J 4 II. TRUE/FALSE (1. The principal function of the foreign exchange market is the transfer of funds, thuspurchasing power, from one nation and currency to another.2. If it takes 116.57 yen to buy one dollar, it takes $.0085785 to buy one yen.3. Purchasing-power parity theory postulates that the change in the exchange ratebetween two currencies is proportional to the change in the ratio in the twocountries' general price levels.第4页共6页4. The price-specie-flow adjustment mechanism operates by the deficit nationlosing gold and experiencing a reduction in its money supply.5. Monetary policy is very effective under a fixed exchange rate policy.6. A clean float system has no government intervention at all in foreign exchangemarkets.7. The theory of absolute advantage was how David Ricardo explained basis fortrade between nations.8. Increasing returns to scale refer to the production situation where inputs orfactors of production grow proportionately more than output.9. Non-tariff barriers are also known as "new protectionism”.10. The formation of a customs union generates static effects for members, but notdynamic effects.

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II. TRUE/FALSE ( 1. The principal function of the foreign exchange market is the transfer of funds, thus purchasing power, from one nation and currency to another.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 6E

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