34, The exchange market is value of a currency relative to inflation B. The pric

Question

34, The exchange market is value of a currency relative to inflation B. The price of one currency relative to gold -C. The price of one currency relative to another D. The change in the value of money over time Salue of the British pound changes from S/pound) $1.25 to 35. When the S1.50 the pound has and the dollar has A. Appreciated; appreciated B. Depreciated; appreciated C. Appreciated; depreciated D. Depreciated; depreciated 36. Everything else held constant, when a country's currency appreciates, the country's good abroad become…… expensive and foreign goods in that country expensive A. More; more B. More: less C. Less; less D. Less; more 37. The theory of Purchasing Power Parity says that when one country' s price level falls relative to another, its currency should A. Depreciate B. Appreciate C. Stay the same D. None of the previous 38. Everything else held constant , increased demand for a country's causes the currency to appreciate in the long run while increased demand for causes its currency to depreciate A. Imports; imports B. imports; exports C. Exports; exports D. Exports; imports 39. The most important short run factor causing exchange rate shifts is A. The level of trade between the countries B. The expected return on assets relative to another country C. The liquidity of assets relative to another country D. the riskiness of assets relative to another country Chapter 22- Aggregate Demand& Supply Analysis 40. The aggregate demand curve is the total quantity of an economy's A. Intermediate goods demanded at all inflation B. Intermediate goods demanded at a particular inflation C. Final goods and services demanded at a particular inflation level D. Final goods and services demanded at different inflation levels

Explanation / Answer

34. C by definition the exchange market is where currency is exchanged for other currencies. Therefore the price of one currency relative to another.

35.B when the pound becomes 1.5 per dollar it means the dollar is now more expensive and the pound is cheaper. Therefore dollar has appreciated and pound has depreciated.

36. B when currecny appreciates, it becomes more expensive to buy that currency , therefore exports become more expensive for other countries. Whereas imports to this country becomes cheaper.

37. B when price level falls according to PPP currency appreciates, and when it rises it depreciates.

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