
102. An advantage of a fixed exchange rate system is that governments are not required to constantly intervene in the
foreign exchange market to maintain exchange rates within specified boundaries.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:52 AM
DATE MODIFIED:
9/30/2016 5:54 AM
103. In a freely floating exchange rate system, high U.S. inflation rate may be magnified. This is because the depreciation
of the dollar would result in more expensive foreign imports, thus reducing foreign competition.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 39
Chapter 06: Government Influence on Exchange Rates
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
INFM.MADU.15.06.01
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 5:54 AM
9/30/2016 5:56 AM
104. Under the system known as the "dirty" float, official boundaries for the exchange rate exist, but they are wider than
they are under a fixed exchange rate system.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:56 AM
DATE MODIFIED:
9/30/2016 5:59 AM
105. In order to stimulate a stagnant economy, a government operating under a managed float may attempt to weaken its
currency.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 5:59 AM
DATE MODIFIED:
9/30/2016 6:01 AM
106. Assume the Fed desires to strengthen the dollar. If it buys dollars and simultaneously buys Treasury securities, this is
an example of sterilized intervention.
a. True
b. False
ANSWER:
a
POINTS:
1
Copyright Cengage Learning. Powered by Cognero.
Page 40
Chapter 06: Government Influence on Exchange Rates
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
Moderate
Multiple Choice
False
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 6:02 AM
9/30/2016 6:03 AM
107. Using indirect intervention, the Fed attempts to affect the dollar's value indirectly by influencing the factors that
determine it, such as interest rates.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 6:04 AM
DATE MODIFIED:
9/30/2016 6:06 AM
108. While a weak currency can reduce unemployment at home, it can also lead to higher inflation, as local companies are
better able to raise prices.
a. True
b. False
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.04
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 6:07 AM
DATE MODIFIED:
9/30/2016 6:09 AM
109. While a strong currency is a possible cure for high inflation, it may cause higher unemployment due to the attractive
foreign prices that result from a strong home currency.
a. True
Copyright Cengage Learning. Powered by Cognero.
Page 41
Chapter 06: Government Influence on Exchange Rates
b. False
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
Moderate
Multiple Choice
False
INFM.MADU.15.06.04
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 6:10 AM
9/30/2016 6:12 AM
110. Countries usually do not have difficulty maintaining a pegged exchange rate, even when they are experiencing major
political or economic problems.
a. True
b. False
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 6:12 AM
DATE MODIFIED:
9/30/2016 6:14 AM
111. Which of the following is NOT true regarding the Mexican peso crisis?
a. Mexico encouraged firms and consumers to buy an excessive amount of imports because the peso was
stronger than it should have been.
b. Many speculators based in the U.S. speculated on the potential decline in the peso by investing their funds in
Mexico.
c. In December of 1994, the central bank of Mexico allowed the peso to float freely.
d. The central bank of Mexico increased interest rates after the peso declined in value in order to prevent
investors from withdrawing their investments in Mexico's debt securities.
e. . All of these are true.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.01
Copyright Cengage Learning. Powered by Cognero.
Page 42
Chapter 06: Government Influence on Exchange Rates
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Knowledge
9/30/2016 6:14 AM
5/19/2018 4:37 AM
112. Which of the following is true regarding the euro?
a. Exchange rate risk between participating European currencies is completely eliminated, encouraging more
trade and capital flows across European borders.
b. It allows for more consistent economic conditions across countries.
c. It prevents each country from conducting its own monetary policy.
d. All of these are true.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.02
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 6:17 AM
DATE MODIFIED:
5/19/2018 4:38 AM
113. Among the reasons for government intervention are:
a. to smooth exchange rate movement.
b. to establish implicit exchange rate boundaries.
c. to respond to temporary disturbances.
d. All of these are correct.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 6:21 AM
DATE MODIFIED:
5/19/2018 4:38 AM
114. Which of the following is NOT true regarding government intervention?
a. Under the direct method of intervention, an appreciation of the dollar would be accomplished by exchanging
dollars for foreign currencies.
Copyright Cengage Learning. Powered by Cognero.
Page 43
Chapter 06: Government Influence on Exchange Rates
b. Under nonsterilized intervention, the Fed would intervene in the foreign exchange market without adjusting
the money supply.
c. Under sterilized intervention, the Fed would intervene simultaneously in the foreign exchange and Treasury
markets.
d. Under indirect intervention, the Fed would attempt to affect the dollar's value by indirectly influencing the
factors that determine it, such as interest rates.
e. All of these are true.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Knowledge
DATE CREATED:
9/30/2016 6:24 AM
DATE MODIFIED:
5/19/2018 4:39 AM
115. Assume that the dollar has been consistently depreciating over a long period. The Fed decides to counteract this
movement by intervening in the foreign exchange market using sterilized intervention. The Fed would:
a. buy dollars with foreign currency and simultaneously sell Treasury securities for dollars.
b. buy dollars with foreign currency and simultaneously buy Treasury securities with dollars.
c. sell dollars for foreign currency and simultaneously sell Treasury securities for dollars.
d. sell dollars for foreign currency and simultaneously buy Treasury securities with dollars.
e. None of these are correct.
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES: INFM.MADU.15.06.03
NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03
STATE STANDARDS:
United States - OH - DISC.INFM.MADU.15.02
KEYWORDS:
Bloom's: Comprehension
DATE CREATED:
9/30/2016 6:28 AM
DATE MODIFIED:
5/19/2018 4:40 AM
116. Assume that the dollar has been consistently appreciating over a long period. The Fed decides to counteract this
movement by intervening in the foreign exchange market using nonsterilized intervention. The Fed would:
a. buy dollars with foreign currency and simultaneously sell Treasury securities for dollars.
b. buy dollars with foreign currency and simultaneously buy Treasury securities with dollars.
c. sell dollars for foreign currency and simultaneously sell Treasury securities for dollars.
d. sell dollars for foreign currency and simultaneously buy Treasury securities with dollars.
e. None of these are correct.
Copyright Cengage Learning. Powered by Cognero.
Page 44
Chapter 06: Government Influence on Exchange Rates
ANSWER:
POINTS:
DIFFICULTY:
QUESTION TYPE:
HAS VARIABLES:
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
STATE STANDARDS:
KEYWORDS:
DATE CREATED:
DATE MODIFIED:
a
1
Moderate
Multiple Choice
False
INFM.MADU.15.06.03
United States - BUSPROG.INFM.MADU.15.03
United States - OH - DISC.INFM.MADU.15.02
Bloom's: Comprehension
9/30/2016 6:31 AM
5/19/2018 4:42 AM
Copyright Cengage Learning. Powered by Cognero.
Page 45