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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