35-1. The exchange rate is the price of:
One good in terms of another.
An import purchased at the local electronics store.
→ One currency in terms of another.
An export purchased in a foreign nation.
35-2. When a Japanese businesswoman traveling in the
United States asks "How many U.S. dollars can I get for
these yen?" she wants to know the:
Gold standard rate.
→ Exchange rate.
Terms of trade.
Currency trade rate.
35-3. Which of the following generates a demand for
dollars in the foreign-exchange market?
Transfers of money by foreign workers in the
United States to relatives abroad
U.S. military installations abroad
Foreign aid given by the United States
→ Travel by foreign visitors in the United States
35-4. The demand for U.S. dollars in the foreign
exchange market is determined by all of the following
except:
Foreign demand for American exports.
Foreign demand for American investments.
Europeans who would rather hold U.S. dollars than
Euros.
→ American demand for American products.
35-5. When foreigners buy U.S. dollars because it is a
more stable currency than the currency in their
country, they are generating a:
Demand for U.S. dollars and a demand for a foreign
currency.
Supply of U.S. dollars and a supply of a foreign
currency.
→ Demand for U.S. dollars and a supply of a foreign
currency.
Supply of U.S. dollars and a demand for a foreign
currency.
35-6. The supply of U.S. dollars originates from:
Demand by foreigners for U.S. produced goods.
Demand for U.S. dollars for speculative purposes.
Foreign investments in America.
→ American demand for imported goods.
35-7. When foreigners come to the United States as
tourists, they are generating a:
Demand for U.S. dollars and a demand for a foreign
currency.
Supply of U.S. dollars and a supply of a foreign
currency.
Supply of U.S. dollars and a demand for a foreign
currency.
→ Demand for U.S. dollars and a supply of a foreign
currency.
35-8. When Americans buy Mercedes-Benz
automobiles made in Germany, they are generating a:
Supply of U.S. dollars and a supply of a foreign
currency.
→ Supply of U.S. dollars and a demand for a foreign
currency.
Demand for U.S. dollars and a supply of a foreign
currency.
Demand for U.S. dollars and a demand for a foreign
currency.
35-9. When the exchange rate between the U.S. dollar
and the Japanese yen is $1 = 100 yen, this is an
indication that:
→ It would take 100 yen to purchase $1.
The yen is stronger than the U.S. dollar.
The dollar is depreciating compared to the yen.
American companies are investing heavily in Japan.
35-10. A change in the exchange rate for a country's
currency alters the prices of:
Exports only.
X Imports only.
→ Both exports and imports.
Only domestic goods and services.
35-2. The price of one currency in terms of another is
the exchange rate; for example $2 = £1 indicates that a
British pound costs two dollars.
35-1. The price of one currency in terms of another is
the exchange rate; for example $2 = £1 indicates that a
British pound costs two dollars.
35-4. U.S. demand for U.S. products does not cause any
change in the demand for any currencies since U.S.
consumers are able to buy locally made products with
the dollar.
35-3. When people from France or any other country
visit America they purchase dollars for use at their
destinations.
35-6. Whenever U.S. consumers purchase goods or
services from abroad or foreign assets, they create a
demand for the foreign currency and a supply of
dollars.
35-5. Foreigners buy U.S. dollars in order to protect
one's wealth against currency devaluation, among
other things; the foreigner must supply their currency
to the market and demand dollars in exchange.
35-8. A vehicle that is produced in Germany must be
paid for in Euros, so American buyers are supplying
dollars for Euros in order to complete such a purchase.
35-7. A European tourist in Florida must use dollars to
make purchases, so it is necessary to convert their
Euros into dollars, creating a supply of Euros and a
demand for dollars.
35-10. Exports and import prices will be altered when
the exchange rate changes because the exchange rate
impacts the amount of currency needed to buy the
goods and services, thereby changing the prices paid
by foreigners and the incomes received by exporters.
35-9. The price of one currency in terms of another is
the exchange rate; for example $1 = ¥100 indicates
that a yen costs one dollar.
35-11. If one euro is equal to 0. 60 U.S. dollars, what
would be the Euro price of a car that costs $10,000?
5,000 Euros
→ 16,667 Euros
60,000 Euros
10,000 Euros
35-13. Exports minus imports define a country's:
Current-account balance.
Capital-account balance.
Balance of payments.
→ Trade balance.
35-12. If the exchange rate between the U.S. dollar and
Japanese yen changes from $1 = 100 yen to $1 = 90
yen, then:
All Japanese producers and consumers will lose.
U.S. auto producers and autoworkers will lose.
U.S. consumers of Japanese TV sets will benefit.
→ Japanese tourists to the U.S. will benefit.
35-14. The current account balance is equal to:
Trade balance + services balance - capital-account
balance.
Trade balance + services balance + capital-account
balance.
→ Trade balance + unilateral transfers.
Total payments made by residents of the United
States to foreigners plus total payments made by
foreigners to residents of the United States.
35-15. The capital account includes:
Trade in goods.
Trade in services.
Unilateral transfers.
→ Foreign purchases of U.S. assets.
35-16. Which of the following does not involve exports
and imports?
Net exports
Current account
Balance of trade
→ Capital account
35-17. The depreciation of a country's currency causes
the price of imports to:
Rise and the prices of exports to rise.
→ Rise and the prices of exports to fall.
Fall and the prices of exports to rise.
Fall and the prices of exports to fall.
35-18. Suppose that today 1 British pound exchanges
for $1.60. If next week 1 pound exchanges for $1.70, it
is clear that:
The pound has depreciated relative to the dollar.
The dollar has appreciated relative to the pound.
Both currencies have appreciated.
→ The dollar has depreciated relative to the pound.
35-19. A good time for an American to hold German
stocks, ceteris paribus, is when the:
Euro is stable compared to the U.S. dollar.
→ U.S. dollar depreciates in value compared to the
euro.
X U.S. dollar appreciates in value compared to the
euro.
The return in the German stock market has no
relationship to the value of the dollar compared to the
euro.
35-20. Which of the following might cause a
depreciation of the U.S. dollar versus the Japanese yen?
→ A recession in Japan
X A recession in the United States
More Japanese visitors to Hawaii
A greater demand for U.S. coal by Japan
35-12. When the yen appreciates relative to the dollar,
Japanese travelers and consumers will benefit since
their purchasing power will rise.
35-11. The Euro price of the car is $10,000 × (€1 ÷
$.60) or €16,667.
35-14. The current account takes the trade balance and
adds to it the unilateral transfers, such as wages sent
home to families abroad from U.S. workers.
35-13. The trade balance is the difference in the value
of exports and imports; a positive value reflects a trade
surplus, a negative balance reflects a trade deficit, and
a value of zero means trade is balanced.
35-16. The capital-account balance takes into
consideration assets bought and sold across
international borders; that is, capital-account balance
is equal to foreign purchases of U.S. assets minus U.S.
purchases of foreign assets.
35-15. The capital-account balance takes into
consideration assets bought and sold across
international borders; that is, capital-account balance
is equal to foreign purchases of U.S. assets minus U.S.
purchases of foreign assets.
35-18. The dollar has depreciated relative to the pound
because with the new exchange rate, it takes more
dollars to get the same amount of British pounds.
35-17. When the dollar depreciates, it will take more
units of the dollar to buy a given amount of imports,
effectively raising their prices. Additionally, U.S.
exports become cheaper to foreign buyers since they
will not have to use as many units of their currencies to
purchase the dollar.
35-20. A recession in Japan will lead Japanese
consumers to buy less of everything, including U.S.
exports, leading to a drop in demand for the dollar and
a depreciation of the dollar, holding everything else
constant.
35-19. Everything else constant it is a good time for an
American to hold German stocks when the dollar is
depreciated relative to the Euro because the American
investor will have its wealth in an appreciated
currency, the Euro.
35-21. American citizens planning a vacation abroad
would welcome:
→ Appreciation of the dollar.
Depreciation of the dollar.
Devaluation of the dollar.
Appreciation of the foreign currency.
35-22. Refer to Figure 35.3 for the dollar-Swiss franc
foreign-exchange market. Which of the following is
true?
The U.S. dollar appreciates in value compared to
the franc when supply increases from S1 to S2.
The Swiss franc appreciates in value compared to
the U.S. dollar when supply decreases from S2 to S1.
→ An increase in supply from S1 to S2 could be
caused by an increase in the U.S. demand for Swiss
chocolate.
An increase in supply from S1 to S2 could be
caused by an increase in Swiss demand for U.S. corn.
35-23. Refer to Figure 35.4 for the dollar-yen foreignexchange market. A decrease in demand from D1 to D2
could have been caused by:
→ A decrease in the demand for U.S. computers.
An increase in the number of Japanese visitors to
the U.S.
A quota placed on Japanese television imports to
the U.S.
A poor performance by the Japanese stock market
compared to the U.S. stock market.
35-24. As a result of an increase in demand from D2 to
D1 in Figure 35.4, ceteris paribus, the price of a
$40,000 U.S. computer system, in terms of Japanese
yen would:
Decrease in price by 200,000 million yen.
Increase in price by 200,000 million yen.
X Decrease in price by 800,000 yen.
→ Increase in price by 800,000 yen.
35-21. An appreciation of the dollar allows U.S. tourists
abroad to stretch their vacation dollars further,
allowing them to purchase more goods and visit more
tourist sites.
35-22. If U.S. demand for Swiss chocolate increases, the
supply of dollars to the market increases in order to
get the Swiss francs needed to purchase the Swiss
made chocolate.
35-23. A drop in demand for U.S. exports will cause a
drop in the demand for the U.S. dollar as well.
35-24. The increase in demand for the U.S. dollar
causes the dollar to appreciate from ¥100 to ¥120,
making all U.S. products 20 percent more expensive;
the computer system will cost ¥800,000.