17. In 2016, it cost $.667 to buy one Canadian dollar. How many Canadian dollars

Question

17. In 2016, it cost $.667 to buy one Canadian dollar. How many Canadian dollars would $1 U.S. buy? a. $1.50 b. $1.30 c. $1.00 d. $0.67 18. If the dollar appreciates relative to other currencies, which of the following is true? a. b. c. d. It takes more of the other currency to buy a dollar. It takes less of the other currency to buy a dollar. No change occurs in the currency needed to buy a dollar. Not enough information is available to make a determination 19. Suppose that the dollar rises from 100 to 125 yen. As a result, a. Exports to Japan will likely increase. b. Japanese tourists will be more likely to visit the United States c. U.S. businesses will be less likely to use Japanese shipping lines to transport their products d. U.S. consumers will be more likely to buy Japanese-made automobiles 20. The most common type of exchange rate system is the a. b. c. d. fixed exchange rate flexible exchange rate managed flexible exchange rate managed fixed exchange rate 1

Explanation / Answer

(17) (a)

Number of Canadian dollars per US dollar = 1 / 0.667 = 1.5

(18) (a)

When dollar appreciates (depreciates), dollar gains (loses) value and higher (lower) units of another currency are needed to buy 1 dollar.

(19) (d)

In this case dollar has appreciated and yen has depreciated, so Japanese importable goods have become cheaper in the US. As a result US exports will fall and imports from Japan will rise.

(20) (c)

The currency is allowed to freely float, but if its value goes beyond an acceptable range, the Central bank buys/sells foreign currency to bring back the value of the domestic currency within the desirable range. This is a managed float (flexible) exchange rate system. Most countries follow this regime.

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