Question : 21) On the foreign exchange market, an increase in a : 1240707

21) On the foreign exchange market, an increase in a country’s exchange rate

A) decreases the quantity demanded of its currency and leads to a movement up along the demand curve.

B) increases the quantity demanded of its currency and leads to a movement up along the demand curve.

C) increases the quantity demanded of its currency and leads to a movement down along the demand curve.

D) decreases the demand for its currency and shifts the demand curve rightward.

E) decreases the demand for its currency and shifts the demand curve leftward.

22) If the exchange rate rises, then the quantity of dollars demanded ________ because with the higher U.S. exchange rate, U.S. exports ________.

A) increases; increase

B) increases; decrease

C) decreases; increase

D) decreases; decrease

E) does not change; do not change

23) If the current exchange rate is 1.00 euro per dollar and the expected exchange rate at the end of the month rises to 1.20 euros per dollar, then the demand for dollars ________ because people expect holding of dollars to become ________ profitable.

A) increases; more

B) increases; less

C) decreases; more

D) decreases; less

E) does not change; neither more nor less

24) When the exchange rate between the U.S. dollar and the euro changes from 1.30 euros per dollar to 1.00 euro per dollar the dollar has ________ and U.S. goods have become ________ to people in Europe so that quantity of U.S. dollars demanded ________.

A) depreciated; cheaper; increases

B) depreciated; more expensive; decreases

C) depreciated; cheaper; decreases

D) appreciated; more expensive; decreases

E) appreciated; cheaper; increases

25) Which of the following statements about the foreign exchange market is correct?

A) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.

B) The lower the expected future exchange rate, the smaller is the expected profit from holding dollars and so the greater is the demand for dollars.

C) The higher the expected future exchange rate, the smaller is the expected profit from holding dollars and so the smaller is the demand for dollars.

D) The higher the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.

E) The lower the expected future exchange rate, the greater is the expected profit from holding dollars and so the greater is the demand for dollars.

26) Which of the following are reasons why U.S. residents supply dollars to the foreign exchange market?

i.to buy U.S. exports

ii.to buy foreign real estate

iii.to buy foreign bonds

A) i only

B) ii only

C) iii only

D) i and iii

E) ii and iii

27) If the exchange rate rises, the quantity of dollars supplied

A) increases, and there is movement up along the supply curve of dollars.

B) increases, and there is movement down along the supply curve.

C) decreases, and there is movement down along the supply curve.

D) does not change.

E) increases with movement down along the supply curve.

28) If the exchange rate falls, the quantity of dollars supplied

A) increases, and there is movement up along the supply curve of dollars.

B) decreases, and there is movement down along the supply curve of dollars.

C) does not change.

D) increases, and there is movement down along the supply curve of dollars.

E) decreases, and there is movement up along the supply curve of dollars.

29) In the foreign exchange market, the

A) quantity of dollars supplied increases as the exchange rate increases and the supply of dollars does not change.

B) quantity of dollars supplied increases as the exchange rate decreases and the supply of dollars does not change.

C) supply of dollars increases as the exchange rate increases and the quantity of dollars supplied does not change.

D) supply of dollars decreases as the exchange rate increases and the quantity of dollars supplied does not change.

E) both the quantity of dollars supplied and the supply of dollars increases as the exchange rate increases.

30) As the exchange rate ________, the quantity supplied of U.S. dollars ________.

A) rises; increases

B) falls; increases

C) falls; remains the same because it is the supply of U.S. dollars decreases so that the supply curve shifts leftward

D) rises; decreases

E) rises; remains the same because it is the supply of U.S. dollars increases so that the supply curve shifts rightward