Question

106. What could cause a shift in the (U.S.) demand for British pounds?

a. A change in our tastes and preferences for their goods.

b. A change in our income.

c. A change in trade restrictions.

d. A change in monetary policy.

e. All of the above.

107. The exchange rate between the U.S. and Japan can be interpreted as:

a. the price of U.S. currency in terms of the Japanese currency.

b. the cost of obtaining funds in the U.S. relative to the cost of obtaining funds in Japan.

c. the difference between the interest rates in the U.S. and Japan.

d. All of the above.

e. None of the above.

108. Suppose that one U.S. dollar is exchanged for 100 yen in the foreign exchange market. If so, then a toy selling for 1,000 yen in Japan has a U.S. dollar price of:

a. 10 cents.

b. $1.

c. $10.

d. $100

e. $1000.

109. If the price of a British pound falls from $1.50 to $1.00, we can say that:

a. the dollar price of British goods has fallen.

b. the pound price of British goods has risen.

c. the dollar price of U.S. goods has fallen.

d. All of the above.

e. Only B and C of the above.

Answer 1

Ans 106: e. All of the above. (All of the given options are right and can influence our demand for foreign currency)

Ans 107: a. the price of U.S. currency in terms of the Japanese currency. This is the correct definition of exchange rate.

Ans 108: c. $10.

1$ = 100 Yen

The price of a toy in japanese currency = 1,000 Yen

The price of a toy in US Dollar = $10 (1,000/100)

Ans 109: a. the dollar price of British goods has fallen.

The pound has depreciated against US dollar. So, british good becomes cheaper for US citizens.