Q16. When a country’s monetary authority increases the money supply, a unit of money:

A)   gains value both in terms of the domestic goods it can buy and in terms of the foreign currency it can buy.

B)   gains value in terms of the domestic goods it can buy but loses value in terms of the foreign currency it can buy.

C)   loses value both in terms of the domestic goods it can buy and in terms of the foreign currency it can buy.

Q17. Which of the following is least likely to cause a country's currency to depreciate?

A)     Faster growth of imports relative to exports.

B)     Domestic real interest rates are less than those abroad.

C)     Slow growth of income relative to one's trading partners.

Q18. A country’s currency will appreciate when its:

A)   capital account is in surplus but not changing.

B)   imports rise in relation to its exports.

C)   exports rise in relation to its imports.

Q19. 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. exports will expand relative to imports.

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

Q20. 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)     Differential income growth.

C)     Inflation rates within a country.

Q21. The factor most likely to cause a nation's currency to appreciate on the foreign exchange market is:

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

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

C)   an increase in exports relative to imports.

答案和详解如下：

Q16. When a country’s monetary authority increases the money supply, a unit of money:

A)   gains value both in terms of the domestic goods it can buy and in terms of the foreign currency it can buy.

B)   gains value in terms of the domestic goods it can buy but loses value in terms of the foreign currency it can buy.

C)   loses value both in terms of the domestic goods it can buy and in terms of the foreign currency it can buy.

Correct answer is C)

An expansionary monetary policy causes inflation, which reduces domestic purchasing power. In addition, inflation causes a currency to depreciate in value.

Q17. Which of the following is least likely to cause a country's currency to depreciate?

A)     Faster growth of imports relative to exports.

B)     Domestic real interest rates are less than those abroad.

C)     Slow growth of income relative to one's trading partners.

Correct answer is C)

Slow growth of income relative to one's trading partners will cause imports to lag behind exports. When the demand for a country's exports increases, the demand for their currency also increases causing their currency to appreciate.

Q18. A country’s currency will appreciate when its:

A)   capital account is in surplus but not changing.

B)   imports rise in relation to its exports.

C)   exports rise in relation to its imports.

Correct answer is C)

A country’s currency will appreciate after its exports rise in relation to its imports. An increase in exports means that other countries are buying the country’s currency, which increases its value.

Q19. 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. exports will expand relative to imports.

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

Correct answer is 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.

Q20. 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)     Differential income growth.

C)     Inflation rates within a country.

Correct answer is 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.

Q21. The factor most likely to cause a nation's currency to appreciate on the foreign exchange market is:

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

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

C)   an increase in exports relative to imports.

Correct answer is C)

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.