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01-11-2018

Product code ECON-Final-Exam-Quizlet19

1Q-A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is a dollar equals 0.7 euros. What is the current nominal exchange rate of the euro?

2Q-True or False? When the dollar depreciates against the yen, the U.S. financial account deficit decreases.

3Q-Suppose the British pound depreciates against the dollar and at the same time the United States suffers higher inflation than Britain. Then the ________ exchange rate between the British pound and the U.S dollar will ________.

4Q-A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is 1 dollar equals 0.4 euros. In order for there to be purchasing power parity, the dollar must:

5Q-Suppose that the exchange rate between the dollar and the pound is 1 dollar equals 0.61 pounds. If the price index in the United States is 100, and the price index in Britain is 110, the real exchange rate is ________ pounds per dollar.

6Q-If the dollar appreciates, U.S. exports _______, and U.S. imports _______.

7Q-When a currency becomes more valuable in terms of other currencies, it:

8Q-Suppose that the exchange rate between the U.S. dollar and the euro is such that 1 U.S. dollar is exchanged for 1.5 euros. Now assume that the rate changes to 1 U.S. dollar for 1.8 euros. The exchange rate for euros in terms of dollars has changed from 1 euro for _______ dollars to 1 euro for ______ dollars.

9Q-True or False? A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is a dollar equals 0.7 euros. Purchasing power parity for the euro is 0.6.

10Q-True or False? When the dollar depreciates against the yen, the U.S. current account deficit increases.

11Q-True or False? A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is a dollar equals 0.7 euros. Purchasing power parity for the dollar is 1.43 euros.

12Q-A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is a dollar equals 0.7 euros. In order for there to be purchasing power parity, the EURO must:

13Q-True or False? When the dollar depreciates against the yen, the U.S. financial account deficit increases.

True. If the dollar depreciates, exports increase and imports decrease, so the current account deficit will decrease or become a surplus. Since the financial account must balance the current account, the financial

14Q-A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is 1 dollar equals 0.7 euros. In order for there to be purchasing power parity, the DOLLAR must

15Q-When the dollar depreciates against the yen, then

16Q-If European investors increase their demand for dollars because European investors want to increase their investment in U.S. assets, then

17Q-If American consumers increase their demand for Japanese cars, the yen will _____, and the dollar will _______.

18Q-If American consumers increase their demand for Japanese cars, the demand for yen will _______, and the supply of dollars will ________.

19Q-True or False? When the dollar appreciates against the yen, the U.S. current account deficit increases.

20Q-True or False? If the exchange rate is that 1 British pound is worth \$1.6463, a hotel room in London that costs 100 pounds costs 164.63 in U.S. dollars.

21Q-A(n) ____________ is a rule governing policy toward the exchange rate.

22Q-A country has a(n) ________ exchange rate when the government lets the market determine the exchange rate.

23Q-True or False? To fix the exchange rate of its currency, a government uses exchange market intervention.

24Q-Suppose Thailand wants to fix its currency's exchange rate with the dollar and there is a surplus of that currency (bhat). The Thai central bank should ___________ bhats and __________ dollars.

25Q-Fixing an exchange rate:

26Q-True or False? An advantage of a fixed exchange rate regime is that monetary policy can be used to achieve the country's macroeconomic goals.

27Q-True or False? Fixing an exchange rate increases the independence of the country.

28Q-An advantage of a floating exchange rate is

29Q-A country has a(n) ____________ exchange rate regime when the government keeps the exchange rate against some other currency at or near a particular target.

30Q-True or False? Currency reserves are stocks of foreign currency that governments maintain to buy their own currency on the foreign exchange market.

31Q-True or False? Foreign exchange controls limit the right of individuals to buy foreign currency.

32Q-Under a fixed rate regime, if the equilibrium exchange rate for the Hong Kong dollar is below the target rate, to support the HK dollar, the government of Hong Kong could:

33Q-Suppose Thailand wants to fix its currency's exchange rate with the dollar and there is a shortage of that currency (bhat). The Thai central bank should ___________ bhats and __________ dollars.

34Q-A country that INCREASES its interest rate to maintain a target exchange rate is likely to have a target exchange rate ____the equilibrium exchange rate.

35Q-A country that DECREASES its interest rate to maintain a target exchange rate is likely to have a target exchange rate ____the equilibrium exchange rate.

36Q-True or False? Under a fixed rate regime, if the equilibrium exchange rate for the Canadian dollar is above the target rate, to support the Canadian dollar, the government of Canada could decrease interest rates in Canada.

37Q-True or False? A country that decreases its interest rate to maintain a target exchange rate is likely to have a target exchange rate above the equilibrium exchange rate.

38Q-If a country is decreasing its interest rate, the target rate is BLANK equilibrium.

39Q-If a country is increasing its interest rate, the target rate is BLANK equilibrium

40Q-True or False? Under a fixed rate regime, if the equilibrium exchange rate for the Hong Kong dollar is below the target rate, to support the HK dollar, the government of Hong Kong could buy HK dollars.

41Q-True or False? A disadvantage of a fixed exchange rate regime is that foreign exchange controls distort incentives and create substantial costs.

42Q-True or False? A country that buys its own currency to maintain a target exchange rate is likely to have a target exchange rate above the equilibrium exchange rate.

43Q-Under a fixed rate regime, Venezuela's currency, the bolivar, is at equilibrium below the target rate. To increase the value of the bolivar, Venezuela should

44Q-Under a fixed rate regime, Venezuela's currency, the bolivar, is at equilibrium above the target rate. To reduce the value of the bolivar, Venezuela should

45Q-True or False? A country that sells its own currency to maintain a target exchange rate is likely to have a target exchange rate above the equilibrium exchange rate.

46Q-True or False? A country that increases its interest rate to maintain a target exchange rate is likely to have a target exchange rate above the equilibrium exchange rate.

47Q-True or False? Under a fixed rate regime, if the equilibrium exchange rate for the Hong Kong dollar is above the target rate, to support the HK dollar, the government of Hong Kong could sell HK dollars.

48Q-True or False? In 1991, Argentina committed to a fixed exchange rate system to prevent inflation.

49Q-When the government changes taxes or government spending to influence aggregate demand, it is using ______ policy.

50Q-The aggregate demand curve is derived from the income-expenditure model in the following way. As the price level rises, real wealth declines. This shifts the aggregate expenditure line ____________ and ___________ the equilibrium level of real GDP demanded.

51Q-An economy initially has 200 units of physical capital per worker. Each year it increases the amount of physical capital by 10 percent. According to the aggregate production function for this economy, each 1 percent increase in physical capital per worker, holding human capital and technology constant, increases output per worker by one-fourth of 1 percent, or 0.25 percent. According to the Scenario: Capital, if there is no inflation in this economy and output per worker is initially \$1000, what does the estimated output per worker equal after one year?

52Q-Government spending on education contributes directly to:

53Q-The East Asian countries have exhibited tremendous economic growth during the last 40 years because of all EXCEPT: (a significant increase in physical capital per worker made possible by very high rate of saving, a significant increase in human capital made possible by very good basic education, a substantial achievement in technological progress, or intervening governments with lots of regulations.)

54Q-Albania has a real GDP per capita of \$25,000, while England has a real GDP per capita of \$50,000. If real GDP per capita in Albania grows at a 7 percent rate and England's real GDP per capita grows at a 3.5 percent rate, how long will it take for real GDP per capita in the two nations to converge?

55Q-The convergence hypothesis says that international differences in real GDP per capita tend to become greater over time.

56Q-When a country's currency depreciates, the prices of its exports in terms of foreign currency will _______.

57Q-If the British pound appreciates against the dollar, then:

58Q-Suppose that the country of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at \$0.50, but the current equilibrium exchange rate for the gizmo is \$0.40. If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to \$0.75, it should ________ interest rates by _______ the money supply.

59Q-A floating exchange rate:

60Q-Classical economists believed all EXCEPT that: (there could be temporary periods of unemployment, emphasis should be placed on the long run, and in the long run all would be set right because of the smooth functioning of the price system, the Great Depression would be a short-run aberration, or monetary policy could tame the business cycle)

61Q-_______ was a _______ economist who believed that _______ in wages and prices could block adjustments to full employment.

1Q-A BMW costs \$50,000 in the United States and 30,000 euros in Germany. The current nominal exchange rate is a dollar equals 0.7 euros. What is the current nominal exchange rate of the euro? 1A-\$1.43. The exchange rate for the euro is 1/0.7 = \$1.43 for 1 euro.

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