Assume that an American investor decides to buy one-year Swiss bonds that are denominated in Swiss francs and pay 2 percent annual interest. For this purpose, 10,000 is exchanged into Swiss francs at an exchange rate of 1 = 2Fr to buy the bonds. How many dollars will the investor have after one year if the exchange rate is 1 = 1.5Fr?
a. 10,000
b. 10,200
c. 15,300
d. 13,600
e. 7,650
Question 2A decrease in supply will cause a surplus at the original market price.
a. True
b. False
Indicate whether the statement is true or false
Question 3Expansionary fiscal policy may have an even smaller effect on aggregate demand in the open economy than a closed economy.
a. True
b. False
Indicate whether the statement is true or false
Question 4Which of the following is true of the European Currency Unit?
a. It was used by the European nations as a medium of exchanging goods and services.
b. It was an accounting entry that was transferred between two European nations.
c. It was replaced by the euro in the early 1980s.
d. It was denominated in the British pound.
e. It was a primary international reserve asset of most of the nations across the world.
Question 5An increase in demand will cause a shortage at the original market price.
a. True
b. False
Indicate whether the statement is true or false
Question 6The crowding-out effect occurs when household consumption and investment spending decrease as a result of financing a budget deficit.
a. True
b. False
Indicate whether the statement is true or false
Question 7The primary international reserve asset in most countries is:
a. silver.
b. gold.
c. the euro.
d. the U.S. dollar.
e. the Japanese yen.
Question 8A decrease in demand will cause a surplus at the original market price
a. True
b. False
Indicate whether the statement is true or false
Question 9When the economy is at the full employment level of real GDP, expansionary fiscal policy will not increase the economy's total output in the long run.
a. True
b. False
Indicate whether the statement is true or false
Question 10Which of the following can be categorized as a composite currency?
a. Italian lira
b. European Currency Unit
c. Pound
d. Australian dollar
e. Danish Krone
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