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Homework answers / question archive / Texas A&M International University ECO 3320 CHAPTER 11 1)When interest rates go up, people are more likely to borrow less likely to borrow does not affect a person’s consumption None of the above       If the Chinese currency devalues compared to the US dollar, then US producers will benefit; Chinese consumers will benefit US producers will benefit; Chinese consumers will hurt US producers will hurt; Chinese consumers will benefit US producers will hurt; Chinese consumers will hurt   Holding other things constant, increases in the price level in the US will Cause the dollar to gain value Cause the dollar to lose value Does not affect the dollar value None of the above   The purchasing power parity predicts that if US price level rises relative to the Mexico price level, then Dollar value will rise relative to the peso Dollar value will fall relative to the peso There is no effect on either currency PPP predicts price level will normalize in the long-run   A term to describe one currency in terms of another is Interest rates Market price Inflation rate Exchange rate   An individual in the US wants to buy a car from England which costs 12,000 pounds

Texas A&M International University ECO 3320 CHAPTER 11 1)When interest rates go up, people are more likely to borrow less likely to borrow does not affect a person’s consumption None of the above       If the Chinese currency devalues compared to the US dollar, then US producers will benefit; Chinese consumers will benefit US producers will benefit; Chinese consumers will hurt US producers will hurt; Chinese consumers will benefit US producers will hurt; Chinese consumers will hurt   Holding other things constant, increases in the price level in the US will Cause the dollar to gain value Cause the dollar to lose value Does not affect the dollar value None of the above   The purchasing power parity predicts that if US price level rises relative to the Mexico price level, then Dollar value will rise relative to the peso Dollar value will fall relative to the peso There is no effect on either currency PPP predicts price level will normalize in the long-run   A term to describe one currency in terms of another is Interest rates Market price Inflation rate Exchange rate   An individual in the US wants to buy a car from England which costs 12,000 pounds

Economics

Texas A&M International University

ECO 3320

CHAPTER 11

1)When interest rates go up, people are

    1. more likely to borrow
    2. less likely to borrow
    3. does not affect a person’s consumption
    4. None of the above

 

 

 

  1. If the Chinese currency devalues compared to the US dollar, then
    1. US producers will benefit; Chinese consumers will benefit
    2. US producers will benefit; Chinese consumers will hurt
    3. US producers will hurt; Chinese consumers will benefit
    4. US producers will hurt; Chinese consumers will hurt

 

  1. Holding other things constant, increases in the price level in the US will
    1. Cause the dollar to gain value
    2. Cause the dollar to lose value
    3. Does not affect the dollar value
    4. None of the above

 

  1. The purchasing power parity predicts that if US price level rises relative to the Mexico price level, then
    1. Dollar value will rise relative to the peso
    2. Dollar value will fall relative to the peso
    3. There is no effect on either currency
    4. PPP predicts price level will normalize in the long-run

 

  1. A term to describe one currency in terms of another is
    1. Interest rates
    2. Market price
    3. Inflation rate
    4. Exchange rate

 

  1. An individual in the US wants to buy a car from England which costs 12,000 pounds. If the exchange rate is $1.75/pound, how much will it cost him in dollar terms?

a) $21,000

b) $6,800

c) $12,000

d) Need more information

 

  1. The demand for dollars is downward sloping because when dollar value rises,
    1. Foreigners demand more of US goods and services
    2. Foreigners demand less of US goods and services
    3. Foreigners demand more dollars
    4. It does not depend on the dollar value

 

  1. All these factors affect a country’s exchange rates, except
    1. Inflation
    2. Interest rates

 

    1. Employment
    2. Price levels

 

  1. Holding other things constant, an appreciation of the US Dollar to the Chinese Yuan might cause the demand for Yuan to                                                      and the supply for Yuan to

                           .

    1. Increase; decrease
    2. Increase, increase
    3. Decrease; Increase
    4. Decrease; Decrease

 

  1. Holding other things constant, an increase in the inflation rate in US compared to the Chinese economy may cause the demand for dollar to                                           and the supply for dollar to                              .
    1. Increase; decrease
    2. Increase, increase
    3. Decrease; Increase
    4. Decrease; Decrease

 

  1. An individual in the US wants to buy office equipment from England which costs 2,800 pounds. If the exchange rate is $1.92/pound, how much will it cost him in dollar terms?

a) $2,800

b) $5,376

c) $1,458

d) Need more information

 

  1. Holding other things constant, decreases in the price level in the US will
    1. Cause the dollar to gain value
    2. Cause the dollar to lose value
    3. Does not affect the dollar value
    4. None of the above

 

  1. The purchasing power parity predicts that if US price level falls relative to the Mexico price level, then
    1. Dollar value will rise relative to the peso
    2. Dollar value will fall relative to the peso
    3. There is no effect on either currency
    4. PPP predicts price level will normalize in the long-run

 

  1. When interest rates go down, people are
    1. more likely to borrow
    2. less likely to borrow

 

    1. does not affect a person’s consumption
    2. None of the above

 

  1. If the US interest rate is 4% per year and the Mexico interest rate is 9% per year, which of the following is true:
    1. The dollar will depreciate 5% in one year.
    2. The peso will appreciate 9% in one year.
    3. The peso will depreciate 5% in one year.
    4. The dollar will appreciate 9% in one year.

 

  1. US are experiencing a productivity growth. When comparing to other countries with lower productivity growth, we expect to see
    1. Its exchange rate appreciating
    2. Its exchange rate depreciating
    3. It has no effect on the US exchange rate
    4. None of the above

 

  1. Currency devaluations hurt
    1. Consumers but help suppliers
    2. Suppliers
    3. Suppliers but help consumers
    4. None of the above

 

  1. Holding other things constant, a depreciation of the US Dollar to the Kenyan Shilling might cause the demand for Shilling to                                                       and the supply for Shilling to

                           .

    1. Increase; decrease
    2. Increase, increase
    3. Decrease; Increase
    4. Decrease; Decrease

 

  1. Holding other things constant, a decrease in the inflation rate in the US compared to the Canadian economy may cause the demand for dollar to                                                   and the supply for dollar to                               .
    1. Increase; decrease
    2. Increase, increase
    3. Decrease; Increase
    4. Decrease; Decrease

 

  1. An increase in the US demand for pound causes
    1. An appreciation of the pound
    2. Depreciation in the dollar
    3. None of the above

 

    1. Both a and b

 

  1. Borrowing in foreign currencies to spend or invest domestically,
    1. decreases demand for the domestic currency, appreciating the domestic currency
    2. increases demand for the domestic currency, depreciating the domestic currency
    3. increases demand for the domestic currency, appreciating the domestic currency
    4. does not affect the exchange rates

 

  1. Borrowing in foreign currency to buy imports or invest in foreign currency,
    1. decreases demand for the domestic currency, appreciating the domestic currency
    2. increases demand for the domestic currency, depreciating the domestic currency
    3. increases demand for the domestic currency, appreciating the domestic currency
    4. does not affect the exchange rates

 

  1. Currency devaluations help suppliers because they make exports                              expensive in the                                      currency.
    1. Less; domestic
    2. Less; foreign
    3. More; domestic
    4. More; foreign

 

  1. Currency devaluations hurt consumers because they make imports                             

expensive in the                                      currency.

    1. Less; domestic
    2. Less; foreign
    3. More; domestic
    4. More; foreign

 

  1. If buyers expect future price increase, they will                                     their purchases to avoid it. Similarly, sellers will                                    selling to take advantage of it.
    1. Accelerate; accelerate
    2. Accelerate; delay
    3. Delay; accelerate
    4. Delay; delay

 

  1. If buyers expect prices to               faster than the interest rate, it makes sense to

               as much money as possible to                   now in order to                    in the future.

    1. Increase; borrow; buy; sell
    2. increase; save; buy; sell
    3. decrease; save; buy; sell
    4. decrease; borrow; sell; buy

 

  1. If Chinese consumers want to buy US goods, they will
  1. buy Yuans to sell US Dollars
  2. Sell Yuans to buy US Dollars
  3. Demand Yuan
  4. Both b and c

 

  1. If US consumers want to buy Chinese goods, they will
    1. buy Yuans to sell US Dollars
    2. Sell Yuans to buy US Dollars
    3. Demand Yuan
    4. Both a and c

 

  1. All of the following are true, except
    1. Bubbles are prices that cannot be explained by normal economic forces
    2. Many economists don’t think bubbles exist
    3. Many economists have a clear idea about how to model bubbles
    4. All of the above are true

 

  1. The intersection between demand of US dollar and the supply of US dollar is known as
    1. Inflation rate
    2. Exchange rate
    3. Price
    4. Quantity

 

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