6. Suppose that there are only two countries, the U.S. and Japan. If real interest rates rise in Japan, which of the following is NOT true? (a) More Japanese yen will be supplied in exchange for dollars. (b) More U.S. dollars will be supplied in exchange for yen. (c) The volume of yen traded will increase. (d) Japanese borrowers will be worse off.
6. Suppose that there are only two countries, the U.S. and Japan. If real interest rates rise in Japan, which of the following is NOT true? (a) More Japanese yen will be supplied in exchange for dollars. (b) More U.S. dollars will be supplied in exchange for yen. (c) The volume of yen traded will increase. (d) Japanese borrowers will be worse off.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Just TRUE & FALSE
Transcribed Image Text:6. Suppose that there are only two countries, the U.S. and Japan. If real interest rates rise in Japan,
which of the following is NOT true?
(a) More Japanese yen will be supplied in exchange for dollars.
(b) More U.S. dollars will be supplied in exchange for yen.
(c) The volume of yen traded will increase.
(d) Japanese borrowers will be worse off.
7. Which of the following statements is true?
(a) If inflation in the rest of the world is lower than inflation in Brazil, Brazil's currency (the real)
would tend to appreciate.
(b) If Mexicans increasingly lose confidence in their domestic financial markets and move their
assets to other countries, the peso will depreciate.
(c) Imports tend to fall whenever a nation's currency appreciates because foreign products become
more expensive to domestic consumers.
(d) A country that experiences higher real interest rates than other countries would expect its
currency to depreciate.
8. The nominal interest rate in the U.S. is 5% and the nominal interest rate in Canada is 3%. The
spot value of one Canadian dollar is one US dollar and the forward rate is 1.2 US dollar for one
Canadian dollar. Which of the following is true?
(a) The US dollar can be expected to depreciate.
(b) The interest parity condition does not hold.
(c) The dollar is trading at a forward discount.
(d) Money will flow into the Canada.
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