Marketing

Chapter 6

Government Influence on Exchange Rates

1. To force the value of the pound to appreciate against the dollar, the Federal Reserve should:

A) sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell dollars for pounds in the foreign exchange market.

B) sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should sell dollars for pounds in the foreign exchange market.

C) sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should not intervene.

D) sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell pounds for dollars in the foreign exchange market.

ANSWER: A

2. A weak dollar is normally expected to cause:

A) high unemployment and high inflation in the U.S.

B) high unemployment and low inflation in the U.S.

C) low unemployment and low inflation in the U.S.

D) low unemployment and high inflation in the U.S.

ANSWER: D

3. A strong dollar is normally expected to cause:

A) high unemployment and high inflation in the U.S.

B) high unemployment and low inflation in the U.S.

C) low unemployment and low inflation in the U.S.

D) low unemployment and high inflation in the U.S.

ANSWER: B

4. To force the value of the British pound to depreciate against the dollar, the Federal Reserve should:

A) sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.

B) sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.

C) sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market.

D) sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars...