Question : 81.The average price of a Big Mac in the United : 1299376

81.The average price of a Big Mac in the United States is $3.58. Which of the following currencies is the most overvalued according to the Big Mac Index?  

A. Japanese yen; average price of a Big Mac equals $3.50

B. South African rand; average price of a Big Mac equals $2.46

C. Norwegian krone; average price of a Big Mac equals $7.02

D. Chinese yuan; average price of a Big Mac equals $1.83

E. Swiss franc; average price of a Big Mac equals $6.80

82.Which of the following is true of inflation?  

A. It occurs when the demand for a particular currency is more than the supply

B. It occurs when securities are purchased in one market for immediate resale in another

C. It occurs when two parties agree to exchange currency and execute a deal at a specific date in the future

D. It occurs when the quantity of money in circulation rises faster than the stock of goods and services

E. It occurs when output increases faster than the money supply

83.Which of the following results from the output of goods and services not matching the increase in money supply?  

A. Inflation

B. Deflation

C. Arbitrage

D. Bandwagon effect

E. Carry trade

84.Which of the following occurs when a government increases money supply?  

A. It results in an overall decrease in credit.

B. It makes it difficult for individuals and companies to borrow from banks.

C. It makes it easier for banks to borrow from the government.

D. It causes a decrease in demand for goods and services.

E. It causes price deflation as the money supply exceeds goods and services output.

85.The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will see:  

A. appreciation in its currency exchange rate.

B. decrease in interest rates.

C. the collapse of the gold standard.

D. depreciation in its currency exchange rate.

E. a decrease in its money supply.

86.During inflation, an increase in the amount of currency available leads to:  

A. overheating of the economy thereby reducing the production levels in the economy.

B. changes in the relative demand and supply conditions in the foreign exchange market.

C. a reduction in the rate of inflation thus leading to an appreciation of the currency.

D. decreased lending by banks thereby resulting in more savings.

E. a decrease in the demand of goods and services which drives currency value higher.

87.Which of the following is true when a government is strongly committed to controlling the rate of growth in money?  

A. The country’s future inflation rate may be low.

B. The country’s currency will steadily depreciate significantly and instantly in the foreign exchange market.

C. The country’s economy will be marked by an abundance of liquidity.

D. The country will see a good number of populist measures not funded by taxation.

E. The country will struggle to match money supply with adequate supply of goods and services.

88.If a country’s government does not control the rate of growth in money supply:  

A. its future inflation rate will be low.

B. its taxes will decrease in the future.

C. it will see reduced spending on public infrastructure projects.

D. its currency could depreciate in the future.

E. its output of goods and services will exceed money supply, thereby fueling deflation.

89.Which of the following is a drawback of the purchasing power parity theory?     

A. It does not appear to be a strong predictor of short-run movements in exchange rates covering time spans of five years.

B. It does not explain change in exchange rates in terms of change in relative prices.

C. It cannot explain when the demand of a particular currency would exceed its supply and vice versa.

D. It does not address inflation in situations where governments control the rate of growth in money supply.

E. It cannot predict exchange rate changes for countries with high rates of inflation and underdeveloped capital markets.

90.The purchasing power parity (PPP) theory best predicts exchange rate changes for countries with _____.  

A. appreciating currencies

B. stable currencies

C. underdeveloped capital markets

D. small differentials in inflation rates

E. industrialized economies