Chapter 01 Test Bank for International Macroeconomics 5th Edition Feenstra
1. International macroeconomics studies:
- decisions of individual households in other countries.
- decisions by governments in other countries.
- the interrelationship of large-scale economic issues across countries.
- the interrelationship of politics and economics within a country.
ANSWER: c
2. International macroeconomics focuses on:
- isolated nations.
- economy-wide variables such as interest rates, income, prices, and wealth.
- city-level economic problems.
- market-specific variables such as the price of orange juice.
ANSWER: b
3. Key elements of the international macroeconomy are:
- political alliances, capital accumulation, and monopoly power.
- many currencies, financial integration, and economic policy choices made in context.
- competition, efficiency, and openness.
- waste and overuse of natural resources, disregard for the environment, and unfair competition.
ANSWER: b
- It is to assume that all goods are priced in a common currency in international markets.
- correct in every case
- dangerous
- incorrect in every case
- unrealistic
ANSWER: d
- Understanding how a nation's economy works requires a complete understanding of the:
- political system.
- level of imports and exports.
- exchange rate with other currencies.
- tax system.
ANSWER: c
- What is an exchange rate? 1 / 4
Chapter 01 Test Bank for International Macroeconomics 5th Edition Feenstra
- It is the percentage rate of interest charged by international banks to exchange currency.
- It is the fees banks charge their best customers to exchange currency.
- It is the price of one nation's currency measured in units of another nation's currency.
- It is the lending rate for international credit.
ANSWER: c
- Which of the following would be an exchange rate?
- One car trades for 1,000 books.
- One dollar trades for two candy bars.
- One dollar trades for four quarters.
- One dollar trades for three pesos.
ANSWER: d
8. Suppose one dollar can purchase eight pesos. This is an example of:
- an international price.
- the price of a dollar in terms of pesos.
- the price of a peso in terms of dollars.
- the price of goods denominated in dollars.
ANSWER: c
9. Exchange rate behavior is:
- unimportant in determining income, prices, and flows of goods and services.
- very important in determining income, prices, and flows of goods and services.
- very predictable, steady, and not of interest to policymakers.
- not subject to market forces, but is determined by international agreements.
ANSWER: b
10. Changes in a nation's exchange rates have an impact on:
- prices of equities but not domestic bonds.
- relative prices of home and foreign goods.
- prices of nontradable services.
- prices of international bonds but not equities.
ANSWER: b
11. Compared with 100 years ago, the number of currencies exchanged today is:
- dozens fewer.
- insignificant.
- many times more. 2 / 4
Chapter 01 Test Bank for International Macroeconomics 5th Edition Feenstra
- the same.
ANSWER: c
12. Exchange rates exhibit:
- steady behavior across the board.
- erratic behavior across the board.
- very different behavior, depending on whether the rates are fixed or floating.
- variable behavior (sometimes steady and other times erratic), depending on the business cycle.
ANSWER: c
13. A floating exchange rate regime can often lead to:
- higher domestic investment.
- faster economic growth.
- higher inflation.
- less stable international trade in goods and services.
ANSWER: d
- In general, economists divide the world into two types of exchange rate systems:
- long run and short run.
- fixed and floating.
- liberal and conservative.
- speculative and risk averse.
ANSWER: b
- Which best describes the dollar–yuan exchange rate over time?
- volatile
- steady
- gradually rising
- gradually declining
ANSWER: b
16. The exchange rate between the U.S. dollar and the Chinese yuan:
- resulted in a rise in Chinese buying power.
- declined 15% between 2005 and the financial crisis in 2008.
- has created a situation in which China is able to get cheap products from the United States.
- has been unchanged since July 2005. 3 / 4
Chapter 01 Test Bank for International Macroeconomics 5th Edition Feenstra
ANSWER: b
17. In June of 2010, the Chinese government:
- cracked down on illegal currency trading.
- reduced the value of the yuan in terms of the U.S. dollar.
- allowed a gradual appreciation in the value of the yuan in terms of the U.S. dollar.
- allowed the yuan to fluctuate freely according to the market.
ANSWER: c
18. When an exchange rate is said to be fixed, it:
- does not vary at all.
- can vary a lot.
- changes every day.
- is volatile.
ANSWER: a
- An exchange rate that does not vary with domestic or international economic conditions can be best
described as:
- fixed.
- floating.
- undervalued.
- correctly valued.
ANSWER: a
- Compared with the dollar–yuan exchange rate, the dollar–euro exchange rate is best described as:
- volatile.
- steady.
- gradually falling.
- gradually rising.
ANSWER: a
- Compared with the U.S. dollar–euro exchange rate, the U.S. dollar–yuan exchange rate has exhibited:
- extreme fluctuation.
- much less fluctuation.
- a constant value.
- complete control by the World Bank.
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