Exhibit 21-7 Foreign exchange market for U.S. dollars and British 100 0 80 pounds 080 40 20 100200 400 500 eillion per day) Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 21-77 A American goods become more popular in Great Britain. B. British incomes rise, while U.S. incomes remain unchanged C. The US. price level rises, while the British price level remains unchanged D. The U.S. real interest rate rises, while the British real interest rate remains unchanged 15) Exhibit 21-7 shows a situation in which A both the dollar and the pound have depreciated B. both the dollar and the pound have appreciated C. the dollar has appreciated and the pound has depreciated D. the dollar has depreciated and the pound has appreciated 16) 17) Which of the following theories suggests that firms seek to penetrate new markets over time? A theory of comparative advantage. B. product cycle theory C imperfect markets theory D. none of the above. 18) It real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus? A The dollar will depreciate; the current account will move toward a deficit. B. The dollar ill depreciate; the current account will move toward a surplus C. The dollar will appreciate; the current account will move toward a deficit D. The dollar will appreciate,the current account will move toward a surplus. 19) Assume that Swiss investors have francs available to invest in securities, and they initially view U.S. and British interest rates as equaly attractive. Now assume that U.S. interest rates increase while British interest rates stay the same. This would likely cause A the Swiss demand for dollars to decrease and the dollar will depreciate against the pound. B. the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc. the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc C. D. the Swiss demand for dollars to decrease and the dollar will appreciate against the pound