Question

____   73.   If a nation imposes a tariff on imports,

a.	part of the tax is paid by foreign exporters.
b.	the entire tax is paid by foreign exporters.
c.	none of the tax is paid by foreign exporters.
d.	the tax has no impact on the profits of foreign exporters.

____   74.   Exchange rates determined by the forces of demand and supply are called

a.	fixed exchange rates.
b.	floating exchange rates.
c.	equilibrium exchange rates.
d.	dirty exchange rates.

____   75.   Who among the following is most likely to favor an appreciation of the U.S. dollar?

a.	a German professor visiting Chicago
b.	an American farmer who depends on exports
c.	an American professor on a tour of Austrian universities
d.	Disney World in Orlando, Florida, a popular destination for foreign tourists

____   76.   If the United States experiences an economic boom, compared to other countries, how will this affect the value of the U.S. dollar?

a.	It will fall because other nations would be forced to raise their interest rates.
b.	It will fall because the United States will import more goods and services, leading to an increased supply of dollars.
c.	It will rise because U.S. GDP would be rising faster than other countries.
d.	It will rise because the Fed will have to lower U.S. interest rates.

____   77.   If a country is in a strong upward phase of the business cycle, one can expect that its currency will

a.	revalue.
b.	devalue.
c.	appreciate.
d.	depreciate.

____   78.   The exchange rate of Country X is set by government decisions and maintained by government actions. Country X follows a

a.	floating exchange rate policy.
b.	free market exchange rate policy.
c.	pegged exchange rate policy.
d.	fixed exchange rate policy.

____   79.   An important effect of foreign currency speculators is that

a.	they have consistently lost money and have left the market.
b.	they have pushed exchange rates to wider extremes than most economists predicted.
c.	they actually limit the volatility of exchange rate movements.
d.	they have had no effect at all on exchange rate volatility.

____   80.   For a major country with extensive capital flows, what is the effect of an increase in interest rates?

a.	a currency depreciation and increased net exports
b.	a currency depreciation and reduced net exports
c.	a currency appreciation and increased net exports
d.	a currency appreciation and reduced net exports

Answer 1

Answer 73) If a nation imposes a tariff on imports, the entire tax is paid by foreign exporters.

Hence option B is the correct answer.

74) Exchange rates determined by the forces of demand and supply are called floating exchange rates. A floating exchange rate is a system where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.

Hence option B is the correct answer.

77) If a country is in a strong upward phase of the business cycle, one can expect that its currency will appreciate. In upward cycle means country is growing then the people would have an incentive to invest so the currency would appreciate.

Hence option C is the correct answer.

78)The exchange rate of Country X is set by government decisions and maintained by government actions. Country X follows a fixed exchange rate policy.  fixed exchange rate is a system applied by a government or central bank ties the country's currency official exchange rate to another country's currency or the price of gold.

Hence option D is the correct answer.

80) For a major country with extensive capital flows, the effect of an increase in interest rates a currency appreciation and reduced net exports.

Hence option D is the correct answer.

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