Chapter 16

What do the economies of Greece, Ireland and Germany all share?

A. they pegged their various currencies

B. they unpegged their various currencies

C. a common currency

D. floating rate currencies

C. a common currency

Which of the following denotes a common misunderstanding about exchange rates?

A. an appreciating currency must be better than a stronger currency

B. a depreciating currency must be better than an appreciating currency

C. a weaker currency must be better than a stronger currency

D. an appreciating currency must be better than a depreciating currency

D. an appreciating currency must be better than a depreciating currency

In 2010, 1 Swiss franc cost .56 British pounds and in 2012 it cost .51 British pounds. How much would 1 British pound purchase in Swiss francs in 2010 and 2012?

A. 2010: 1.79 francs, 2012: 1.96 francs

B. 2010: 1.78 francs, 2012: 1.98 francs

C. 2010: 1.71 francs, 2012: 2.00 francs

D. 2010: 1.73 francs, 2012: 1.97 francs

A. 2010: 1.79 francs, 2012: 1.96 francs

A stronger euro is less favorable for:

A. German tourists traveling abroad.

B. American tourists traveling in France.

C. Canadian firms selling in Germany.

D. Canadian investors with money investments in Germany.

B. American tourists traveling in France.

If a nation merges its currency with another nation to create a single currency, what must it give up?

A. the ability to purchase currency in foreign exchange markets

B. the ability to determine its own nationally-oriented monetary policy

C. the ability to fight recessions and control inflations

D. the ability to sell currency in foreign exchange markets

B. the ability to determine its own nationally-oriented monetary policy

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:

A. the dollar depreciated against the yen.

B. the dollar appreciated against the yen.

C. the yen depreciated against the dollar.

D. the yen weakened against the dollar.

A. the dollar depreciated against the yen.

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then:

A. the U.S. dollar appreciated against the Canadian dollar.

B. the Canadian dollar weakened against the U.S. dollar.

C. the U.S. dollar strengthened against the Canadian dollar.

D. the Canadian dollar appreciated against the U.S. dollar.

D. the Canadian dollar appreciated against the U.S. dollar.

If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and $0.87 U.S. dollars in 2010, then:

A. the dollar depreciated against the peso.

B. the peso appreciated against the dollar.

C. the dollar strengthened against the peso.

D. the peso strengthened against the dollar.

C. the dollar strengthened against the peso.

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:

A. a hard peg policy.

B. purchasing power parity.

C. depreciation.

D. a floating exchange rate.

D. a floating exchange rate

In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?

A. 2010: .12 U.S. dollars; 2012: .15 U.S. dollars

B. 2010: 1.2 U.S. dollars; 2012: 1.5 U.S. dollars

C. 2010: .82 U.S. dollars; 2012: .66 U.S. dollars

D. 2010: .15 U.S. dollars; 2012: .11 U.S. dollars

A. 2010: .12 U.S. dollars; 2012: .15 U.S. dollars

The _ is an example of a large-scale common currency.

A. euro

B. dollar

C. pound

D. franc

A. euro

When Mataeo buys Euros through _, he will use his U.S. dollars to pay for them.

A. the foreign exchange market

B. the currency exchange market

C. a floating exchange market

D. foreign currency market

A. the foreign exchange market

A depreciating U.S. dollar is __ because it is worth ___ in terms of other currencies.

A. strengthening; more

B. weakening; less

C. a problem for exporters; less

D. beneficial to importers; more

B. weakening; less

The most commonly traded currency in foreign exchange markets is the:

A. euro.

B. U.S. dollar.

C. Chinese yuan.

D. British pound.

B. U.S. dollar.

**__ equalizes the prices of internationally traded goods across countries.

A. The foreign exchange rate

B. A floating exchange rate

C. Purchasing power parity

D. An international parity rate

C. Purchasing power parity

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with **_<

A. distinctive trade-offs and risks

B. exchange rate policy

C. monetary policy

D. the tools of demand and supply

D. the tools of demand and supply

Foreign direct investment is the term used to describe purchases of firms in another country that involve **.

A. internationally traded goods across countries

B. using another currency

C. taking a management responsibility

D. the exchange rate market

C. taking a management responsibility

For firms engaged in international lending and borrowing, can have an enormous effect on profits.

A. swings in exchange rates

B. trade-offs and risks

C. foreign portfolio investment

D. foreign direct investment

A. swings in exchange rates

One of the following groups is not participating in the foreign exchange markets. Which one?

A. Boston business firms trading goods and services with firms in France

B. international investors buying bonds issued by a German car manufacturing firm

C. an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

D. international investors buying part-ownership of a mining operation in Afghanistan

C. an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012?

A. 2010: 1.78 dollars, 2012: 1.57 dollars

B. 2010: 1.79 dollars, 2012: 1.59 dollars

C. 2010: 1.87 dollars, 2012: 1.65 dollars

D. 2010: 1.97 dollars, 2012: 1.75 dollars

B. 2010: 1.79 dollars, 2012: 1.59 dollars

A stronger British pound is beneficial for:

A. U.S. exchange students studying in Britain with a U.S. scholarship.

B. British firms selling goods and services in Canada.

C. British investors who have invested money in Australia.

D. exchange students with a British scholarship studying in Canada.

D. exchange students with a British scholarship studying in Canada.

In 2010, 100 Japanese yen purchased .88 U.S. dollars and in 2013, it purchased .93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?

A. 2010: 88 yen, 2013: 93 yen

B. 2010: 100 yen, 2013: 114 yen

C. 2010: 113.6 yen, 2013: 107.5 yen

D. 2010: 112.4 yen, 2013: 105.3 yen

C. 2010: 113.6 yen, 2013: 107.5 yen

If the Canadian dollar is strengthening, then:

A. it has been unpegged from other currencies.

B. Canada has adopted a hard peg policy.

C. Canada has purchasing power parity.

D. it has appreciated in terms of other currencies.

D. it has appreciated in terms of other currencies.

Governments that attempt to intervene in exchange rate markets through soft pegs or hard pegs:

A. risk causing even greater fluctuations in foreign exchange markets.

B. will save an economy that consistently fails at achieving the main economic goals.

C. gain the power to use monetary policy to focus on domestic inflations.

D. gain the power to use monetary policy to focus on domestic recessions.

A. risk causing even greater fluctuations in foreign exchange markets.

The **_ is the largest market in the world economy.

A. international exchange market

B. foreign exchange market

C. foreign currency market

D. international currency market

B. foreign exchange market

People or firms use one currency to purchase another currency at the **_.

A. international currency exchange

B. foreign exchange market

C. foreign currency exchange

D. international parity market

B. foreign exchange market

In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2

D. 2009: .71 dollars, 2013: 1.11 dollar