If the exchange rate has been 1.50 per British pound but now falls to 1.25 per British pound, there will be
a. more U.S. imports from Great Britain because the price of pounds has fallen
b. more exports to Great Britain because the price of pounds has risen
c. fewer exports to Great Britain because the price of the pound has risen
d. more U.S. exports to Great Britain since the price of the dollar has fallen
e. no change in either exports or imports
QUESTION 2In most state-run lotteries,
a. the winner receives a single lump-sum payment
b. the present value of the winnings is less than the number of dollars won
c. the present value of the winnings exceeds the number of dollars won
d. winners are paid the present value of the total amount won
e. winners are paid only in the distant future
QUESTION 3Imagine that there are only two nations in the world, the United States and Mexico. If Mexico experiences a drop in the price of foreign exchange, people in Mexico will
a. have to buy more U.S. currency, because prices of imports from the United States will have increased
b. end up buying less U.S. currency, because U.S. prices on goods will decrease to everyone
c. be able to afford less U.S. currency, and imports from the United States will be more expensive
d. be able to afford more U.S. currency, and imports from the United States will be cheaper
e. be able to afford more U.S. currency, and imports from the United States will be more expensive
QUESTION 4Winners of the Jackson City Lottery prize of 10 million are paid 1 million per year for ten years. Paid out in this form, this prize is
a. worth less than 10 million because the payment is deferred over time
b. worth more than 10 million because the payments remain constant for the next ten years
c. worth more than 10 million because the tax burden on the smaller payments is less
d. worth exactly 10 million
e. not worth 10 million only if the interest rate is positive
QUESTION 5If a foreign currency becomes more expensive in United States dollars, we would expect
a. U.S. exports to increase
b. U.S. imports to increase
c. U.S. exports to remain constant
d. U.S. exports to decrease
e. the quantity of foreign currency demanded in the United States to rise
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