Practice MCQs For Final 1 Essay

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1. When the trading of one currency for another is determined by the laws of supply and demand it is called a(n) _____ exchange rate system.

*a. flexible
b. free-market
c. floating
d. either A or C
e. none of the options listed General Feedback:
Page 453. Learning Objective 1. Difficulty: Easy. Systems in which the exchange rate is determined by the laws of supply and demand are called flexible exchange rate systems, such is the case with Australia.

2. A flexible exchange rate system is one in which exchange rates:

*a. are determined by the laws of supply and demand.
b. are determined by the government.
c. adjust according to foreign policy.
d. are fixed in relation to other currencies.
e. are determined by the central bank. General Feedback:
Page 453. Learning Objective 1. Difficulty: Easy. Systems in which the exchange rate is determined by the laws of supply and demand are called flexible exchange rate systems, such is the case of Australia.

3. A fixed exchange rate system is one in which exchange rates:

a. are determined by the laws of supply and demand.
b. are determined by a referendum.
c. adjust according to foreign policy.
*d. are fixed in relation to other currencies.
e. are determined by the United Nations. General Feedback:
Page 453. Learning Objective 1. Difficulty: Easy. Systems in which the exchange rate is determined by the laws of supply and demand are called flexible exchange rate systems, such is the case of Australia.

5. If the exchange rate of Chinese yuan for dollars increases from ¥6 = $1 to ¥7 = $1, then:

*a. Australian goods will be more expensive.
b. Australian goods will be cheaper.
c. Chinese goods will be more expensive.
d. the dollar has depreciated.
e. the Chinese yuan has appreciated. General Feedback:
Page 454. Learning Objective 1. Difficulty: Medium. Since the Australian dollar has appreciated in value, its exports will become more expensive.

6. If the exchange rate of Chinese yuan for dollars increases from ¥6 = $1 to ¥7 = $1, then:

a. Chinese goods will be more expensive.
*b. Chinese goods will be cheaper.
c. Australian goods will be cheaper.
d. the dollar has depreciated.
e. the Chinese yuan has appreciated. General Feedback:
Page 454. Learning Objective 1. Difficulty: Medium. Since the Chinese yuan has depreciated in value, its exports will become cheaper.

7. Assume that the exchange rate between the Australian dollar and Chinese yuan is ¥6 = $1. If the exchange rate changes to ¥8 = $1. What is the price in Australian dollars of a ¥48 pair of Chinese pyjamas before and after the appreciation of the Australian dollar?

a. $9 before; $7 after
b. $10 before; $8 after
c. $6 before; $8 after
*d. $8 before; $6 after
e. $8 before; $8 after General Feedback:
Page 454. Learning Objective 1. Difficulty: Easy. Before the change, the pyjamas cost ¥48/¥6 = $8, after the change, the pyjamas cost ¥48/¥8 = $6.

8. With an exchange rate of ¥100 = $1, then for ¥500 we would receive:

a. $0.05.
b. $0.50.
*c. $5.00
d. $50.00
e. $500.00 General Feedback:
Page 454. Learning Objective 1. Difficulty: Easy. ¥500/¥100 = $5.00.

9. With an exchange rate of ¥200 = $1, then for ¥500 we would receive:

a. $0.25.
b. $0.50.
c. $1.00
*d. $2.50
e. $25.00 General Feedback:
Page 454. Learning Objective 1. Difficulty: Easy. ¥500/¥200 = $2.50.

10. Which of the following would generate a decrease in the value of the Australian dollar?

a. An increase in the demand for Australian dollars
*b. An increase in the supply of Australian dollars
c. An increase in the demand for Australian exports
d. An increase in foreign tourism in Australia
e. An increase in Australian interest rates General Feedback:
Page 455. Learning Objective 1. Difficulty: Medium. An increased supply of Australian dollars leads to the supply curve shifting to the right. The Australian dollar will then depreciate until the new equilibrium is reached.

70. Which
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