International Economics: Exchange rates - Question Bank

Question Bank ''International Economics: Exchange rates'' with interactive revision questions on a variety of economics topics.

Question Bank - Economics

International Economics: Exchange rates

Q1. If a country is on the gold standard, then

(Select one answer)

(a) * only gold coins and notes can be used as money
(b) * its currency must be easily convertible into gold
(c) * gold, in some form, must be used as money
(d) * banks are unable to lend money


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Q2. Under a system of floating exchange rates, if the price of French francs falls from 12.5 cents to 10 cents, then

(Select one answer)

(a) * the dollar has appreciated against the franc
(b) * the dollar has depreciated against the franc
(c) * the dollar has been devalued
(d) * French goods become more expensive


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Q3. Devaluation

(Select one answer)

(a) * refers to an official act to alter an exchange rate
(b) * is not required under a system of completely flexible exchange rates
(c) * is an alternative to internal adjustment of an economy under fixed exchange rates
(d) * all the above


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Q4. An economist will define the exchange rate between two currencies as the

(Select one answer)

(a) * amount of one currency that must be paid in order to obtain one unit of another currency
(b) * difference between total exports and total imports within a country
(c) * price at which the sales and purchases of foreign goods takes place
(d) * ratio of import prices to export prices for a particular country


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Q5. A fiscal expansion in the UK

(Select one answer)

(a) * tends to depreciate the pound sterling.
(b) * tends to appreciate the pound sterling.
(c) * does not affect the price of the pound sterling.
(d) * has no predictable effect on the price of the pound sterling.


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Q6. In 1971, most countries

(Select one answer)

(a) * returned to the gold standard.
(b) * adopted a new system of fixed exchange rates.
(c) * gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand.
(d) * adopted a single, internationally-accepted currency whose use is limited to international transactions.


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Q7. The agreements that were reached at the Bretton Woods conference in 1944 established a system

(Select one answer)

(a) * in which the values of currencies were fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading.
(b) * of floating exchange rates determined by the supply and demand of one nation's currency relative to the currency of other nations.
(c) * that prohibited governments from intervening in the foreign exchange markets.
(d) * of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed-upon value of its currency.


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Q8. If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to

(Select one answer)

(a) * depreciate under a system of floating exchange rates.
(b) * depreciate under a system of fixed exchange rates.
(c) * appreciate under a system of fixed exchange rates.
(d) * appreciate under a system of floating exchange rates.


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Q9. If the U.K. experiences inflationary prices, then the presence of rising prices will

(Select one answer)

(a) * decrease imports into the country
(b) * increase the exports from the country
(c) * shift the country's currency supply curve in the foreign exchange market to the right
(d) * shift the demand curve for the country's foreign exchange to the right


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Q10. If the exchange rate between the UK and Japan changes from £1 being equivalent to 100 yen to £1being equivalent to 150 yen, then, ceteris paribus, the price of UK goods in Japan

(Select one answer)

(a) * will increase.
(b) * will decrease.
(c) * will remain the same.
(d) * could either increase or decrease.


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