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ECO 213- Final Exam Questions And Correct Answers
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ECO 213- Final Exam Questions And Correct Answersc. If a country's currency is determined only by the demand and supply for that country's
currency, the country is said to have a - Answer floating exchange rate.
Many countries that use the euro as their currency face similar concerns as countries
did during the years of the gold standard in that each are - Answer Unable to conduct
monetary policy
If a country's currency is pegged to the dollar its exchange rate is - Answer fixed
A decrease in a fixed exchange rate from 1.75 per pound to 1.60 per pound is called an -
Answer devaluation
You decide you will work in London for the next 5 years, accumulate some savings, then
move back to the US - Answer You should be discouraged as the declining US
preference for British goods should decrease the value of the pound to the dollar and
decrease the value of your savings when converted to dollars
During the Chinese experience with pegging the yuan to the dollar, the yuan was
undervalued. - Answer There was an excess of dollars on the market that the Chinese
Government had to buy to maintain the peg.
Americans, other than jewelers or rare coin collectors, were not allowed to own gold
from the early 1930s until the - Answer 1970s
Thailand, that tried to peg the baht to the dollar found that the baht was _______________
relative to the dollar - Answer Overvalued, Undervalued
Figure 19-1. Which of the following would cause the change depicted in the figure
, above. - Answer US productivity rises relative to European productivity
The ____________ system of currency exchange was set up in 1944. - Answer Bretton
Woods
Figure 19-10. Under the Bretton Woods System of exchange rates, if the par exchange
rate was $2 per pound in the figure above, and equilibrium persisted at $3 - Answer
Increased the price of British exports to the United States
If the US government puts a tariff on imports from the countries that have been accused
of deliberately undervaluing their currencies, the price of these imports will _________
-Answer: rise/fall
China began pegging its currency, the yuan, to the dollar in 1994. Since the yuan was
undervalued at the pegged exchange rate, the level of Chinese exports remained higher
than they would have been had the exchange rate been allowed to float freely.
Figure 19-3. At what level should the Thai government peg its currency to the dollar to
make Thai exports cheaper to the United States. - Answer Less than $.03/baht
Suppose the United States decides to go back on the gold standard. This should -
Answer Decrease the Federal Reserve's ability to pursue active monetary policy.
Pegging a country's exchange rate to the dollar will be beneficial if - Answer Investors
view the dollar as being more stable compared to the domestic country's currency.
Suppose the GDP deflator in the United States is 125 and the GDP deflator in Japan is
100 - Answer The exchange rate of yen per dollar will be less than 0.8.
Although the pegged exchange rate between the yuan and the dollar has _________ the
yuan, China had been reluctant to abandon the peg for fear that abandoning the peg
would ________- - Answer Undervalued, Reduce exports
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