Chapter 18 International Trade and Finance

| November 9, 2018

10)
If the Japanese government enters the foreign exchange market and sells yen to
maintain a specific exchange rate with the dollar, the dollar will ________ and
the yen will ________.
A)
depreciate; depreciate
B)
depreciate; appreciate
C)
appreciate; depreciate
D)
appreciate; appreciate

11)
A currency system in which governments try to keep constant the values of their
currencies against another is called a ________ exchange rate system.
A)
fixed
B)
stable
C)
consistent
D)
flexible

12)
A balance of payments deficit occurs if
A)
exports exceed imports.
B)
the supply of a nation’s currency exceeds the demand for the currency at the
current exchange rate.
C)
the demand for a nation’s currency exceeds the supply of the currency at the
current exchange rate.
D)
the supply of a nation’s currency is equal to the demand for the currency at
the current exchange rate.

13)
A balance of payments surplus occurs if
A)
exports exceed imports.
B)
the supply of a nation’s currency exceeds the demand for the currency at the
current exchange rate.
C)
the demand for a nation’s currency exceeds the supply of the currency at the
current exchange rate.
D)
the supply of a nation’s currency is equal to the demand for the currency at
the current exchange rate.

14)
Suppose the United States is experiencing a balance of payments deficit. To
prevent the exchange rate from depreciating, the U.S. Treasury must
A)
sell foreign currency and buy dollars.
B)
sell dollars and buy foreign currency.
C)
sell both dollars and foreign currency.
D)
buy both dollars and foreign currency.

15)
Suppose the United States is experiencing a balance of payments surplus. To
prevent the exchange rate from appreciating, the U.S. Treasury must
A)
sell foreign currency and buy dollars.
B)
sell dollars and buy foreign currency.
C)
sell both dollars and foreign currency.
D)
buy both dollars and foreign currency.

16)
In a fixed exchange rate system, a decrease in the exchange rate at which a
currency is pegged is called a(n)
A)
appreciation.
B)
devaluation.
C)
revaluation.
D)
depreciation.

17)
In a fixed exchange rate system, an increase in the exchange rate at which a
currency is pegged is called a(n)
A)
appreciation.
B)
devaluation.
C)
revaluation.
D)
depreciation.

18)
A country undertakes a devaluation in order to
A)
increase its net exports.
B)
decrease its net exports.
C)
raise the value at which its currency is pegged.
D)
move to a flexible exchange rate system.

19)
A country undertakes a revaluation in order to
A)
increase its net exports.
B)
decrease its net exports.
C)
lower the value at which its currency is pegged.
D)
move to a flexible exchange rate system.

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