1. The principal function of the foreign exchangemarket is the transfer of funds, thus purchasing 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 thechange in the exchange rate between two currencies isproportional to the change in the ratio in the twocountries' general price levels.4. The price-specie-flow adjustment mechanismoperates by the deficit nation losing gold andexperiencing a reduction in its money supply.5. Monetary policy is very effective under a fixedexchange rate policy.True or Falae

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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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