Exam Name MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1 The immediate two day exchange of one currency for another is a 1 A forward transaction B money transaction C exchange transaction D spot transaction 2 When the value of the dollar changes from 0 5 to 0 75 then the British pound has and the U S dollar has 2 A appreciated appreciated B depreciated depreciated C depreciated appreciated D appreciated depreciated 3 On January 25 2009 one U S dollar traded on the foreign exchange market for about 1 15 Swiss francs Therefore one Swiss franc would have purchased about U S dollars 3 A 0 30 B 0 87 C 1 15 D 3 10 4 Everything else held constant when a country s currency depreciates its goods abroad become expensive while foreign goods in that country become expensive 4 A more more B more less C less more D less less 5 If the U S Congress imposes a quota on imports of Japanese cars due to claims of unfair trade practices and Japanese demand for American exports increases at the same time then in the long run everything else held constant 5 A there will be no effect on the Japanese yen relative to the U S dollar B the Japanese yen will depreciate relative to the U S dollar C the Japanese yen will appreciate relative to the U S dollar D the Japanese yen will either appreciate depreciate or remain constant against the U S dollar 6 Everything else held constant increased demand for a country s causes its currency to appreciate in the long run while increased demand for causes its currency to depreciate 6 A exports imports B imports exports C imports imports D exports exports 7 If the price level in Japan increases more rapidly than the price level in Britain we would expect 7 A interest rates in Japan to lower than interest rates in Britain B Japanese productivity to have increased more rapidly than British productivity C the Japanese yen to depreciate against the British pound D the British pound to depreciate against the Japanese yen 8 If oranges sell for 100 per crate in the United States and 4000 pesos per crate in Mexico the law of one price indicates that you should be able to exchange 1 for 8 A 0 025 peso B 400 pesos C 40 pesos D 4 pesos 9 Under the theory of purchasing power parity an increase in the U S price level of 10 relative to the Japanese price level will result in 9 A an appreciation of the yen by an amount that depends upon what happens to the real exchange rate B a 10 appreciation of the yen C a 10 appreciation of the dollar D an appreciation of the dollar by an amount that depends upon what happens to the real exchange rate 10 If 2013 Ford Focus costs 18 000 dollars in US and 10 000 pounds in UK and exchange rate between dollar and pound is 1 5 per pound then law of one price 10 A does not hold and exchange rate should go down B does not hold and exchange rate should go up C holds D does not hold and dollar should appreciate 1 D 2 C 3 B 4 C 5 B 6 A 7 C 8 C 9 B 10 B
View Full Document
Unlocking...