United States Dollar and Basic Understanding Page

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EXCHANGE RATES: THE GLOBAL LINK

1.The exchange rate is the:
A)Opportunity cost at which goods are produced domestically.
B)Balance-of-trade ratio of one country to another.
C)Price of one country's currency expressed in terms of another country's currency.
D)Amount of currency that can be purchased with 1 ounce of gold.

Answer: C Type: Complex Understanding Page: 437

2.An exchange rate is:
A)Always fixed. C)The price of one currency in terms of another.
B)Tied to the price of gold. D)All of the above.

Answer: C Type: Basic Understanding Page: 437

FOREIGN-EXCHANGE MARKETS

3.The U.S. demand for foreign currency represents:
A)A demand for U.S. dollars.
B)A supply of U.S. dollars.
C)The foreign demand for U.S. exports.
D)A point of disequilibrium in the foreign-exchange market.

Answer: B Type: Basic Understanding Page: 437

4.The U.S. demand for foreign currency arises from speculation and the:
A)U.S. demand for foreign goods, services, and financial assets.
B)Foreign demand for United States goods, services, and financial assets.
C)Foreign demand for United States holdings of gold.
D)Supply of goods and services from the United States.

Answer: A Type: Definition Page: 437

5.The demand for dollars in the foreign-exchange market:
A)Is represented by a point in a diagram of foreign-exchange supply and demand.
B)Depends in part on the foreign demand for U.S. goods.
C)Depends on U.S. demand for foreign goods and services.
D)Is the ratio of the dollars demanded to the amount of foreign currency supplied.

Answer: B Type: Basic Understanding Page: 437