NOMINAL EXCHANGE RATES
1. The nominal exchange rate is the
a nominal interest rate in one country divided by the nominal interest rate in the
. other country.
b the ratio of a foreign country’s interest rate to the domestic interest rate.
.
c rate at which a person can trade the currency of one country for another.
.
d the real exchange rate minus the inflation rate.
.
3. If the exchange rate were 5 Egyptian pounds per U.S. dollar, a watch that costs
$25 US dollars would cost
a 125 Egyptian pounds
.
b 50 Egyptian pounds
.
c 5 Egyptian pounds
.
d None of the above is correct.
.
6. You are planning a graduation trip to Nepal. Other things the same, if the dollar
appreciates relative to the Nepalese rupee, then
a the dollar buys fewer rupees. Your purchases in Nepal will require fewer dollars.
.
b the dollar buys fewer rupees. Your purchases in Nepal will require more dollars.
.
c the dollar buys more rupees. Your purchases in Nepal will require fewer dollars.
.
d the dollar buys more rupees. Your purchases in Nepal will require more dollars.
.
7. You are planning a graduation trip to Nepal. Other things the same, if the dollar
depreciates relative to the Nepalese rupee, then
a the dollar buys fewer rupees. Your purchases in Nepal will require fewer dollars.
.
b the dollar buys fewer rupees. Your purchases in Nepal will require more dollars.
.
c the dollar buys more rupees. Your purchases in Nepal will require fewer dollars.
.
d the dollar buys more rupees. Your purchases in Nepal will require more dollars.
.
8. You are the CEO of a U.S. firm considering building a factory in Chile. If the
dollar appreciates relative to the Chilean peso, then other things the same
a it takes fewer dollars to build the factory. By itself building the factory increases
. U.S. net capital outflow.
b it takes fewer dollars to build the factory. By itself building the factory decreases
. U.S. net capital outflow.
c it takes more dollars to build the factory. By itself building the factory increases
. U.S. net capital outflow.
d it takes more dollars to build the factory. By itself building the factory decreases
. U.S. net capital outflow.
9. If you go to the bank and notice that a dollar buys more Mexican pesos than it
used to, then the dollar has
a appreciated. Other things the same, the appreciation would make Americans less
. likely to travel to Mexico.
b appreciated. Other things the same, the appreciation would make Americans more
. likely to travel to Mexico.
c depreciated. Other things the same, the depreciation would make Americans less
. likely to travel to Mexico.
d depreciated. Other things the same, the depreciation would make Americans more
. likely to travel to Mexico.
10. You are staying in London over the summer and you have a number of dollars
with you. If the dollar depreciates relative to the British pound, then other things the same,
a the dollar would buy more pounds. The depreciation would discourage you from
. buying as many British goods and services.
b the dollar would buy more pounds. The depreciation would encourage you to buy
. more British goods and services.
c the dollar would buy fewer pounds. The depreciation would discourage you from
. buying as many British goods and services.
d the dollar would buy fewer pounds. The depreciation would encourage you to
. buy more British goods and services.
11. If you are vacationing in France and the dollar depreciates relative to the euro,
then
a the dollar buys more euros. It will take fewer dollars to buy a good that costs 50
. euros.
b the dollar buys more euros. It will take more dollars to buy a good that costs 50
. euros.
c the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50
. euros.
d the dollar buys fewer euros. It will take more dollars to buy a good that costs 50
. euros.
12. Other things the same, if the exchange rate changes from 75 Algerian dinar per
dollar to 72 Algerian dinar per dollar, the dollar has
a appreciated and so buys more Algerian goods.
.
b appreciated and so buys fewer Algerian goods.
.
c depreciated and so buys more Algerian goods.
.
d depreciated and so buys fewer Algerian goods.
.
13. Other things the same, if the exchange rate changes from 30 Thai bhat per dollar
to 25 Thai bhat per dollar, then the dollar has
a appreciated and so buys more Thai goods.
.
b appreciated and so buys fewer Thai goods.
.
c depreciated and so buys more Thai goods.
.
d depreciated and so buys fewer Thai goods.
.
14. Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per
dollar to .35 Kuwaiti dinar per dollar, then the dollar has
a appreciated and so buys more Kuwaiti goods.
.
b appreciated and so buys fewer Kuwaiti goods.
.
c depreciated and so buys more Kuwaiti goods.
.
d depreciated and so buys fewer Kuwaiti goods.
.
15. If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155
Kazakhstan tenge per dollar, the dollar has
a appreciated. Other things the same, it now takes fewer dollars to buy
. Kazakhstani goods.
b appreciated. Other things the same, it now takes more dollars to buy Kazakhstani
. goods.
c depreciated. Other things the same, it now takes fewer dollars to buy
. Kazakhstani goods.
d depreciated. Other things the same, it now takes more dollars to buy Kazakhstani
. goods.
16. If the exchange rate is 3 units of Peruvian currency per dollar and a hotel room in
Lima costs 300 units of Peruvian currency, then how many dollars do you need to get a room?
a 900 and your purchase will increase Peru's net exports.
.
b 100 and your purchase will increase Peru's net exports.
.
c 900 and your purchase will have no effect on Peru's net exports.
.
d 100 and your purchase will have no effect on Peru's net exports.
.
17. If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it
will be 14 pesos, then the forecast is given in
a real terms and implies the dollar will appreciate.
.
b real terms and implies the dollar will depreciate.
.
c nominal terms and implies the dollar will appreciate.
.
d nominal terms and implies the dollar will depreciate.
.