Assume that the yen price of one U.S. dollar rises to 80 yen and that the Bank of Japan has a target exchange rate of 75 yen per dollar. As a result, the Bank of Japan will intervene in the foreign exchange market by:
a. selling U.S. dollars and buying yen.
b. selling both U.S. dollars and yen.
c. buying U.S. dollars and selling yen.
d. buying both U.S. dollars and yen.
e. buying U.S. Treasury securities.
Question 2A leftward shift of the demand curve results in:
a. increase in equilibrium price.
b. increase in quantity.
c. decrease in both equilibrium price and quantity.
d. decrease in quantity and an indeterminate equilibrium price.
Question 3A reserve requirement of 10 implies a money multiplier of 10 and a reserve requirement of 15 implies a money multiplier of 15.
a. True
b. False
Indicate whether the statement is true or false
Question 4Which of the following is most likely to lead to an increase in the demand for U.S. dollars in the foreign exchange market?
a. U.S. firms purchasing raw materials from Japan
b. U.S. speculators expecting the value of the German mark to rise
c. The Fed intervening in the foreign exchange market and devaluing the dollar
d. Speculative outflows of money from the United States to Britain because of higher interest rates in Britain
e. Japanese cars becoming more popular in the United States
Question 5Which of the following is false?
a. If demand decreases and supply increases, the equilibrium price will rise.
b. If supply decreases and demand remains the same, the equilibrium price will rise.
c. if supply increases and demand decreases, the equilibrium price will fall.
d. if demand increases and supply decreases, the equilibrium price will rise.
Question 6Banks create money when they increase demand deposits through the process of creating loans.
a. True
b. False
Indicate whether the statement is true or false
Question 7The supply curve of U.S. dollars in the foreign exchange market is:
a. downward-sloping because it is negatively related to U.S. exports.
b. downward-sloping because it is negatively related to U.S. imports.
c. upward-sloping because it is positively related to U.S. exports.
d. upward-sloping because it is positively related to U.S. imports.
e. horizontal because it is unrelated to foreign demand for U.S. goods and services.
Question 8Which of the following changes would tend to both decrease the quantity of a good traded and increase the price?
a. An increase in demand.
b. A decrease in demand.
c. An increase in supply.
d. A decrease in supply.
Question 9For society, more money means more wealth.
a. True
b. False
Indicate whether the statement is true or false
Question 10The supply of the U.S. dollar on the foreign exchange market is generated by:
a. demand for U.S. exports.
b. the U.S. demand for the products and financial assets of other countries.
c. the U.S. demand for domestic goods and services.
d. foreign demand for U.S. products.
e. foreign demand for U.S. financial assets.
Question 11If nuts and bolts are complements, an increase in the price of nuts caused by a change in the supply of nuts will
a. increase the number of bolts sold.
b. decrease the demand for nuts
c. increase the price of bolts.
d. decrease the number of bolts sold
Question 12Reserve requirements exist primarily to prevent bank failures.
a. True
b. False
Indicate whether the statement is true or false
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