1.        The market clearing exchange rate is __________ Swiss francs per dollar.

a. 1.50

b. 1.60

c. 345

d. 400

2.        If U.S. officials announce that the par value of the U.S. dollar shall be 1.50 SFr, then the dollar is substantially __________ at this fixed rate.

a. appreciated

b. depreciated

c. overvalued

d. undervalued

3.        If the U.S. exchange rate were fixed at 1.50 SFr per dollar, a __________ would exist in the foreign exchange market.

a. $35 billion surplus

b. $100 billion shortage   

c. $90 billion surplus   

d. $90 billion shortage  

4.        In order to defend the fixed rate of 1.50 SFr per dollar, the U.S. government must intervene in the foreign exchange market and __________ billion dollars.

a. buy 35

b. buy 55      

c. sell 90      

d. sell 105      

5.        In order to defend the fixed rate of 1.50 SFr per dollar, the U.S. government must intervene in the foreign exchange market and __________ billion Swiss francs.

a. sell 55

b. sell 90

c. buy 135      

d. buy 155