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Multiple Choice Quiz
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1
A decline in the value of one currency relative to another is called a depreciation of the currency that is falling in value.
A)True
B)False
2
The theory of Purchasing Power Parity (PPP) means that one unit of U.S. domestic currency will buy the same basket of goods and services anywhere in the world.
A)True
B)False
3
An increase in the real interest rate on foreign bonds relative to U.S. bonds will result in a rightward shift in the supply curve for U.S. dollars.
A)True
B)False
4
An increase in foreign wealth will lead to a rise in the value of the dollar.
A)True
B)False
5
Large industrialized countries generally allow currency markets to determine their exchange rates.
A)True
B)False





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