Recent Question

Citicorp would make money at the expense of the Bank of England by 1. "He says an overvalued dollar would be just another blow to an already fragile economy." An overvalued dollar would be a blow to the economy because it would a) decrease exports b) encourage capital inflows c) increase the domestic money supply d) increase demand for import-competing goods and services 2. "Now it's the once-mighty German mark's turn to come unde ...

Other / Other 11 May 2016

The statistical evidence is that there is a strong correlation 1. "The survey found that 28 percent of U.S. dollar trading in North America is in the mark, 23 percent in the yen, 13 percent in the British pound and 9 percent in the Swiss franc. Rounding out the list of major trading currencies at 3 percent to 7 percent each, are the Canadian and Australian dollars and the French franc." The U.S. trades more with Canada than with any other ...

Other / Other 11 May 2016

Why would exporters want lower interest rates 1. Why would they do this? a) to maintain a low exchange rate with the U.S. dollar b) to avoid inflation c) to help the U.S. d) to earn a lot of interest 2. “In Europe, the weaker dollar has raised fears that a moderate recovery will be dampened.” Why would a weaker U.S. dollar affect Europe?” a) European exports will fall b) European imports will fall c) Eu ...

Other / Other 11 May 2016

When the government wants to strengthen the dollar 1. "The response has been to search out the middle ground. The central bank has a simple operating formula: Some of the adjustment will be taken through the exchange rate, some through interest rates, and the rest through a loss of international reserves." This policy involves a) a fall in the exchange rate and a fall in the interest rate b) a fall in the exchange rate and a rise in t ...

Other / Other 11 May 2016

Central banking is as much about winning the trust of markets 1. “Economic growth is supposed to be a good thing, right? Not always. If it gets too strong …..“ The best way of completing this statement is a) income maldistribution occurs b) inflation is created c) unemployment increases d) a budget deficit develops 2. “Just 21,000 new jobs were created in February, compared with forecasts for 125,000, mar ...

Other / Other 11 May 2016

What must be happening with the Canadian dollar and the U.S 1. "The deal won't hold together if, say, recession-bound Spaniards are screaming for easy money while inflation-wary Germans want to keep money tight." What deal is being talked about here? a) a common currency a) a flexible exchange rate c) a full employment guarantee d) freedom to operate independent monetary policies 2. “For many years the driving force behind the ...

Other / Other 11 May 2016

These policies increased the value of the dollar because 1. A strong dollar is a mixed blessing. It ________ the price of imports, thus _______ inflation, and it makes trips to foreign countries ________ for Americans. But it makes our exports _________. The blanks are best filled with. a) lowers; lowering; expensive; cheap b) raises; increasing; expensive; cheap c) lowers; lowering; cheap; expensive d) raises; increasing; cheap; expe ...

Other / Other 11 May 2016

The existence of the international sector causes fiscal policy to 1. "Indeed, the yen may have to stay strong for two years or more, many experts say, to have much impact on American-Japanese trade." This is because of a) the J curve b) capital inflows c) high U.S. interest rates d) high Japanese interest rates 2. A country with an undervalued currency a) is hurting exporters b) will have a balance of payments deficit c) will accu ...

Other / Other 11 May 2016

The supply-side effects of a devaluation are that it increases 1. "The floating exchange-rate system has served us well. In recent years, currency flexibility has facilitated adjustment, first to higher inflation, and then to sharp declines in export prices and volumes." The exchange rate first a) fell then rose b) rose then fell c) fell then fell again d) rose then rose again 2. "It is surprising that, with the dollar trading so high, ...

Other / Other 11 May 2016

The dollar was granted a reprieve yesterday from its recent slide against the mark 1. "Traders said the dollar will probably ____ if non-farm payrolls rose in August by anything less than 110,000, but if the gain was between 140,000 and 200,000 traders might expect a mild reaction. If the figure comes in above 200,000, it may reassure the market that the Fed won't need to cut rates." From the information available, if nonfarm payrolls ros ...

Other / Other 11 May 2016