AP Macro Exchange Rates

An increase in Korea’s demand for U.S. goods would cause the US dollar to

• Depreciate because of inflation

• Depreciate because the U.S. would be selling more dollars to Korea

• Depreciate because the U.S. money supply would increase as exports rise

• Appreciate because Korea would be buying more U.S. dollars

• Appreciate because Korea would be selling more U.S. dollars

If the demand for the British Pound increases relative to the U.S. dollar, then the

• US dollar would appreciate

• Supply of US dollars would decrease

• Quantity supplied of Pounds would decrease

• British pound would appreciate

• British pound will depreciate

Incomes fall in the United States, but not in Japan. Which of the following will occur?

• The US dollar will appreciate and the Japanese Yen will depreciate

• The US dollar will appreciate and the Japanese Yen will appreciate

• US imports from Japan will increase

• The US dollar will depreciate and the Japanese Yen will appreciate

• Japanese exports to the US will increase

Suppose price level increases more in the United States than it does in Indonesia. What is the short-run impact on U.S. net exports, the value of the U.S. dollar, and the value of the Indonesian rupee?

• Net Exports / U.S. dollar / Indonesian rupee

  Increase / depreciate / depreciate

• Net Exports / U.S. dollar / Indonesian rupee

  Decrease / depreciate / appreciate

• Net Exports / U.S. dollar / Indonesian rupee

  Increase / depreciate / appreciate

• Net Exports / U.S. dollar / Indonesian rupee

  Decrease / appreciate / depreciate

• Net Exports / U.S. dollar / Indonesian rupee

  Increase / appreciate / depreciate

Why do countries need an exchange rate?

• to promote tourism

• to determine GDP

• to see who has the most money

• to trade with each other

Suppose interest rates fall in the United States, but they don't fall in Mexico. What is the short-run impact on the value of the U.S. dollar (USD) and the value of the Mexican Peso (Peso)?

• USD / Peso

  Appreciate / appreciate

• USD / Peso

  Appreciate / depreciate

• USD / Peso

  Depreciate / depreciate

• USD / Peso

  Depreciate / appreciate

• USD / Peso

  Depreciate / no change

An increase in a country’s interest rate relative to other country’s interest rate will most likely cause which of the following?

• An decrease in the demand for the country’s currency

• An increase in the supply of the country’s currency

• The depreciation of the country’s currency

• An increase in the amount of domestic investment

• Capital inflow into the country to exceed capital outflow

Assume that the supply of loanable funds increases in Canada. The international value of Canada’s currency and Canada’s exports will most likely change in which of the following ways

• Value of the Canadian Dollar Exports

  Decrease Decrease

• Value of the Canadian Dollar Exports

  Decrease Increase

• Value of the Canadian Dollar Exports

  Increase Decrease

• Value of the Canadian Dollar Exports

  Increase Increase

• Value of the Canadian Dollar Exports

  Not change Not change

An increase in net exports for country X will most likely be caused by which of the following?

• An increase in consumer spending

• An increase in direct foreign investment

• A decrease in the international value of the currency in country X

• An increase in the international value of the currency in country X

• An increase in the price level in country X

The value of a country's currency relative to another country's currency is called

• capital flow

• purchasing-power parody

• the inflation rate

• the exchange rate appreciation

• appreciation