Question :
91) Suppose there a rise in the world price of : 1384548
91) Suppose there is a rise in the world price of Canada’s imports. If the Canadian demand for imports has a price elasticity greater than 1 (elastic), the demand for foreign exchange will ________ and the Canadian dollar will ________.
A) rise; appreciate
B) rise; depreciate
C) fall; appreciate
D) fall; depreciate
E) fall; and remain constant
92) Suppose there is a rise in the world price of Canada’s imports. If the Canadian demand for imports has a price elasticity less than 1 (inelastic), the demand for foreign exchange will ________ and the Canadian dollar will ________.
A) rise; appreciate
B) rise; depreciate
C) fall; appreciate
D) fall; depreciate
E) fall; and remain constant
93) If there are no transactions in the official financing account, it is likely that
A) the central bank has pegged the exchange rate so that the current and capital accounts sum to zero.
B) the exchange rate is being determined freely in the foreign-exchange market.
C) this country must not be engaging in international trade.
D) there must be a disequilibrium in the foreign-exchange market.
E) this country has a pegged exchange rate and persistent surpluses on its balance of payments.
94) Assume exchange rates are flexible. The existence of inflation in a country that is higher than inflation in the rest of the world will tend to
A) increase the demand for that country’s currency in the foreign-exchange market, and lead to an appreciation of that currency.
B) increase the supply of that country’s currency in the foreign-exchange market, and lead to a depreciation of that currency.
C) increase its exports.
D) decrease its imports.
E) have no effect on the foreign-exchange market.
95) Assume exchange rates are flexible. General domestic inflation that is above inflation in the rest of the world will affect the supply and demand for foreign exchange in the following way:
A) decrease the demand and increase the supply
B) increase both the supply and demand
C) decrease both the supply and demand
D) decrease the supply and increase the demand
E) there will be no effect.
96) Assume exchange rates are flexible. When the quality of one country’s products is improving more rapidly than the quality of the products produced in the rest of the world, there will be a tendency, ceteris paribus, for
A) short term capital to flow out of the country.
B) the country’s interest rates to rise relative to the rest of the world.
C) that country’s currency to appreciate.
D) that country’s currency to depreciate.
E) the country’s inflation rate to rise relative to the rest of the world.
97) Assume exchange rates are flexible. Capital inflows tend to
A) appreciate the currency of the capital-importing nation.
B) appreciate the currency of the capital-exporting nation.
C) increase the supply of the capital-importing country’s currency in the foreign-exchange market.
D) increase the demand for the capital-exporting country’s currency in the foreign-exchange market.
E) decrease the official reserves of the capital-importing country.
98) Assume exchange rates are flexible. Other things being equal, a contractionary monetary policy in Canada will tend to cause a(n)
A) depreciation of the Canadian dollar.
B) appreciation of the European currency.
C) financial capital outflows.
D) a decreased external value of the Canadian dollar.
E) appreciation of the Canadian dollar.
99) Long-term capital movements are largely influenced by
A) long-term expectations about another country’s profit opportunities and the path of the exchange rate.
B) differences in the overnight interest rates between the domestic country and foreign countries.
C) speculation about movements in the exchange rate in coming months.
D) whether they are treated as debits or credits in the capital account.
E) speculation about the movements in monthly inflation rate estimates.
100) If a Canadian company builds and operates a mine in Indonesia, in the foreign-exchange market there will be a(n)
A) fall in the demand for dollars in the foreign-exchange market.
B) increase in the demand for dollars in the foreign-exchange market.
C) fall in the supply of dollars to the foreign-exchange market.
D) increase in the supply of dollars to the foreign-exchange market.
E) decrease in the debits on Canada’s capital account.
