39. The ________ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries. Question 39 options: a) theory of purchasing power parity b) theory of money neutrality c) law of one price d) quantity theory of money
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39.
The ________ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries.
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- The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar (the exchange rate) rises ___________________________________. Group of answer choices A) foreigners demand more American goods because these goods have become less expensive to foreign consumers B) foreigners demand fewer non-American goods because these goods have become more expensive to foreign consumers C) Americans demand fewer foreign goods because these goods have become more expensive to American consumers D) Americans demand more foreign goods because these goods have become less expensive to American consumers36. When a country's goods and services are expensive relative to other countries', we say that its currency is ________ in terms of purchasing power parity. Question 36 options: a) irrational b) rational c) overvalued d) undervalued7. Economic costs and benefits of a common currency Identify whether each attribute in the following table is an advantage or disadvantage of sharing a currency across country boundaries. Advantage Disadvantage Attribute Increased difficulty adjusting out of recession Lower cost of currency conversion Higher risk of public debt Uniform prices Enhanced competition Which of the following are reasons the United States is considered Flexibility of prices and wages Labor mobility Independent monetary and fiscal policies Wage rigidity οιοιο currency area? Check all that apply.
- 24. The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 10%. The current exchange rate for the Japanese yen (¥) is $0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:Question 4 (i) The Chinese Renminbi (RMB) is very strong against the US dollar due to increased supply of dollars and has moved from 8 RMB/$1 to 6 RMB/$1. The People Bank of china decides to intervene by selling Renminbi and buying US dollars to move the exchange rate to 7RMB/$1. The intervention is of the non sterilized kind. Using a diagram for the supply and demand for dollars in the forex market, illustrate and comment on the intervention undertaken by the People Bank of China. Also comment on the implications of the intervention for the money supply in China and Chinese short term interest rates. (ii) Assume that you start by borrowing either $100,000 or 10,500,000 Japanese Yen. Using a starting yen per dollar exchange of 105 Yen per dollar and a one- year US interest rate of 5% and one-year Japanese interest rate of 0.5%. Explain how a hedge fund can use the carry trade to make profits or incur losses. In your answer, show the profits or losses in both dollars and yen in the…A9 In which of the following scenarios are currency speculators likely to attack a country's currency? When a currency is manipulated such that it makes imports more attractive for domestic residents. When the currency is fairly valued. When the currency is undervalued. When the value of the currency is pegged below the market equilibrium rate. When a currency is manipulated such that it makes a country's exports more attractive.
- Please label your answers to the following questions clearly. (a) Outline two factors that affect the demand for a currency and two factors that affect its supply. (b) Imagine that the diagram below respresents the market for the Australian Dollar. Refer to this diagram in explaining what would happen to the value of the Australian Dollar if Australia suddenly experienced an increase in its inflation rate relative to that of its trading partners. ER SAUD ER, DAUD Quantity of AUDDollar Price of 1 Euro 0.90 0 Multiple Choice Quantity of Euros Demand will decrease. Demand will increase. Supply Supply will increase. D Assume that U.S. and European governments adopt a system of flexible exchange rates. The figure shows the market for euros. If more people in Europe decide to purchase U.S. cars, what effect will this have on the market for euros? Supply will decrease. Euros Demand EurosQuestion: "In a scenario where a country experiences a sudden and significant increase in its natural resource exports due to newly discovered resources, what is the most likely immediate effect on the country's currency in the foreign exchange market?" A) The currency will appreciate. B) The currency will depreciate. C) There will be no change in the currency value. D) The effect on the currency cannot be determined.
- 7. Economic costs and benefits of a common currency Identify whether each attribute in the following table is an advantage or disadvantage of sharing a currency across country boundaries. Attribute Advantage Disadvantage Greater risk of macroeconomic shocks Elimination of exchange fluctuations Greater certainty for investors Dependent monetary policy Lower protectionism Which of the following are reasons the European Union is considered a suboptimal v currency area? Check all that apply. A single monetary policy that is equally effective across borders O No legal or cultural barriers to labor mobility across borders O Limited use of fiscal policy O Low economic efficiency gainsGiven the demand and supply curves for dollars (in terms of the South African rand) in the foreign exchange market. The outbreak of the Corona virus causes the South African Rand to: Select one: a. Depreciate as the supply curve of USD shift to the left b. Appreciate as the demand curve for USD shift to left c. Depreciate as the supply curve of USD shift to the right d. Appreciate as the demand curve for USD shift to right e. Remain the same Reason:18. Question 18 options: ---------- is the rate at which the market converts one currency into another. An exchange rate can be quoted as direct or indirect.
