1."The fund also said Russia should focus on cutting inflation by allowing a more flexible exchange ruble rate." What must currently be happening with regard to the exchange rate? a) there is a balance of payments surplus and the exchange rate is trying to rise

b) there is a balance of payments surplus and the exchange rate is trying to fall

c) there is a balance of payments deficit and the exchange rate is trying to rise

d) there is a balance of payments deficit and the exchange rate is trying to fall

2.In 1975 the Canada/US exchange rate was 1.02 (i.e., 1$US bought 1.02$C). The Canadian price level rose by 52% between 1975 and 1980, while the US price level rose by 41%. What does PPP predict is the 1980 exchange rate?

a) below 1.00b) between 1.00 and 1.10

c) between 1.10 and 1.20d) above 1.20

3. "At the moment, the market for the U.S. dollar is completely ignoring things like record U.S. trade deficits and the widening current account deficit. It also seems not to be afraid of the possibility of Federal Reserve rate _____. Instead, speculators appear to be counting on fiscal and monetary _____ in Japan." The blanks are best filled in with: a) increases; tighteningb) increases; easing c) decreases; tighteningd) decreases; easing

4."The employment numbers were a bit of a shocker, but the market isn't that concerned about inflation because of the potential for Asian weakness to slow the U.S. economy." This is best interpreted as:

a) unemployment rose and U.S. exports to Asia should rise

b) unemployment rose and U.S. exports to Asia should fall

c) unemployment fell and U.S. exports to Asia should rise

d) unemployment fell and U.S. exports to Asia should fall