quiz_45.pdf - 14 $2inSanFrancisco.Ifthereal...

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14) Suppose that a slice of pepperoni pizza costs £1 in London and $2 in San Francisco. If the real exchange rate is one - third of a slice of U.S. pizza for one slice of British pizza, how many pounds should you receive in exchange for $1? A) 1/3 B) 1.5 C) 3 D) 2 14) Answer: B Diff: 3 Page Ref: 229 Topic: exchange rate Objective: Explain the difference between nominal and real exchange rates AACSB: Analytic Skills 15) The relation between the nominal and real exchange rates is given by which of the following equations? A) EX = ( EX r × P )/ P f B) EX r = ( EX × P f )/ P C) EX = ( EX r × P f )/ P D) EX r = ( EX × P )/ P f 15) Answer: D Diff: 2 Page Ref: 229 Topic: exchange rate Objective: Explain the difference between nominal and real exchange rates AACSB: Reflective Thinking 16) When a country ʹ s real exchange rate appreciates, A) it can trade its goods for more units of foreign goods. B) its nominal exchange rate must have depreciated. C) it can trade its goods for fewer units of foreign goods. D) its nominal exchange rate must also have appreciated. 16) Answer: A Diff: 2 Page Ref: 229 Topic: trade Objective: Explain the difference between nominal and real exchange rates AACSB: Reflective Thinking 17) When a country ʹ s real exchange rate depreciates, A) it can trade its goods for fewer units of foreign goods. B) it can trade its goods for more units of foreign goods. C) its nominal exchange rate must have appreciated. D) its nominal exchange rate must also have depreciated. 17) Answer: A Diff: 2 Page Ref: 229 Topic: trade Objective: Explain the difference between nominal and real exchange rates AACSB: Reflective Thinking 18) A depreciating nominal exchange rate results from A) a depreciating real exchange rate. B) a large government budget deficit. C) an appreciating real exchange rate. D) a low domestic inflation rate relative to the foreign inflation rate.
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