Economics MCQs

Page No. 198

For the United States suppose the annual interest rate on government securities equals 8 percent while the annual inflation rate equals 4 percent, For Switzerland the annual interest rate on government securities equal 10 percent while the annual inflation rate equals 7 percent the above variables would cause investment funds to flow from ?


athe United States to Switzerland causing the dollar to depreciate

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bthe United States to Switzerland causing the dollar to appreciate

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cSwitzerland to the United States causing the franc to depreciate

✓


dSwitzerland to the United States causing the franc to appreciate

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View Answer Switzerland to the United States causing the franc to depreciate

The exchange value of the U.S dollar is primarily determined by ?


a the rate of inflation in the United States

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bthe number of dollars printed by the U.S government

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cthe international demand and supply for dollars

✓


dthe monetary value of gold held at Fort Knox, Kentucky

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View Answer the international demand and supply for dollars

If Canada runs a balance of payments surplus and exchange rates are floating ?


athe value of other currencies will rise relative to the dollar

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b the dollar will depreciate relative to other currencies

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c the price of foreign goods will become cheaper to Canadians

✓


dthe price of foreign goods will rise for Canadians

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View Answer the price of foreign goods will become cheaper to Canadians

The appreciation in the value of the dollar in the early 1980s is explained by all of the following except ?


a the United States being considered a safe haven by foreign investors

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brelatively high real interest rates in the United States

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cconfidence of foreign investors in the U.S economy

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drelatively high inflation rates in the United States

✓


View Answer relatively high inflation rates in the United States

When the price of foreign currency (i.e the exchange rate) is below the equilibrium level ?


a an excess demand for that currency exists in the foreign exchange market

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ban excess supply of the currency exists in the foreign exchange marketan excess supply of the currency exists in the foreign exchange market

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cthe demand for foreign exchange shifts outward to the right

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dthe demand for foreign exchange shifts backward to the left

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View Answer an excess demand for that currency exists in the foreign exchange market

A primary reason that explains the appreciation in the value of U.S dollar would be ?


alarge trade surpluses for the United States

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bhigh inflation rates in the United States

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clack of investor confidence in U.S money policy

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dhigch interest rates in the United States

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View Answer higch interest rates in the United States

In the presences of purchasing power parity, if one-dollar exchanges for 2 British pounds and


a200 pounds

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b 400 pounds

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c600 pounds

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d 800 pounds

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View Answer 800 pounds

Relatively high real interest rates in the United States tend to ?


adecrease the foreign demand for dollars causing the dollar to depreciate

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bdecrease the foreign demand for dollars causing the dollar to appreciate

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c increase the foreign demand for dollars causing the dollar to depreciate

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dincrease the foreign demand for dollars causing the dollar to appreciate

✓


View Answer increase the foreign demand for dollars causing the dollar to appreciate

If a Big Mac hamburger sells for the same dollar value in New York as in London then ?


athe inflation rate in each country will necessarily equal zero

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bthe inflation rate in each country will necessarily equal 1 percent

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cthe exchange rates are said to be fixed pegged to each other

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dpurchasing power parity holds

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View Answer purchasing power parity holds

The relationship between the exchange rate and the prices of tradable goods is known as the ?


apurchasing power parity theory

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basset markets theory

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cmonetary theory

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d balance of payments theor

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View Answer purchasing power parity theory

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