QUESTION 11

Demand for a currency is driven by demand for a country's ___.

goods

services

assets

all of the above

QUESTION 12

According to the simple model of derived demand, if demand for Japanese goods increases globally, then the yen will

depreciate

appreciate

remain unchanged

QUESTION 13

Suppose the US economy recovers from the covid recession more quickly than the European market. This would imply that US interest rates will __ relative to European rates and the dollar will __ relative to the euro.

rise ; appreciate

rise ; depreciate

fall ; appreciate

fall ; depreciate

QUESTION 14

If institutions operating in foreign exchange markets expect the dollar to depreciate relative to the yen due to excessive US monetary policy, then in the short-run ___.

nothing will change

the dollar will appreciate relative to the yen

the dollar will depreciate relative to the yen

the yen will depreciate relative to the dollar

QUESTION 15

As the dollar weakens, US goods become __ in global markets and the US CA will __.

more expensive ; improve (move towards surplus)

cheaper ; improve (move towards surplus)

more expensive ; worsen (move towards deficit)

cheaper ; worsen (move towards deficit)

QUESTION 16

Suppose the yuan strengthens relative to other major global currencies. This will cause the inflow of foreign savings into China to ___.

increase

decrease

remain unchanged

QUESTION 17

Exchange Rate Pass Through measures how responsive firm prices are to fluctuations in exchange rates. These firms can manipulate their prices in response to adverse exchange rate movements because they ___.

operate in countries with flexible exchange rate regimes

have sufficient market power and profit margins

are clustered together with similar firms

operate in countries with limited corporate regulations

QUESTION 18

**Suppose the US government implements larger fiscal stimulus in response to Covid than Japan to answer questions 18-20**

From the perspective of US markets, the domestic rate of return will ___.

increase

decrease

remain unchanged

QUESTION 19

**Suppose the US government implements larger fiscal stimulus in response to Covid than Japan to answer questions 18-20**

Relative income in the US will ___ relative to Japan.

increase

decrease

remain unchanged

QUESTION 20

**Suppose the US government implements larger fiscal stimulus in response to Covid than Japan to answer questions 18-20**

The dollar will ___ relative to the yen.

appreciate

depreciate

remain unchanged

QUESTION 21

Global savers perceive political turmoil in Country A. This increase in perceived risk causes savers to anticipate Country A's currency to depreciate. This ultimately causes Country A's currency to ___.

strengthen

weaken

QUESTION 22

A weaker currency is always preferable for a nation's consumers.

True

False

QUESTION 23

**Suppose the Chinese economy enters a recession to answer questions 23-25**

Income in China will ___ relative to income in Europe.

increase

decrease

remain unchanged

QUESTION 24

**Suppose the Chinese economy enters a recession to answer questions 23-25**

The foreign rate of return facing a European saver will ___.

increase

decrease

remain unchanged

QUESTION 25

**Suppose the Chinese economy enters a recession to answer questions 23-25**

The euro will ___ relative to the yuan.

appreciate

depreciate

remain unchanged