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© 2014 Pearson Canada Inc.#
Everything else held constant, if a factor increases the demand for ____ goods relative
to ____ goods, the domestic currency will appreciate.
A) foreign; domestic
B) foreign; foreign
C) domestic; domestic
D) domestic; foreign
Answer: D
Diff: 1 Type: MC Page Ref: 475
Skill: Recall
Objective List: 19.2 Identify the factors that lead to changes in the exchange rate in the long run
Everything else held constant, if a factor decreases the demand for ____ goods relative
to ____ goods, the domestic currency will depreciate.
A) foreign; domestic
B) foreign; foreign
C) domestic; domestic
D) domestic; foreign
Answer: A
Diff: 1 Type: MC Page Ref: 475
Skill: Recall
Objective List: 19.2 Identify the factors that lead to changes in the exchange rate in the long run
An increase in productivity in a country will cause its currency to ____ because it can
produce goods at a ____ price, everything else held constant.
A) depreciate; lower
B) appreciate; lower
C) depreciate; higher
D) appreciate; higher
Answer: B
Diff: 1 Type: MC Page Ref: 476
Skill: Recall
Objective List: 19.2 Identify the factors that lead to changes in the exchange rate in the long run
If, in retaliation for "unfair" trade practices, the Canadian government imposes a 30 percent
tariff on Japanese DVD recorders, but at the same time, Canadian demand for Japanese goods
increases, then, in the long run, ____, everything else held constant
A) the Japanese yen should appreciate relative to the Canadian dollar
B) the Japanese yen should depreciate relative to the Canadian dollar
C) there is no effect on the Japanese yen relative to the Canadian dollar
D) the Japanese yen could appreciate, depreciate or remain constant relative to the Canadian
dollar
Answer: D
Diff: 2 Type: MC Page Ref: 475
Skill: Applied
Objective List: 19.2 Identify the factors that lead to changes in the exchange rate in the long run