Exchange-Rate Adjustments And The Balance Of MCQs

Option A: depreciation generally improves the trade balance

Option B: depreciation generally hurts the trade balance

Option C: no strong generalization is possible

Option D: depreciation has no effect on the trade balance

Correct Answer: no strong generalization is possible ✔

Option A: pass through

Option B: absorption

Option C: adjustment mechanism

Option D: currency contract period

Correct Answer: pass through ✔

Option A: sooner

Option B: longer

Option C: bigger

Option D: smaller

Correct Answer: sooner ✔

Option A: improves

Option B: worsens

Option C: is unaffected

Option D: falls for a while before increasing

Correct Answer: is unaffected ✔

Option A: should increase the dollar value of exports

Option B: should not have any effect on the dollar value of U.S imports

Option C: must increase the balance of trade

Option D: All of the above

Correct Answer: All of the above ✔

Option A: import prices to fall by 10 percent

Option B: import prices to rise by 10 percent

Option C: export prices to rise by 10 percent

Option D: export prices to fall by 10 percent

Correct Answer: import prices to rise by 10 percent ✔

Option A: appreciation in the value of both currencies

Option B: depreciation in the value of both currencies

Option C: appreciation in the value of the yen against the mark

Option D: depreciation in the value of the yen against the mark

Correct Answer: depreciation in the value of the yen against the mark ✔

Option A: shorten the amount of time in which the depreciation leads to smaller trade deficit

Option B: shorten the amount of time in which the depreciation leads to smaller trade surplus

Option C: lengthen the amount of time in which the depreciation leads to smaller trade deficit

Option D: lengthen the amount of time in which the depreciation leads to smaller trade surplus

Correct Answer: lengthen the amount of time in which the depreciation leads to smaller trade deficit ✔

Option A: trade surplus in the short run

Option B: trade surplus in the long run

Option C: trade deficit in the short run

Option D: trade deficit in the long run

Correct Answer: trade deficit in the long run ✔

Option A: elasticity of demand for exports = 0.9; elasticity of demand for imports = 0.4

Option B: elasticity of demand for exports = 0.7; elasticity of demand for imports = 0.3

Option C: elasticity of demand for exports = 0.5; elasticity of demand for imports = 0.7

Option D: elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6

Correct Answer: elasticity of demand for exports = 0.3; elasticity of demand for imports = 0.6 ✔

Option A: increases

Option B: decreases

Option C: does not change

Option D: None of the above

Correct Answer: decreases ✔

Option A: pass through

Option B: absorption

Option C: adjustment mechanism

Option D: currency contract period

Correct Answer: pass through ✔

Option A: relative price

Option B: elasticity

Option C: J Curve

Option D: Pass through

Correct Answer: J Curve ✔

Option A: the absorption approaches

Option B: the Marshall Lerner approach

Option C: the monetary approach

Option D: the elasticities approach

Correct Answer: the absorption approaches ✔

Option A: J Curve effect

Option B: Marshall Lerner effect

Option C: absorption effect

Option D: pass through effect

Correct Answer: pass through effect ✔

Option A: official exchange rates

Option B: complete currency pass through

Option C: exchange arbitrage

Option D: trade adjustment assistance

Correct Answer: complete currency pass through ✔

Option A: home demand for imports is inelastic and foreign export demand is inelastic

Option B: home demand for imports is elastic and foreign export demand is inelastic

Option C: home demand for imports is inelastic and foreign export demand is elastic

Option D: home demand for imports is elastic and foreign export demand is elastic

Correct Answer: home demand for imports is inelastic and foreign export demand is inelastic ✔

Option A: partial currency pass through

Option B: complete currency pass through

Option C: partial J curve effect

Option D: complete J curve effect

Correct Answer: partial currency pass through ✔