Multiple Choice Questions
1. The intersection between demand for U.S. dollars and the supply of U.S. dollars is known as the
a. Inflation rate.
b. Exchange rate.
c. Price.
d. quantity.

2. An individual in the United States wants to buy office equipment from England that 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

3. If the Chinese currency devalues compared to the U.S. dollar, then
a. U.S. producers will benefit; Chinese consumers will benefit.
b. U.S. producers will benefit; Chinese consumers will be hurt.
c. U.S. producers will be hurt; Chinese consumers will benefit.
d. U.S. producers will be hurt; Chinese consumers will be hurt.

4. Following a peso appreciation relative to the dollar, which of the following results is expected to occur?
a. Prices in the United States would rise, and prices in Mexico would rise.
b. Prices in the United States would rise, and prices in Mexico would fall.
c. Prices in the United States would fall, and prices in Mexico would rise.
d. Prices in the United States would fall, and prices in Mexico would fall.

5. Following a peso appreciation relative to the dollar, which of the following results is expected to occur?
a. U.S. consumers would benefit, and Mexican producers would benefit.
b. U.S. consumers would be hurt, and Mexican producers would benefit.
c. U.S. consumers would benefit, and Mexican producers would be hurt.
d. U.S. consumers would be hurt, and Mexican producers would be hurt.

6. Following an increase in Mexican interest rates relative to U.S. interest rates (which causes Mexican consumers to borrow abroad to consume domestically), which of the following is expected to occur?
a. The dollar would appreciate relative to the peso, and Mexican prices would increase.
b. The dollar would appreciate relative to the peso, and Mexican prices would decrease.
c. The dollar would depreciate relative to the peso, and Mexican prices would increase.
d. The dollar would depreciate relative to the peso, and Mexican prices would decrease.

7. Following an increase in Mexican interest rates relative to U.S. interest rates, which caused Mexican investors to borrow abroad to invest domestically, which of the following would occur?
a. The dollar would appreciate relative to the peso, and Mexican prices would increase.
b. The dollar would depreciate relative to the peso, and Mexican prices would decrease.
c. The dollar would depreciate relative to the peso, and Mexican prices would increase.
d. The exchange rate would not be affected, and neither would Mexican prices.

8. How does domestic inflation in China affect the Big Mac Index?
a. The price of a Chinese Big Mac would increase relative to the U.S. price.
b. The price of a Chinese Big Mac would decrease relative to the U.S. price.
c. The Big Mac Index is not affected by inflation.
d. No effect

9. Holding other things constant, a decrease in the inflation rate in the U.S. economy compared to the Canadian economy may cause the demand for (U.S.) dollars to and the supply for dollars to .
a. Increase; decrease
b. Increase, increase
c. Decrease; increase
d. Decrease; decrease

10. If buyers expect future price increase, they will their purchases to avoid it. Similarly, sellers will selling to take advantage of it.
a. Accelerate; accelerate
b. Accelerate; delay
c. Delay; accelerate
d. Delay; delay