FIN 6420 CH 4 EXAM QUESTIONS AND ANSWERS LATEST UPDATE 2025/2026
Which of the following situations is most likely to strengthen the yen's value against the dollar?
Assume everything else is held constant.
a. a reduction in US inflation accompanied by an increase in US interest rates
b. a reduction in Japan's inflation accompanied by an increase in Japan's interest rates
c. a reduction in US inflation accompanied by an increase in Japan's inflation
d. an increase in US inflation accompanied by no change in US nominal interest rates - Answers
a reduction in Japan's inflation accompanied by an increase in Japan's interest rates
If a country experiences low inflation relative to the United States, its exports to the United
States should ____, and there is ____ pressure on its currency's equilibrium value.
a. decrease; downward
b. decrease; upward
c. increase; downward
d. increase; upward - Answers increase; upward
If inflation in New Zealand suddenly increased while U.S. inflation stayed the same, there would
be:
a. an inward shift in the demand schedule for NZ$ and an outward shift in the supply schedule
for NZ$
b. an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule
for NZ$
c. an outward shift in the demand schedule for NZ$ and an outward shift in the supply schedule
for NZ$
d. an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for
NZ$ - Answers an inward shift in the demand schedule for NZ$ and an outward shift in the
supply schedule for NZ$
Assume that the British government eliminates all controls on imports by British companies.
, Other things being equal, the US demand for pounds would ____, the supply of pounds for sale
would ____, and the equilibrium value of the pound would ____.
a. increase; increase; increase
b. decrease; increase; decrease
c. remain unchanged; increase; decrease
d. remain unchanged; increase; increase - Answers remain unchanged; increase; decrease
If the United States experiences a sudden surge in inflation and a surge in interest rates while
Japanese inflation and interest rates remain unchanged, the value of the Japanese yen will ____
against the US dollar
a. appreciate
b. depreciate
c. remain unchanged
d. cannot be determined from the information provided - Answers cannot be determined from
the information provided
The supply curve for a currency is downward sloping since US corporations would be
encouraged to purchase more foreign goods when the foreign currency is worth less. T/F? -
Answers FALSE
The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is the
value of euro today?
a. $1.365
b. $1.235
c. $1.330
d. $1.30 - Answers $1.235
The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian
dollar was $0.69. The Australian dollar ____ by ____%.
Which of the following situations is most likely to strengthen the yen's value against the dollar?
Assume everything else is held constant.
a. a reduction in US inflation accompanied by an increase in US interest rates
b. a reduction in Japan's inflation accompanied by an increase in Japan's interest rates
c. a reduction in US inflation accompanied by an increase in Japan's inflation
d. an increase in US inflation accompanied by no change in US nominal interest rates - Answers
a reduction in Japan's inflation accompanied by an increase in Japan's interest rates
If a country experiences low inflation relative to the United States, its exports to the United
States should ____, and there is ____ pressure on its currency's equilibrium value.
a. decrease; downward
b. decrease; upward
c. increase; downward
d. increase; upward - Answers increase; upward
If inflation in New Zealand suddenly increased while U.S. inflation stayed the same, there would
be:
a. an inward shift in the demand schedule for NZ$ and an outward shift in the supply schedule
for NZ$
b. an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule
for NZ$
c. an outward shift in the demand schedule for NZ$ and an outward shift in the supply schedule
for NZ$
d. an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for
NZ$ - Answers an inward shift in the demand schedule for NZ$ and an outward shift in the
supply schedule for NZ$
Assume that the British government eliminates all controls on imports by British companies.
, Other things being equal, the US demand for pounds would ____, the supply of pounds for sale
would ____, and the equilibrium value of the pound would ____.
a. increase; increase; increase
b. decrease; increase; decrease
c. remain unchanged; increase; decrease
d. remain unchanged; increase; increase - Answers remain unchanged; increase; decrease
If the United States experiences a sudden surge in inflation and a surge in interest rates while
Japanese inflation and interest rates remain unchanged, the value of the Japanese yen will ____
against the US dollar
a. appreciate
b. depreciate
c. remain unchanged
d. cannot be determined from the information provided - Answers cannot be determined from
the information provided
The supply curve for a currency is downward sloping since US corporations would be
encouraged to purchase more foreign goods when the foreign currency is worth less. T/F? -
Answers FALSE
The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is the
value of euro today?
a. $1.365
b. $1.235
c. $1.330
d. $1.30 - Answers $1.235
The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian
dollar was $0.69. The Australian dollar ____ by ____%.
