1. When the euro appreciates, are you more likely to drink Canadian or French wine?

2. A country is always worse off when its currency is weak (falls in value). Is this statement true, false, or uncertain? Explain your answer.

3. In a newspaper, check the exchange rates for the foreign currencies listed in the Financial News box, Foreign Exchange Rates, on page 496. Which  of these currencies have appreciated and which have depreciated since January 2009?

4. If the Japanese price level rises by 5% relative to the price level in Canada, what does the theory of purchasing power parity predict will happen to the value of the Japanese yen in terms of dollars?

5. If the demand for a country s exports falls at the same time that tariffs on imports are raised, will  the country s currency tend to appreciate or depreciate  in the long run? *6. In the mid- to late-1970s, the yen appreciated  relative to the U.S. dollar even though Japan s inflation  rate was higher than America s. How can this  be explained by an improvement in the productivity  of Japanese industry relative to American industry?

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