16．The factor most likely to cause a nation's currency to appreciate on the foreign exchange market is:

A)   an increase in exports relative to imports.

B)   an increase in real interest rates in other countries.

C)   an increase in the nation's foreign investment (assets purchased from foreigners).

D)   rapid domestic inflation.

17．A Japanese automobile manufacturer builds an automobile plant in the U.S. In the foreign exchange market, this action creates a:

A)   demand for both dollars and yen.

B)   supply of dollars and a demand for yen.

C)   demand for dollars and a surplus of yen.

D)   supply of both dollars and yen.

18．The U.S. imposes a high tariff on a major imported item. 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)   increase the balance of trade deficit of the U.S.

D)   increase the balance of payments deficit of the U.S.

19．Under a system of flexible exchange rates, which one of the following is more likely to cause a nation's currency to appreciate on the foreign exchange market?

A)   A domestic inflation rate lower than the nation's trading partners.

B)   A decrease in real domestic interest rates.

C)   An increase in real foreign interest rates.

D)   A domestic inflation rate higher than the nation's trading partners.

20．Which of the following is least likely to affect the appreciation or depreciation of a nation’s currency?

A)   Consumers substituting one product for another.

B)   Inflation rates within a country.

C)   Interest rates between countries.

D)   Differential income growth.

21．If increased borrowing by the government drives up the real interest rate in the United States, then:

A)   the U.S. dollar will depreciate in the foreign exchange market.

B)   U.S. investors will increase their investment abroad.

C)   an inflow of loanable funds from abroad will occur.

D)   U.S. exports will expand relative to imports.

答案和详解如下：

16．The factor most likely to cause a nation's currency to appreciate on the foreign exchange market is:

A)   an increase in exports relative to imports.

B)   an increase in real interest rates in other countries.

C)   an increase in the nation's foreign investment (assets purchased from foreigners).

D)   rapid domestic inflation.

The correct answer was A)

Demand for foreign currencies comes from demand for things produced by foreigners. For example, the demand for U.S. dollars on the foreign exchange market comes from non-Americans buying things from Americans. If U.S. imports decrease and exports increase, there is an increased demand for U.S. dollars because foreign countries are purchasing more goods from the U.S., thus appreciating the U.S. dollar.

17．A Japanese automobile manufacturer builds an automobile plant in the U.S. In the foreign exchange market, this action creates a:

A)   demand for both dollars and yen.

B)   supply of dollars and a demand for yen.

C)   demand for dollars and a surplus of yen.

D)   supply of both dollars and yen.

The correct answer was C)  

The Japanese automaker will need to buy U.S. dollars to pay for costs in the United States such as payments to workers, overhead costs, supplies and materials. Thus, the Japanese automaker will be looking to trade yen for dollars, creating a demand for dollars and a surplus of yen.

18．The U.S. imposes a high tariff on a major imported item. 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)   increase the balance of trade deficit of the U.S.

D)   increase the balance of payments deficit of the U.S.

The correct answer was B)

The demand for imports would decrease due to their higher price because of the tariff. This would cause U.S. exports to increase relative to imports. When a country has increased exports relative to its imports, its currency will appreciate.

19．Under a system of flexible exchange rates, which one of the following is more likely to cause a nation's currency to appreciate on the foreign exchange market?

A)   A domestic inflation rate lower than the nation's trading partners.

B)   A decrease in real domestic interest rates.

C)   An increase in real foreign interest rates.

D)   A domestic inflation rate higher than the nation's trading partners.

The correct answer was A)

If a nation's trading partners prices are increasing twice as fast as the domestic country A, then foreign citizens will increase their demand for A's goods. This increased demand will appreciate country A's currency making country A's goods more expensive offsetting the effects of inflation.

20．Which of the following is least likely to affect the appreciation or depreciation of a nation’s currency?

A)   Consumers substituting one product for another.

B)   Inflation rates within a country.

C)   Interest rates between countries.

D)   Differential income growth.

The correct answer was A)

Consumers substituting one product for another influences demand, but this may not necessarily affect imports or exports. Factors affecting the appreciation or depreciation of a currency are: inflation rates, interest rates, income growth, and macroeconomic factors such as monetary and fiscal policies.

21．If increased borrowing by the government drives up the real interest rate in the United States, then:

A)   the U.S. dollar will depreciate in the foreign exchange market.

B)   U.S. investors will increase their investment abroad.

C)   an inflow of loanable funds from abroad will occur.

D)   U.S. exports will expand relative to imports.

The correct answer was C)

The result is an increase in demand for the U.S. dollar and it will appreciate relative to countries whose available real rate of return is low. Thus, an increase in loanable funds will occur.