7 of 38 Which of the following statements is true? o A. The interest rate parity condition shows that the home country currency is expected to depreciate if the domestic interest rate is lower than foreign interest rate. O B. The real exchange rate is the nominal rate adjusted for interest rate differences at home and abroad. O C. Flexible exchange rates provide a more certain environment for business planning. O D. Fixed exchange rates do not protect against outside shocks. Unsure

7 of 38 Which of the following statements is true? o A. The interest rate parity condition shows that the home country currency is expected to depreciate if the domestic interest rate is lower than foreign interest rate. O B. The real exchange rate is the nominal rate adjusted for interest rate differences at home and abroad. O C. Flexible exchange rates provide a more certain environment for business planning. O D. Fixed exchange rates do not protect against outside shocks. Unsure

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the U.S. interest rate is 12 percent, while the British interest rate is 15 percent. If interest rate parity exists, then: O a.U.S. investors will earn 12 percent whether they use covered interest arbitrage or invest in the United States. O b. U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States. O c. British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States. O d. U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.
True or False: If the dollar depreciates relative to the Japanese yen, the dollar price of a Japanese camera produced by Nikon becomes less expensive for Americans. O True False
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
A short-run increase in government spending causes the currency to and output to O appreciate; increase O appreciate; decrease O depreciate; increase O depreciate; decrease
A Canadian traveling to the United States converts $100 Canadian into 80 U.S. dollars. One month later he does the same thing and receives only 86 U.S. dollars. There are no transactions costs. The Canadian-U.S. exchange rate has and the Canadian dollar has relative to the U.S. dollar. O A. fallen; appreciated O B. increased; appreciated O C. not changed; remained stationary OD. fallen; depreciated O E. increased; depreciated
Refer to Figure 32-2. If the real exchange rate is .6, then there is a .. Figure 32-2 1.8+Real Exchange Rate 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 50 100 150 200 250 300 350 400 Quantity of Dolars O a. shortage of 100 so the real exchange rate will fall. O b. surplus of 100 so the real exchange rate will fall. O c. surplus of 100 so the real exchange rate will rise. O d. shortage of 100 so the real exchange rate will rise.
A Guatemalan citizen working in Canada sends remittances to her family in Guatemala. This transaction appears as a... O negative entry in the Guatemalan Capital and Financial Account O positive entry in the Guatemalan Capital and Financial Account O negative entry in the Guatemalan Current Account O negative entry in the Canadian Capital and Financial Account O negative entry in the Canadian Current Account
What does it mean to describe the foreign-exchange market as an "over-the-counter market"? O A. The market consists of customers buying and selling in the foreign-exchange market directly. O B. The market consists of market makers linked together by computers. OC. The market consists of customers linked together by computers. O D. The market is a physical place where currencies are traded.
1. If Thalland wants to maintain a fixed exchange rate of 1 baht per euro, it should ___________ euros in the foreign exchange market. To be successful, this policy would have to ___________ euros by______ billion euros at any given exchange rate. 2. If investors believe the baht is going to be _________ as a result of the change in demand, a speculative attack may occur. 3. True or False: in the event of a successful speculative attack. Thai businesses tend to suffer because their foreign debt will now cost more to repay. True False
In the short run, all of the following are disadvantages of a fixed exchange rate regime except: O A. macroeconomic shocks must be addressed with fiscal policy. O B. open market operations are overused. OC. they can lead to future exchange rate crises. O D. interest rates are constant. According to Robert Mundell, for countries to constitute an optimal currency area, such as adopting a common currency, they must have: O A. a different composition of industries. O B. high factor mobility. O C. similar per capita GDP. O D. all of the above.
If one Canadian dollar buys US$0.85, and one Euro buys US$1.20, then one Euro should buy O a. C$1.02 O b. C$1.41 O c. C$2 O d. C$1.64
If Canadian exports of goods and services were $37 billion, imports of goods and services were $42 billion, transfers by Canadians to foreigners were $3 billion and transfers from foreigners to Canadian citizens were $2 billion, then the current account balance would be O A. $4 billion. O B. - $6 billion. O C. $8 billion O D. $6 billion. O E. - $4 billion.