QUESTION 1 A few months ago, the euro-dollar exchange rate was $1.25 per euro. At that time, what was the exchange rate in euros per dollar?

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  1. A few months ago, the euro-dollar exchange rate was $1.25 per euro. At that time, what was the exchange rate in euros per dollar?


  1. Ten years earlier, in 2008, the exchange rate was around $1.50 per euro.

What was the percentage change in the value of the euro over this period,relative to the dollar? If the euro’s value increased over this period; your answer will be a positive number; if it decreased, your answer will be negative.

Your answer should be the percentage change without decimals or percent signs. So if you think the euro increased in value by 10 percent, just write “10”.


  1. Given the values in the previous question, how many euros was the dollar worth in 2008?


  1. Given the values in questions 1 and 2, which of the following is true? Check all that apply.
  • The dollar appreciated against the euro.
  • The dollar depreciated against the euro.
  • The euro appreciated against the dollar.
  • The euro depreciated against the dollar.
  • Neither currency appreciated or depreciated against the other.


  1. Recently, the dollar-yen exchange rate has been 110 yen per dollar. Suppose that over the next five years, the dollar depreciates by 30 percent against the yen. What will be the the exchange rate at the end of 2023, in yen per dollar?


  1. Relative Purchasing Power Parity implies that …
  1. … real exchange rates are constant.
  2. … countries experiencing rapid economic growth see their exchange rates appreciate.
  3. … the price of a given good should be the same in all countries.
  4. … prices are higher in rich countries than poor countries.


  1. Which of the following best describes a floating exchange rate?
  2. The value of the currency has been adjusted for inflation.
  3. The value of the currency is set by foreign exchange markets rather than by the government.
  4. The value of the currency is controlled by the central bank.
  5. The value of the currency is closely linked to the value of a commodity such as gold.
  6. The value of the currency is highly variable over time.

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