Exchange-Rate Determination Mcqs

1.

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

A. 0.67 pesos = $1

B. 0.8 pesos = $1

C. 1.25 pesos = $1

D. 1.67 pesos = $1

Answer & Solution Discuss in Board

2.

Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

A. appreciation; trade surplus

B. appreciation; trade deficit

C. depreciation; trade surplus

D. depreciation; trade deficit

Answer & Solution Discuss in Board

3.

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

A. flow from the United States to foreign countries

B. flow from foreign countries to the United States

C. remain totally in foreign countries

D. remain totally in the United States

Answer & Solution Discuss in Board

4.

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

A. decrease in the money supply

B. increase in the money supply

C. decrease in the money demand

D. None of the above

Answer & Solution Discuss in Board

5.

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

A. faster economic growth than Japan

B. higher future interest rates than Japan

C. more rapid money supply growth than japan

D. higher inflation rates than japan

Answer & Solution Discuss in Board

6.

Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

A. increase in the demand for imports and an increase in the demand for foreign currency

B. increase in the demand for imports and a decrease in the demand for foreign currency

C. decrease in the demand for imports and an increase in the demand for foreign currency

D. decrease in the demand for imports and a decrease in the demand for foreign currency

Answer & Solution Discuss in Board

7.

For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

A. The United States to Japan causing the dollar to depreciate

B. The United States to Japan causing the dollar to appreciate

C. The Japan to United States, causing the dollar to depreciate

D. The Japan to United States, causing the dollar to appreciate

Answer & Solution Discuss in Board

8.

If Japan runs current account deficit and exchange rates are floating?

A. Japanese exports become more expensive to foreign buyers

B. Japanese exports become less expensive for foreign buyers

C. Japanese imports become less expensive for German buyers

D. Japanese imports become more prestigious to German buyers

Answer & Solution Discuss in Board

9.

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

A. the Canadian current account balance is in surplus

B. the Swiss current account balance is in deficit

C. the Canadian current account balance is in equilibrium

D. the Swiss current account balance is in equilibrium

Answer & Solution Discuss in Board

10.

When the price of foreign currency (the exchange rate) is above the equilibrium level ?

A. an excess supply of that currency exists in the foreign exchange market

B. an excess demand for that currency exists in the foreign exchange market

C. the supply of foreign exchange shifts outward to the right

D. the supply of foreign exchange shifts backward to the left

Answer & Solution Discuss in Board

Practice MCQ Questions and answers on Exchange-Rate Determination Mcqs

1. Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

Answer & Solution

2. Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

Answer & Solution

3. Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

Answer & Solution

4. Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

Answer & Solution

5. Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

Answer & Solution

6. Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

Answer & Solution

Answer & Solution

8. If Japan runs current account deficit and exchange rates are floating?

Answer & Solution

9. Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

Answer & Solution

10. When the price of foreign currency (the exchange rate) is above the equilibrium level ?

Answer & Solution

Read More Section(Economics Mcqs)

1.

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

2.

Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

3.

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

4.

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

5.

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

6.

Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

8.

If Japan runs current account deficit and exchange rates are floating?

9.

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

10.

When the price of foreign currency (the exchange rate) is above the equilibrium level ?