Pracrice Questions - Exam 2

Pracrice Questions - Exam 2 - Practice Questions Exam 2...

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Practice Questions – Exam 2 1.Suppose that real incomes increase more rapidly in the United States than in Mexico. In the United States, this situation would likely result in a (an): a. Increase in the demand for pesos b. Decrease in the demand for pesos c. Increase in the supply of pesos d. Decrease in the supply of pesos ANS: A 2. If Canadian speculators believed the Swiss franc was going to appreciate against the U.S. dollar, they would: a. Purchase Canadian dollars b. Purchase U.S. dollars c. Purchase Swiss francs d. Sell Swiss francs ANS: C 3. Grain shortages in countries that buy large amounts of grain from the United States would increase the demand for American grain and: a. Reduce the demand for dollars b. Increase the demand for dollars c. Reduce the supply of dollars d. Increase the supply of dollars ANS: B 4. Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs? a. Price inflation in France b. An increase in U.S. real income c. A decrease in the Swiss money supply d. Falling interest rates in Switzerland ANS: D 5. An increase in the dollar price of other currencies tends to cause: a. U.S. goods to be cheaper than foreign goods b. U.S. goods to be more expensive than foreign goods c. Foreign goods to be more expensive to residents of foreign nations d. Foreign goods to be cheaper to residents of the United States ANS: A 6. Suppose the exchange value of the British pound is $2 per pound while the exchange value of the Swiss franc is 50 cents per pound. The cross exchange rate between the pound and the franc is: a. 1 franc per pound b. 2 francs per pound c. 3 francs per pound d. 4 francs per pound ANS: D
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Fig 1 7. Refer to Figure 1, A shift in the demand for francs from D 0 to D 1 or a shift in the supply of francs from S 0 to S 2, would result in a (an): a. Depreciation in the dollar against the franc b. Appreciation in the dollar against the franc c. Unchanged dollar/franc exchange rate d. None of the above ANS: A 8. Refer to Figure 1. A shift in the demand for francs from D 0 to D 2 , or a shift in the supply of francs from S 0 to S 1 , would result in a (an): a. Depreciation in the dollar against the franc b. Appreciation in the dollar against the franc c. No change in the dollar/franc exchange rate d. None of the above ANS: B 9. If the exchange rate between Swiss francs and British pounds is 5 francs per pound, then the number of pounds that can be obtained for 200 francs equals: a. 20 pounds b. 40 pounds c. 60 pounds d. 80 pounds ANS: B
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10. Assume that the United States faces an 8 percent inflation rate while no (zero) inflation exists in Japan. According to the purchasing-power parity theory, the dollar would be expected to: a. Appreciate by 8 percent against the yen b. Depreciate by 8 percent against the yen
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Pracrice Questions - Exam 2 - Practice Questions Exam 2...

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