Reading 19: Foreign Exchange Parity Relations - LOS a ～ foreign, Foreign, exchange, 2008, class

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1.Depreciation in the value of the U.S. dollar on the foreign exchange market will:

A)   make U.S. exports cheaper to foreigners.

B)   make imports less expensive for U.S. consumers.

C)   make U.S. exports more expensive for foreign consumers.

D)   cause the U.S. to run a balance of payments surplus in the long run.

2.Under a system of flexible exchange rates, a decrease in the foreign demand for a nation’s currency will cause the nation’s:

A)   currency to depreciate in value.

B)   currency to appreciate in value.

C)   balance of payments deficit to increase.

D)   consumer prices to increase, in terms of foreign currencies.

3.In a flexible exchange rate system, exchange rates are determined by:

A)   the total value of the country's gold reserves.

B)   trade restrictions.

C)   supply and demand in the currency market.

D)   governmental fiat.

4.The U.S. eliminates high tariffs on major imported goods. Under a system of flexible exchange rates, this would tend to:

A)   cause the dollar to depreciate in value.

B)   cause the dollar to appreciate in value.

C)   decrease the U.S. balance of payments.

D)   decrease the U.S. balance of trade deficit.

5.A U.S. tourist planning to visit Germany exchanges $500 for euros at a rate of $.95/

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答案和详解如下：

1.Depreciation in the value of the U.S. dollar on the foreign exchange market will:

A)   make U.S. exports cheaper to foreigners.

B)   make imports less expensive for U.S. consumers.

C)   make U.S. exports more expensive for foreign consumers.

D)   cause the U.S. to run a balance of payments surplus in the long run.

The correct answer was A)

Depreciation of a currency makes a country's goods more attractive to foreign buyers.

The choices, "Make imports less expensive for U.S. consumers" and "Make U.S. exports more expensive for foreign consumers," would be true if the dollar was appreciating.

The balance of payments equation should always equal 0.

2.Under a system of flexible exchange rates, a decrease in the foreign demand for a nation’s currency will cause the nation’s:

A)   currency to depreciate in value.

B)   currency to appreciate in value.

C)   balance of payments deficit to increase.

D)   consumer prices to increase, in terms of foreign currencies.

The correct answer was A)

As foreign demand for a currency decreases, its price decreases and it depreciates.

3.In a flexible exchange rate system, exchange rates are determined by:

A)   the total value of the country's gold reserves.

B)   trade restrictions.

C)   supply and demand in the currency market.

D)   governmental fiat.

The correct answer was C)

Exchange rates are determined by supply and demand. British importers needing dollars to purchase U.S. goods will buy U.S. dollars and sell British pounds. British exporters needing to convert dollars to pounds will sell dollars and buy pounds.

4.The U.S. eliminates high tariffs on major imported goods. Under a system of flexible exchange rates, this would tend to:

A)   cause the dollar to depreciate in value.

B)   cause the dollar to appreciate in value.

C)   decrease the U.S. balance of payments.

D)   decrease the U.S. balance of trade deficit.

The correct answer was A)

The elimination of tariffs causes imported goods to be cheaper and the demand for imported goods to increase. In order to purchase the goods, Americans will sell dollars to purchase other currencies, thus causing the dollar to depreciate.

5.A U.S. tourist planning to visit Germany exchanges $500 for euros at a rate of $.95/