1. If the inflation rate in Britain is greater than the inflation rate in the United States, other things held constant, the British pound will

a. Depreciate against the U.S. dollar.

b. Remain unchanged against the U.S. dollar.

c. Appreciate against other major currencies.

d. Appreciate against the dollar and other major currencies.

e. Appreciate against the U.S. dollar.

2. If it takes $0.81 U.S. dollars to purchase one Swiss franc, how many Swiss francs can one U.S. dollar buy?

a. 0.50

b. 0.71

c. 1.23

d. 1.41

e. 2.81

3. Suppose one U.S. dollar can purchase 140 yen today in the foreign exchange market. If the yen depreciates by 7.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?

a. 155.5 yen

b. 149.8 yen

c. 133.5 yen

d. 78.0 yen

e. 72.0 yen

4. Suppose one U.S. dollar can purchase 140 yen today in the foreign exchange market. If the yen appreciates by 5.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?

a. 155.5 yen

b. 149.8 yen

c. 133 yen

d. 78.0 yen

e. 72.0 yen

5. Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 1.64 Euros. What is the cross-rate of Swiss francs to Euros?

a. 0.43

b. 0.86

c. 1.41

d. 1.64

e. 2.27