Chapter 22 Flashcards
The exchange rate is the
price of one country’s currency expressed in terms of another country’s currency.
Which of the following generates demand for foreign currencies?
imports of foreign goods by firms located in the United States
Which of the following generates demand for foreign currencies?
expenditures by Americans traveling abroad
When foreigners buy U.S. dollars because they are a more stable currency than the currencies in their countries, they are generating a
demand for U.S. dollars and a supply of a foreign currency.
When foreign countries buy wheat grown in the United States, they are generating a
demand for U.S. dollars and a supply of a foreign currency.
A change in the exchange rate for a country’s currency alters the prices of
both exports and imports.
An increase in the price of the U.S. dollar in terms of euros will cause, ceteris paribus,
European goods to be cheaper to residents of the United States.
If one euro is equal to 0.60 U.S. dollars, what would be the euro price of a car that costs $10,000?
16,667 euros
Suppose a U.S. firm purchases some English china. The china costs 1,000 British pounds. At the exchange rate of $1.45 = 1 pound, the dollar price of the china is
$1,450.
Suppose a bottle of wine produced in France sells for 35 euros. If the exchange rate between euros and dollars is €1 = $1.30, how much will an American pay for the bottle of wine in America?
$45.50
If the exchange rate between the U.S. dollar and Japanese yen changes from $1 = 100 yen to $1 = 90 yen, then
Japanese tourists visiting the United States will benefit.
The depreciation of a country’s currency causes the price of imports to
rise and the prices of exports to fall.Correct
If the U.S. dollar depreciates, in the long run the United States should experience a
smaller deficit in the U.S. trade balance.
A depreciation of the South Korean won against the U.S. dollar will
raise the won price of U.S. goods.
Generally speaking, a country whose currency depreciates will experience, as a result,
inflationary pressure because the prices of imports rise.
Which of the following groups would be aided by a depreciation of the American dollar?
U.S. producers of goods for export
If speculators believed the yen was going to depreciate against the U.S. dollar, they would most likely
purchase U.S. dollars.
American citizens planning a vacation abroad that would require foreign currency would welcome
appreciation of the dollar.
An increase in the U.S. trade deficit could be caused by
an appreciation of the dollar.
(Figure 36.2) Choose the panel that represents the shift in the foreign exchange market for dollars given the following situation, ceteris paribus: A sudden, unexpected surge in inflation in the United States causes reduced purchases of U.S. goods by foreigners.
C
