Exchange rates a. are always fixed between the currencies of two countries. O b. fluctuate to equate interest rates in various countries. O c. fluctuate to equate imports and exports. d. fluctuate according to agreements between the governments of various countries. e. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied.

Exchange rates a. are always fixed between the currencies of two countries. O b. fluctuate to equate interest rates in various countries. O c. fluctuate to equate imports and exports. d. fluctuate according to agreements between the governments of various countries. e. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the U.S. interest rate falls relative to other countries' interest rates, then the exchange rate O a. rises only if it was the foreign interest rate that changed. O b. falls only if it was the U.S. interest rate that changed. O c. definitely rises. O d. definitely falls. O e. does not change.
On the DD curve, exchange rate depreciation causes output to because it affects a component of aggregate demand. O rise; consumption O rise; the current account O fall; investment fall; the current account
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and currency If Foreign decreases its interest rate, Home's output will will O increase; appreciate increase; depreciate O decrease; appreciate O decrease; depreciate
Suppose the exchange rates betwe he United States and Canada are in long -run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Canadian rates of inflation would O be completely offset by changes in the real exchange rate. O have no effect on nominal exchange rates. be completely offset by changes in the nominal exchange rate. O violate the conditions for the law of one price.
QUESTION 3 sdenoted by GBP/USD and reflects the price of one Pound in Dollars. Search for the current GBP/USD exchange rate The U.S. Dollar-British Pound exchange rate and select a correct statement among the options below O A. Pound is a less expensive currency than Dollar O B. Pound is a more expensive currency than Dollar O C. Pound has always been less expensive than Dollar in the last 5 years O D. If GBP/USD falls, British goods would be more expensive for American consumers
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U.S. firms involved in international trade have to a. ignore U.S. inflation and ignore value of the dollar relative to foreign currencies. b. ignore U.S. inflation and guess value of the dollar relative to foreign currencies. Oc. International transactions are not affected by inflation or foreign exchange. O d. anticipate U.S. inflation and guess value of the dollar relative to foreign currencies. e. anticipate U.S. inflation and ignore value of the dollar relative to foreign currencies.
When there is political instability in another country, the United States can expect O an increase in the financial account balance due to the movement of assets to the U.S. a decrease in the balance of payments due to a decrease in the demand for goods and services. O a decrease in the balance of payments due to a decrease in official reserve transactions. an increase in the financial account balance due to an increase in the current account.
Purchasing Power Parity (PPP) theory states that Select one: O a the prices of standard commodity baskets in two countries are not related. O b. None of them. O c. as the purchasing power of a currency sharply declines (due to hyperinfiation) that currency will appreciate against stable currencies. O d the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels. 22 As of today, the spot exchange rate is C100 = $1.20, and the rate of infiation expected to prevoil for the next year in the U.S. is 2% and 3% in the eurozone. What is the one-year forward rate that should prevail? Select one: O a cL00 - S1.2379 O b S1.00 = co.8623 O c. S1.00 - €CLI883 O d e100 - S1IBB3
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
How will an increase in remittance flows to your country during the Christmas Season affect the market for foreign exchange? Select one: O a. Outward shift of the demand curve, real exchange rate rises and the balance of trade rises O b. Outward shift of the supply curve, real exchange rate falls and the balance of trade falls O c. Inward shift of the supply curve, real exchange rate rises and the balance of trade rises O d. Inward shift of the demand curve, real exchange rate falls and the balance of trade falls е. Inward shift of the demand curve, real exchange rate rises and the balance of trade falls