Question : 20.1   The Balance of Payments 1) The price of one country’s : 1381282

20.1   The Balance of Payments

1) The price of one country’s currency in terms of another country’s currency is the

A) balance of trade.

B) exchange rate.

C) terms of trade.

D) currency valuation.

2) The agreements that were reached at the Bretton Woods conference in 1944 established a system

A) in which the values of currencies were fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading.

B) of floating exchange rates determined by the supply and demand of one nation’s currency relative to the currency of other nations.

C) of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed-upon value of its currency.

D) that prohibited governments from intervening in the foreign exchange markets.

3) In the early part of the twentieth century, nearly all currencies

A) were backed by gold.

B) were held together by a system of fixed exchange rates in which the value of those currencies was set in relation to the British pound.

C) were held together by a system of fixed exchange rates in which the value of those currencies was set in relation to the U.S. dollar.

D) were held together by a system of flexible exchange rates in which the value of those currencies fluctuated in response to the relative supply of and demand for them.

4) In 1971, most countries, including the United States,

A) returned to the gold standard.

B) adopted a new system of fixed exchange rates.

C) adopted a single, internationally accepted currency whose use is limited to international transactions.

D) gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand.

5) Which of the following increases the price of the dollar relative to the Mexican peso?

A) an increase in the supply of dollars

B) an increase in the demand for pesos

C) an increase in the demand for dollars

D) a decrease in the supply of pesos

6) Which of the following decreases the price of the dollar relative to the British pound?

A) a decrease in the supply of dollars

B) a decrease in the demand for pounds

C) an increase in the demand for dollars

D) an increase in the supply of dollars

7) An increase in the supply of dollars and an increase in the demand for Japanese yen

A) increases the dollar price of yen.

B) decreases the dollar price of yen.

C) increases the yen price of dollars.

D) does not change the exchange rate between dollars and yen.

8) An increase in the supply of dollars and an increase in the demand for Japanese yen

A) increases the value of the dollar.

B) increases the value of the yen.

C) increases the yen price of dollars.

D) does not change the exchange rate between dollars and yen.

9) A decrease in the supply of dollars and a decrease in the demand for Japanese yen

A) increases the value of the dollar.

B) increases the value of the yen.

C) increases the yen price of dollars.

D) does not change the exchange rate between dollars and yen.

10) The value of the dollar relative to the euro would increase if

A) the demand for dollars increases and the supply of euros increases.

B) the demand for dollars decreases and the supply of euros increases.

C) the supply of dollars increases and the demand for euros increases.

D) the supply of dollars increases and the demand for euros decreases.