PPSCFPSCNTSPakistan govt jobs
- Subject
- Exchange-Rate Determinationeconomics-mcqs › exchange-rate-determination
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
In a floating exchange rate system, what effect would a decline in income in the United States have on the demand for imports and foreign currency?
Multiple choice question for Exchange-Rate Determination. Select an option, then review the explanation below.
Explanation
When income in the United States falls under a floating exchange rate system, consumers and businesses typically reduce their spending on imported goods. This leads to a lower demand for imports and consequently less demand for foreign currency to pay for those imports.
More Exchange-Rate Determination MCQs
Practice related questions from the same subject.
- 1.If a Big Mac costs $3 in the United States and 2 pesos in Mexico, what is the implied purchasing power parity (PPP) exchange rate between the peso and the US dollar?
- 2.If Japan, with its high savings rate, invests capital overseas, how is the Japanese yen likely to be affected, and what impact would this have on Japan's trade balance?
- 3.If interest rates are the same on similar assets in the U.S. and abroad, and investors expect the U.S. dollar to weaken relative to foreign currencies in the future, where are investment funds most likely to move?
- 4.If a country's money demand equals its money supply and its balance of payments is initially balanced, which of the following changes would cause the balance of payments to shift into a surplus?
- 5.Which market expectation would lead to the U.S. dollar strengthening against the Japanese yen?