Chapter 24 Self-test questions

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An appreciation of the UK currency means that __________

Inflation is high correct incorrect

You need more units of the pound to exchange for the same quantity of another currency than before correct incorrect

You will now require more units of another currency to exchange for the same quantity of the pound than before correct incorrect

Foreigners are showing gratitude for the pound correct incorrect

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The nominal effective exchange rate is __________

Considers all the currencies in the world correct incorrect

A price index which attaches weights to different currencies based on their relative importance to UK trade. correct incorrect

Not a useful measure of the exchange rate correct incorrect

None of the above correct incorrect

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The real exchange rate index index measures __________

The relative prices of domestic and foreign goods and services correct incorrect

The currency of one country against that of another country correct incorrect

Consumer price index correct incorrect

The nominal exchange rate minus inflation correct incorrect

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When a foreign country decides to increase its British pound reserves, it leads to __________

A sharp decline in the demand for the pound correct incorrect

A rise in demand for the pound correct incorrect

Shortage of the pound correct incorrect

None of the above correct incorrect

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The British pound faces a _________demand curve relative to the dollar

Positively sloping correct incorrect

Vertical correct incorrect

Horizontal correct incorrect

Downward sloping correct incorrect

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If the pound depreciates, American buyers will consume more British pork and this leads to _______

An increase in the demand for pounds correct incorrect

Shortages of British pork correct incorrect

Collapse of American pork producers correct incorrect

None of the above correct incorrect

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When the pound depreciates against the dollar, the quantity supplied of pounds __________

Remains constant correct incorrect

Rises correct incorrect

Falls correct incorrect

None of the above correct incorrect

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Under a floating exchange rate regime, the central bank _______

Can still influence the exchange rate by entering into the market correct incorrect

Is barred from buying or selling foreign currencies correct incorrect

Cannot influence market forces because of inefficiencies correct incorrect

None of the above correct incorrect

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When a country keeps its currency below the equilibrium market value, __________

The currency will float correct incorrect

The currency has been undervalued correct incorrect

The currency will lose value correct incorrect

The currency will depreciate correct incorrect

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When people expect the currency to be devalued, __________

They patiently wait for the action of the central bank correct incorrect

They sell off their assets correct incorrect

There is likely to be a currency flight correct incorrect

They often protest correct incorrect