Econ 340 Exam 2 with accurate answers
100% 2026
What does a nation's demand for foreign exchange arise from? - Correct Answers Residents
visiting foreign countries
What does a nation's supply of a foreign exchange arise from? - Correct Answers inflow of
foreign investment, exports of goods and services to other nations, and investment returns
received from abroad
What would occur if the price level in the US decreases relative to the UK? - Correct Answers
the US will now find imports from the UK more expensive, the demand curve for pound will
shift down (to the left), and the supply curve for pound will shift down (to the right)
What would occur if the interest rate in the US increases relative to that in the UK? - Correct
Answers US dollar will appreciate against the British pound, the demand curve for pound will
shift down, and the supply curve for pound will shift down
In 2017, banks in what country took the leading role in the foreign exchange market trading? -
Correct Answers UK
Today, about _______ of foreign exchange trading is used to finance international trade? -
Correct Answers 10%
If the exchange rate between US dollar and Japanese yen changes from $1=y100 to $1=Y80 the
dollar is said to have______ against the yen and the yen has _______ against the dollar. -
Correct Answers depreciated, appreciated
According to the law of one price, in order for the commodity arbitrage to equalize the price of
homogeneous traded commodities, it is necessary that what does not exist? - Correct Answers
Transportation costs, tariffs, and non tariff barriers
, If the price for a big mac in the US is $2 and the exchange rate between the dollar and the
pound is $1.6=P1, what should be the price for a big mac in the UK according to the law of one
price? - Correct Answers 2/1.6= p1.25
If the price index is 120 in the US and 90 in the UK, what should be the equilibrium exchange
rate between the dollar and pound according to the absolute PPP theory? - Correct Answers
Pd/Pf=120/90=1.33
Suppose the price level in the US is 110 in 2010 and 132 in 2020, and the price level in Mexico is
150 in 2010 and 240 in 2020. According to the relative PPP theory, What would happen to the
exchange rate between dollar and Mexican peso over the period of 2010-2020? - Correct
Answers Dollar depreciates by 25%
What will happen when the dollar appreciates in real terms against Chinese yuan? - Correct
Answers Imports from china are sold at a lower price in the US
What will happen when dollar depreciates in real terms against Chinese yuan? - Correct
Answers Us exporters gain competitiveness in the Chinese market, Chinese investors find it
cheaper to invest in the US, and US import-competing sectors gain competitiveness against
import from China
What is not recorded in the U.S. current account? - Correct Answers Subsidiaries of US
multinationals produce and sell products in China
What is recorded in the U.S. financial account? - Correct Answers US residents purchase stocks
in a Chinese company, US residents receive dividends from investments in Korea, US residents
remit money to family members in Fiji
US has an export surplus in - Correct Answers chemicals
100% 2026
What does a nation's demand for foreign exchange arise from? - Correct Answers Residents
visiting foreign countries
What does a nation's supply of a foreign exchange arise from? - Correct Answers inflow of
foreign investment, exports of goods and services to other nations, and investment returns
received from abroad
What would occur if the price level in the US decreases relative to the UK? - Correct Answers
the US will now find imports from the UK more expensive, the demand curve for pound will
shift down (to the left), and the supply curve for pound will shift down (to the right)
What would occur if the interest rate in the US increases relative to that in the UK? - Correct
Answers US dollar will appreciate against the British pound, the demand curve for pound will
shift down, and the supply curve for pound will shift down
In 2017, banks in what country took the leading role in the foreign exchange market trading? -
Correct Answers UK
Today, about _______ of foreign exchange trading is used to finance international trade? -
Correct Answers 10%
If the exchange rate between US dollar and Japanese yen changes from $1=y100 to $1=Y80 the
dollar is said to have______ against the yen and the yen has _______ against the dollar. -
Correct Answers depreciated, appreciated
According to the law of one price, in order for the commodity arbitrage to equalize the price of
homogeneous traded commodities, it is necessary that what does not exist? - Correct Answers
Transportation costs, tariffs, and non tariff barriers
, If the price for a big mac in the US is $2 and the exchange rate between the dollar and the
pound is $1.6=P1, what should be the price for a big mac in the UK according to the law of one
price? - Correct Answers 2/1.6= p1.25
If the price index is 120 in the US and 90 in the UK, what should be the equilibrium exchange
rate between the dollar and pound according to the absolute PPP theory? - Correct Answers
Pd/Pf=120/90=1.33
Suppose the price level in the US is 110 in 2010 and 132 in 2020, and the price level in Mexico is
150 in 2010 and 240 in 2020. According to the relative PPP theory, What would happen to the
exchange rate between dollar and Mexican peso over the period of 2010-2020? - Correct
Answers Dollar depreciates by 25%
What will happen when the dollar appreciates in real terms against Chinese yuan? - Correct
Answers Imports from china are sold at a lower price in the US
What will happen when dollar depreciates in real terms against Chinese yuan? - Correct
Answers Us exporters gain competitiveness in the Chinese market, Chinese investors find it
cheaper to invest in the US, and US import-competing sectors gain competitiveness against
import from China
What is not recorded in the U.S. current account? - Correct Answers Subsidiaries of US
multinationals produce and sell products in China
What is recorded in the U.S. financial account? - Correct Answers US residents purchase stocks
in a Chinese company, US residents receive dividends from investments in Korea, US residents
remit money to family members in Fiji
US has an export surplus in - Correct Answers chemicals
