If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a 12 watch in New York City.
a. c and e
b. 10 U.S. dollars
c. 12 U.S. dollars
d. 14.4 U.S. dollars
e. 14.4 Canadian dollars
QUESTION 2When one observes consumption and investment patterns over time, one finds that:
a. like consumption, investment is fairly stable over time.
b. like consumption, investment is fairly erratic over time.
c. unlike consumption, which is fairly stable over time, investment is subject to erratic fluctuations.
d. unlike consumption, which is subject to erratic fluctuations, investment is fairly stable over time.
e. investment is rarely affected by technological and economic factors.
QUESTION 3A concern about crowding out caused by increased government borrowing is that:
a. interest rates on private borrowing fall.
b. lower rates of economic growth can result from a decline in business investment spending.
c. the federal government may default on its loans.
d. foreign lenders find it less attractive to help finance federal deficits.
QUESTION 4If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies, then the exchange rate is:
a. fixed.
b. government-determined.
c. set by the value of gold.
d. floating.
e. improper.
QUESTION 5The demand curve for investment in the economy as a function of interest rates is:
a. vertical.
b. horizontal.
c. upward sloping.
d. downward sloping.
e. elliptical.
QUESTION 6The crowding-out effect can be:
a. zero.
b. partial.
c. complete.
d. any of these.
QUESTION 7Suppose a U.S.-made machine costs 500 and the exchange rate is 100 yen = 1 . Now the exchange rate changes to 90 yen = 1 . Then the:
a. machine would now cost more dollars.
b. machine would now cost the Japanese citizen less yen.
c. machine would now cost less dollars.
d. machine would now cost the Japanese citizen more yen.
e. yen has depreciated in value.
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