Question

Question 1

The exchange rate is the:

The opportunity cost at which goods are exchanged

The volume at which exports flow out of the country.

Price of one currency in terms of another.

All of the above.

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Question 2

Which of the following would create a demand for dollars?

When foreign countries buy U.S. exports

When the U.S. buys imports from other countries.

When the U.S. citizens travel abroad.

When U.S. imports are greater than exports.

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Question 3

The depreciation of the dollar means:

U.S. exports become more scarce.

U.S. imports become cheaper.

U.S. citizens can buy more of a foreign currency.

U.S. citizens can buy less of a foreign currency.

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Question 4

When the dollar appreciates, which of the following is true?

U.S. exports become more expensive to our trading partners.

U.S exports become cheaper to our trading partners.

U.S. imports become more expensive.

None of the above.

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Question 5

Changes in the value of the euro only affects the European economies.

True

False

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Question 6

American citizens planning a vacation in Japan would welcome a depreciation of the yen.

True

False

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Question 7

The foreign exchange rates are set by the banks in each respective country.

True

False

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Question 8

When a currency is devalued, it can mean an economic disaster for a country dependant on imports.

True

False

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Question 9

The primary determinant of currency exchange rates is the volume of exports and imports.

True

False

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Question 10

The purchase of U.S. real estate from foreign sources would create a supply of a foreign currency.

True

False

Answer 1

1) Answer: Price of one cou ntry in terms of other

The price of one country currency other country currency is called exchange rate.

2) Answer: When US buys imports from other countries.

If the demand for dollars increases the price level increases thus imports will increases and exports will decrease for US

3) Answer: US citiziens can buy less of foriegn currency

If the depreciation of dollar takes place the exchange rate value of dollar decreases thus the leading to buying of less foriegn currency

4) Answer: US exports become more expensive to trading partners.

If the appreciation of dollar takes place demand for dollars increases thus price level increases thus imports will increases and exports will decrease for US.

So due to this increase in price level the trading partners have difficulty in buying more exports.