Question 1

If you are vacationing in France and the dollar depreciates relative to the euro,then
A)the dollar buys more euros.It will take fewer dollars to buy a good that costs 50 euros.
B)the dollar buys more euros.It will take more dollars to buy a good that costs 50 euros.
C)the dollar buys fewer euros.It will take fewer dollars to buy a good that costs 50 euros.
D)the dollar buys fewer euros.It will take more dollars to buy a good that costs 50 euros.

Accepted Answer

When the dollar depreciates relative to the euro, it means that the dollar is worth less compared to the euro. This means that it will take more dollars to buy the same amount of euros. Therefore, the dollar buys fewer euros and it will take more dollars to buy a good that costs 50 euros.

Question 2

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar,the dollar has
A)appreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods.
B)appreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods.
C)depreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods.
D)depreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods.

Accepted Answer

The dollar has appreciated because it now takes more tenge to buy one dollar, indicating that the dollar has strengthened relative to the tenge. This means it takes fewer dollars to buy Kazakhstani goods.

Question 3

Other things the same,if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar,then the dollar has
A)appreciated and so buys more Thai goods.
B)appreciated and so buys fewer Thai goods.
C)depreciated and so buys more Thai goods.
D)depreciated and so buys fewer Thai goods.

Accepted Answer

The dollar has depreciated because it now exchanges for fewer Thai baht (from 30 to 25), meaning it buys fewer Thai goods.

Question 4

If you go to the bank and notice that a dollar buys more Japanese yen than it used to,then the dollar has
A)appreciated.Other things the same,the appreciation would make Americans less likely to travel to Japan.
B)appreciated.Other things the same,the appreciation would make Americans more likely to travel to Japan.
C)depreciated.Other things the same,the depreciation would make Americans less likely to travel to Japan.
D)depreciated.Other things the same,the depreciation would make Americans more likely to travel to Japan.

Accepted Answer

When the dollar appreciates, it means it has gained value relative to the yen, making Japanese goods and travel cheaper for Americans, thus making them more likely to travel to Japan.

Question 5

You are planning a graduation trip to Mexico.Other things the same,if the dollar depreciates relative to the peso,then
A)the dollar buys fewer pesos.Your hotel room in Mexico will require fewer dollars.
B)the dollar buys fewer pesos.Your hotel room in Mexico will require more dollars.
C)the dollar buys more pesos.Your hotel room in Mexico will require fewer dollars.
D)the dollar buys more pesos.Your hotel room in Mexico will require more dollars.

Accepted Answer

If the dollar depreciates relative to the peso, it means that the value of the dollar has decreased compared to the value of the peso. This would result in the dollar being able to buy fewer pesos. Therefore, your hotel room in Mexico would require more dollars because the exchange rate favors the peso.

Question 6

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals,then how many dollars does it take to buy a meal in Rio?
A)40 and your purchase will increase Brazil's net exports.
B)10 and your purchase will increase Brazil's net exports.
C)40 and your purchase will decrease Brazil's net exports.
D)10 and your purchase will decrease Brazil's net exports.

Accepted Answer

Since the exchange rate is 2 Brazilian reals per dollar, we can divide the cost of the meal in Rio by the exchange rate to find out how many dollars it takes to buy the meal:

20 reals / 2 reals per dollar = 10 dollars

Therefore, the answer is B, and purchasing a meal in Rio for 10 dollars will increase Brazil's net exports.

Question 7

Other things the same,if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar,the dollar has
A)appreciated and so buys more Algerian goods.
B)appreciated and so buys fewer Algerian goods.
C)depreciated and so buys more Algerian goods.
D)depreciated and so buys fewer Algerian goods.

Accepted Answer

The dollar has depreciated because it now exchanges for fewer Algerian dinars (from 75 to 72), meaning it buys fewer Algerian goods.

Question 8

You are staying in London over the summer and you have a number of dollars with you.If the dollar appreciates relative to the British pound,then other things the same,
A)the dollar would buy more pounds.The appreciation would discourage you from buying as many British goods and services.
B)the dollar would buy more pounds.The appreciation would encourage you to buy more British goods and services.
C)the dollar would buy fewer pounds.The appreciation would discourage you from buying as many British goods and services.
D)the dollar would buy fewer pounds.The appreciation would encourage you to buy more British goods and services.

Accepted Answer

If the dollar appreciates, it means it can buy more pounds, making British goods and services cheaper for you, thus encouraging you to buy more.

Question 9

The nominal exchange rate is the
A)nominal interest rate in one country divided by the nominal interest rate in the other country.
B)the ratio of a foreign country's interest rate to the domestic interest rate.
C)rate at which a person can trade the currency of one country for another.
D)the real exchange rate minus the inflation rate.

Accepted Answer

The nominal exchange rate is the rate at which a person can trade the currency of one country for another. It is the price of one currency in terms of another currency. Option A is incorrect because it refers to the interest rate parity condition, which is not directly related to the nominal exchange rate. Option B is also incorrect because it refers to the relative interest rate between two countries, but does not directly address the nominal exchange rate. Option D is incorrect because the real exchange rate is calculated by adjusting the nominal exchange rate for inflation.

Question 10

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos,then the forecast is given in
A)real terms and implies the dollar will appreciate.
B)real terms and implies the dollar will depreciate.
C)nominal terms and implies the dollar will appreciate.
D)nominal terms and implies the dollar will depreciate.

Accepted Answer

The forecast is given in nominal terms because it simply states the expected change in the exchange rate between the dollar and the peso without taking into account any changes in the prices of goods and services in either country. The forecast implies that the dollar will appreciate because it will be able to purchase more pesos in the future than it can currently.

Question 11

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar,then compared to British goods,U.S.goods become
A)relatively more expensive for both British and U.S.residents.
B)relatively more expensive for British residents and relatively less expensive for U.S.residents.
C)relatively less expensive for British residents and relatively more expensive for U.S.residents.
D)relatively less expensive for both British and U.S.residents.

Accepted Answer

The answer of If the exchange rate rises from .65...

Question 12

If the exchange rate is .60 British pounds = $1,a bottle of ale that costs 3 pounds costs
A)$1.80.
B)$4.80.
C)$5.
D)None of the above is correct.

Accepted Answer

The answer of If the exchange rate is .60 British...

Question 13

Other things the same,if the exchange rate changes from .8 euros per dollar to .9 euros per dollar,the dollar
A)depreciates so U.S.goods become less expensive relative to foreign goods.
B)depreciates so U.S.goods become more expensive relative to foreign goods.
C)appreciates so U.S.goods become less expensive relative to foreign goods.
D)appreciates so U.S.goods become more expensive relative to foreign goods.

Accepted Answer

When the exchange rate changes from 0.8 euros per dollar to 0.9 euros per dollar, the dollar appreciates because it can now buy more euros. As a result, U.S. goods become more expensive relative to foreign goods.

Question 14

You are the CEO of a U.S.firm considering building a factory in Chile.If the dollar appreciates relative to the Chilean peso,then other things the same
A)it takes fewer dollars to build the factory.By itself building the factory increases U.S.net capital outflow.
B)it takes fewer dollars to build the factory.By itself building the factory decreases U.S.net capital outflow.
C)it takes more dollars to build the factory.By itself building the factory increases U.S.net capital outflow.
D)it takes more dollars to build the factory.By itself building the factory decreases U.S.net capital outflow.

Accepted Answer

If the dollar appreciates relative to the Chilean peso, it means that the exchange rate has become more favorable for the U.S. firm. It will need fewer dollars to purchase the same amount of Chilean pesos required for the construction of the factory. Therefore, building the factory will become cheaper, and the firm will need to invest fewer dollars. However, as building the factory involves investing in a foreign country, it increases the U.S. net capital outflow.

Question 15

The dollar is said to depreciate against the euro if
A)the exchange rate falls.Other things the same,it will cost fewer euros to buy U.S.goods.
B)the exchange rate falls.Other things the same,it will cost more euros to buy U.S.goods.
C)the exchange rate rises.Other things the same,it will cost fewer euros to buy U.S.goods.
D)the exchange rate rises.Other things the same,it will cost more euros to buy U.S.goods.

Accepted Answer

The dollar depreciates against the euro when the exchange rate falls, meaning it takes fewer euros to buy the same amount of U.S. goods.

Question 16

The dollar is said to appreciate against the euro if
A)the exchange rate falls.Other things the same,it will cost fewer euros to buy U.S.goods.
B)the exchange rate falls.Other things the same,it will cost more euros to buy U.S.goods.
C)the exchange rate rises.Other things the same,it will cost fewer euros to buy U.S.goods.
D)the exchange rate rises.Other things the same,it will cost more euros to buy U.S.goods.

Accepted Answer

When the dollar appreciates against the euro, the exchange rate rises, meaning it takes more euros to buy the same amount of U.S. goods.

Question 17

You are planning a graduation trip to Mexico.Other things the same,if the dollar appreciates relative to the peso,then
A)the dollar buys fewer pesos.Your hotel room in Mexico will require fewer dollars.
B)the dollar buys fewer pesos.Your hotel room in Mexico will require more dollars.
C)the dollar buys more pesos.Your hotel room in Mexico will require fewer dollars.
D)the dollar buys more pesos.Your hotel room in Mexico will require more dollars.

Accepted Answer

If the dollar appreciates, it means that it can buy more pesos. This will make the hotel room in Mexico cost fewer dollars as the value of the dollar has increased.

Question 18

Other things the same,if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar,then the dollar
A)appreciates and buys more Chinese goods.
B)appreciates and buys fewer Chinese goods.
C)depreciates and buys more Chinese goods.
D)depreciates and buys fewer Chinese goods.

Accepted Answer

When the exchange rate changes from 6 to 7 yuan per dollar, the dollar appreciates because it can now buy more yuan, allowing it to purchase more Chinese goods.

Question 19

If the exchange rate is 5 Egyptian pounds per U.S.dollar,a watch that costs $25 US dollars costs
A)125 Egyptian pounds
B)50 Egyptian pounds
C)5 Egyptian pounds
D)None of the above is correct.

Accepted Answer

If the exchange rate is 5 Egyptian pounds per U.S. dollar, to convert $25 to Egyptian pounds, we need to multiply by 5.

$25 x 5 = 125 Egyptian pounds

Question 20

The real exchange rate is the nominal exchange rate,defined as foreign currency per dollar,times
A)U.S.prices minus foreign prices.
B)U.S.prices divided by foreign prices.
C)foreign prices divided by U.S.prices.
D)None of the above is correct.

Accepted Answer

The real exchange rate is calculated as the nominal exchange rate, which is foreign currency per dollar, multiplied by the ratio of U.S. prices to foreign prices. This gives an indication of the relative purchasing power of the two currencies. Therefore, choice B, which is U.S. prices divided by foreign prices, is the correct option.

Quiz 18: Open Economy Macroeconomics Basic Concepts: The Prices for International Transactions Real and Nominal Exchange Rates

If you are vacationing in France and the dollar depreciates relative to the euro,then

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar,the dollar has

Other things the same,if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar,then the dollar has

If you go to the bank and notice that a dollar buys more Japanese yen than it used to,then the dollar has

You are planning a graduation trip to Mexico.Other things the same,if the dollar depreciates relative to the peso,then

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals,then how many dollars does it take to buy a meal in Rio?

Other things the same,if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar,the dollar has

You are staying in London over the summer and you have a number of dollars with you.If the dollar appreciates relative to the British pound,then other things the same,

The nominal exchange rate is the

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos,then the forecast is given in

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar,then compared to British goods,U.S.goods become

If the exchange rate is .60 British pounds = $1,a bottle of ale that costs 3 pounds costs

Other things the same,if the exchange rate changes from .8 euros per dollar to .9 euros per dollar,the dollar

You are the CEO of a U.S.firm considering building a factory in Chile.If the dollar appreciates relative to the Chilean peso,then other things the same

The dollar is said to depreciate against the euro if

The dollar is said to appreciate against the euro if

You are planning a graduation trip to Mexico.Other things the same,if the dollar appreciates relative to the peso,then

Other things the same,if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar,then the dollar

If the exchange rate is 5 Egyptian pounds per U.S.dollar,a watch that costs $25 US dollars costs

The real exchange rate is the nominal exchange rate,defined as foreign currency per dollar,times