SOLVED

 1 The Foreign Exchange Market 1) The term “foreign currency” refers to foreign I.coins II.notes III.bank deposits A) II only. B) II and III only. C) I and II only. D) I, II, and III. 2) If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with A) dollars. B) yuan, the Chinese currency. C) international monetary credits. D) euros, or any other third currency. 3) If the United States sells beef to Japan, the U.S. beef producer is paid with A) dollars. B) yen, the Japanese currency. C) international monetary credits. D) euros, or any other third currency. 4) When Safeway supermarkets in the United States buys strawberries from Mexico, A) it uses dollars to pay Mexican farmers. B) it uses pesos to pay Mexican farmers. C) it may use any currency it chooses. D) the transaction shows up in the U.S. capital account. 5) Americans demand Japanese yen in order to A) buy Japanese products. B) supply American goods in Japanese markets. C) allow the Japanese to buy U.S. products. D) balance the current account. 6) Which of the following statements is correct? I.The exchange rate is a price. II.The exchange rate is different from other prices because it is NOT determined by supply and demand. A) only I B) only II C) I and II D) neither I nor II 7) The exchange rate is the A) opportunity cost of pursuing a nation’s comparative advantage. B) price of one country’s currency expressed in terms of another country’s currency. C) ratio between imports and exports. D) interest rate that is charged on risk-free international capital flow. 8) The exchange rate is the price at which the ________ of one country exchanges for the ________ of another country. A) currency; goods B) goods; goods C) currency; currency D) currency; financial instruments 9) A decrease in the value of a currency in terms of other currencies is known as A) an appreciation. B) a depreciation. C) a par value. D) a gold point. 10) When the value of one currency falls relative to another currency, the exchange rate for the first currency has A) depreciated. B) appreciated. C) demanded. D) revalued. 1