In-Lab Problem Lecture 11

28. A devaluation of a country's currency to improve its trade deficit would most likely benefit a producer of: A. export goods that have no close substitutes. B. an export good that represents a relatively small proportion of consumer expenditures. C. luxury goods for export. Hint: A devaluation of the currency will reduce the price of export goods in foreign currency terms. The greatest benefit would be to producers of goods with more elastic demand. Luxury goods tend to have higher elasticity of demand, while goods that have no close substitutes or represent a small proportion of consumer expenditures tend to have low elasticities of demand.

What effect would a devaluation of a country's currency most likely have on its export volumes? A. Export volumes would decrease, as goods become more expensive in foreign markets. B. Export volumes would increase, as goods become cheaper in foreign markets. C. Export volumes would remain unchanged, as currency value does not affect trade. D. Export volumes would initially decrease, but then increase over time due to adjustments in trade agreements.

Dollar Price of 1 Euro 0.90 0 Multiple Choice Quantity of Euros Demand will decrease. Demand will increase. Supply Supply will increase. D Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. If more people in Europe decide to purchase U.S. cars, what effect will this have on the market for euros? Supply will decrease. Euros Demand Euros

Ap Macro:International Trade and Foreign Exchange

6. If Canadian consumers expect the value of the Canadian dollar to rise against the US dollar, what impact would we expect this to have on Canadians' demand for American made products? a. The demand for American-made items would fall. b. The demand for American-made items would not change. c. The demand for American-made items would rise. d. The demand for American-made items would double.

In the foreign exchange​ market, when the U.S. interest rate​ rises, the supply of dollars​ ________ and the foreign exchange rate​ ________.   A. ​decreases; rises   B. ​increases; falls   C. ​increases; rises   D. ​increases; does not change   E. ​decreases; falls

9 The fall of the exchange rate favors imports and exports a. True b. False

8. All exchange rates change over time due to economic circumstances a. True b. False

8. Incomes of U.S. farmers tend to be boosted by: A. Very good harvests on farms abroadB. Economic weakness in Europe and Southeast AsiaC. Increased protectionism in farm policies abroadD. A depreciation of the U.S. dollar

What is the forward market?   A. environment that permits receiving foreign exchange payments in the weeks or months ahead   B. An organizational setting that allows individuals, firms, and banks to trade foreign currencies   C. An environment protecting investors’ expected profits from the risk of exchange rate fluctuations   D. An environment that permits the buying and selling of foreign exchange for immediate delivery

3. If interest rates increase in a country with a fixed exchange rate, what will the central bank do? A. Buy the country's currency B. Sell the country's currency C. Engage in contractionary fiscal policy 4. The United States has floating exchange rates. Suppose there is an increase in inflation in the United States. What will happen? A. The U.S. central bank will sell U.S. currency so the exchange rate remains constant B. The U.S. central bank will buy Euros so the exchange rate remains constant C. The exchange rate (price of a dollar) will go up D. The exchange rate (price of a dollar) will go down 5. Belize uses a fixed exchange rate, with one Belize dollar equal to one half of a U.S. dollar. There is an increase in U.S. citizens traveling to Belize on vacation. What will the central bank do? A Buy the country's currency B. Sell the country's currency Sell bonds to banks C.

Which of these would cause the value of the Euro to rise? a. A rise in the Euro zone inflation rate relative to the rest of the world. b. An increase in US interest rates relative to European rates. c. An increase in the money supply in the Euro zone d. An increase in the demand for European made goods. Bracket creep (or fiscal drag) arises from a combination of a. real wage rises and a regressive tax system. b. Increasing government spending and taxes C. inflation and a progressive tax system. D tax cuts and inflation