How many dollars do you need to buy a Swedish Kronor (SEK) when the exchange rate is 1 = 6.429 SEK?
a. 0.016
b. 1.056
c. 0.649
d. 0.156
e. 1.56
Question 2With flexible exchange rates, the imbalance between debits and credits arising from shifts in currency demand and/or supply is accommodated through special financial borrowings or reserve movements.
a. True
b. False
Indicate whether the statement is true or false
Question 3The ability to pay principle suggests that:
a. traditional exemptions should be removed since they are more frequently used by people with ability to pay more taxes.
b. people with different levels of income should be treated in the same manner.
c. individuals receiving the benefits should be those who pay for them.
d. those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes.
Question 4One of the advantages of floating exchange rates is that:
a. consumers always know how much imported goods cost.
b. businesses always know, in advance, what future exchange rates will be.
c. countries are free to pursue their own macroeconomic policies without maintaining exchange rates.
d. countries cannot act independently and must thus coordinate their macroeconomic policies.
e. the global interest rate tends to decline to the lowest possible level.
Question 5Since the advent of flexible exchange rates, world trade has not only continued but also expanded.
a. True
b. False
Indicate whether the statement is true or false
Question 6If Jim earns 300,000 this year and pays 75,000 in taxes and Sharon earns 80,000 this year and pays 20,000 in taxes, this tax system would appear to be
a. progressive.
b. proportional.
c. regressive.
d. none of the above
Question 7Under a fixed exchange-rate system, in order to maintain the exchange rate:
a. governments must adopt a laissez-faire economic policy.
b. all trading partners must enjoy the same level of economic growth.
c. currencies must be inconvertible.
d. the imports of one country must equal the exports of its trading partner.
e. governments must intervene in the foreign exchange market.
Question 8The current exchange rate system is effectively a dirty float system.
a. True
b. False
Indicate whether the statement is true or false
Question 9If Stephen earns 100,000 this year and pays 20,000 in taxes and Chris earns 50,000 this year and pays 5,000 in taxes, this tax system would appear to be
a. progressive.
b. proportional.
c. regressive.
d. none of the above
Question 10Fixed exchange rates require the economic policies of countries linked by the exchange rate to be:
a. completely independent.
b. complementary to each other.
c. determined by the World Bank.
d. similar in nature.
e. determined by the International Monetary Fund.
Question 11Fixed exchange rates give countries too much freedom over their monetary policies, thereby threatening higher rates of inflation.
a. True
b. False
Indicate whether the statement is true or false
Question 12A flat tax:
a. is designed so that everybody would pay the same number of dollars in taxes.
b. is designed in such a way that as a person's income rises, the tax rate falls.
c. is designed so that everybody would be charged the same percentage of their income.
d. is designed to take a smaller percentage of higher incomes as compared to lower incomes.
Question 13Under the flexible exchange rate system, when a country tries to stimulate economic growth and improve its employment rates, it is likely to cause:
a. the domestic inflation rate to rise and the domestic currency to depreciate.
b. the domestic inflation rate to rise and the domestic currency to appreciate.
c. the domestic inflation rate and the value of the domestic currency to remain constant.
d. the domestic inflation rate to fall and the domestic currency to appreciate.
e. the domestic inflation rate to fall and the domestic currency to depreciate.
Question 14Prior to 1973, the world operated on a system of fixed exchange rates called the Bretton Woods system.
a. True
b. False
Indicate whether the statement is true or false
Question 15Which of the following is not an option that could be used to save Social Security?
a. Decreasing the age required for full-time benefits.
b. Implementing means testing
c. Allowing individuals to opt out of the Social Security system
d. Increasing the return to Social Security funds
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