**Understanding Fixed Exchange Rate Systems**In a fixed exchange rate system:- **A.** The International Monetary Fund determines exchange rates.- **B.** Market forces play a role in determining the fixed value of a currency.- **C.** Market forces and the country's stock of gold determine its exchange rate.- **D.** A central bank affects the value of a currency by changing its foreign exchange reserves.**Explanation:**In fixed exchange rate systems, the value of a currency is pegged to another currency or a basket of currencies. Option B is highlighted, suggesting a focus on how market influences can still impact the value under this system. Central banks have a significant role in maintaining the fixed rate by adjusting their reserves.

An international exchange rate, also said as a foreign exchange rate. It is the price of a currency of one country in terms of the currency of another country. International exchange rates are expressed as one currency's value to another.The fixed exchange rate/pegged exchange rate is the regime in which the worth of the exchange rate of a country is kept unchanging to another country’s currency. In this system of the exchange rate, the government intervenes to keep the exchange rate fixed. The central bank intervenes in the market to change the foreign exchange reserve in order to keep the exchange rate fixed. Thus, the correct option is ‘d) a central bank affects the value of currency of a country by changing its foreign exchange reserve’.

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In a fixed exchange rate system, O A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. O D. a central bank affects the value of a currency by changing its foreign exchange reserves.

In a fixed exchange rate system, O A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. O D. a central bank affects the value of a currency by changing its foreign exchange reserves.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1.5
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.
The approach to exchange rate determination argues that exchange rates are determined by the supply and demand for a wide variety of financial assets. O a. law of one price b. monetary Oc. asset market Od. balance of payments
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.
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
Which of the following is true? O f the European Central Bank sells euros and buys pounds, the U.S. dollar will appreciate. O f the Chinese government imposes restrictions on the flow of capital from China to the U.S, the U.S. dollar will appreciate. O f the Federal Reserve Bank of the U.S. buys Mexican pesos and sells dollars, the U.S. dollar will appreciate. O If the Japanese central bank sells yen and buys U.S. dollars, the U.S. dollar will appreciate.
1. Use the long run model of real exchange rate determination for the small open economy to predict what would happen to the trade balance and the real exchange rate in response to each of the following events. a. A sudden decline in the popularity of Tesla (which is an American company) leads to a reduction in the sale of Tesla cars abroad. b. A strong surge in demand results from the reopening of the economy post covid-19 pandemic. Assume that this surge in demand is persistent.
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.
6. In the exchange rate model in Example 7.2, supposethe company continues to manufacture its product inthe United States, but now it sells its product in theUnited States, the United Kingdom, and possibly othercountries. The company can independently set its pricein each country where it sells. For example, the pricecould be $150 in the United States and £110 in theUnited Kingdom. You can assume that the demandfunction in each country is of the constant elasticityform, each with its own parameters. The question iswhether the company can use Solver independently ineach country to find the optimal price in this country.(You should be able to answer this question withoutactually running any Solver model(s), but you mightwant to experiment, just to verify your reasoning.)
When we express the value of goods in one country in terms of the same goods in another country, we use: O the real exchange rate. O real GDP. O the nominal exchange rate. O nominal GDP.
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What is the exports effect? The exports effect is the result that the lower the exchange rate, other things remaining the same, the O A. higher are the prices of Canadian-produced goods and services to foreigners and the greater is the volume of Canadian imports O B. lower are the prices of foreign-produced goods and services to Canadians and the greater is the volume of Canadian exports O C. higher are the prices of foreign-produced goods and services to Canadians and the greater is the volume of Canadian imports O D. lower are the prices of Canadian-produced goods and services to foreigners and the greater is the volume of Canadian exports Click to select your answer and then click Check Answer. All parts showing Clear All Check Answer P Type here to search 立