r parity if it depreciates by an amount equal to the excess of: Question 3 options: a) Foreign inflation over U.S. inflation b) Foreign interest rates over U.S. interest rates c) U.S. interest rates over foreign interest rates d) U.S. inflation over foreign inflation
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- The yen has been depreciating relative to the U.S. dollar in recent weeks due to which of the following: Relatively lower interest rates in the U.S. Relatively higher inflation in Japan Expansionary monetary policy in the U.S. O Higher global oil prices QUESTION 6 The daily transaction value in the international FX market is roughly equivalent to that of the NYSE True False QUESTION 7 The Chinese renminbi is currently pegged to the U.S. dollar. True False QUESTION 8 Monetary policy and exchange rate targeting could be combined to accomplish all of the following except Increase a central bank's creditability Decrease the incidence of speculative attacks Increase a currency's value Decrease a currency's valueBased on the Exchange rates above, Which of the following is true? A)More pounds are needed to buy a dollar, so the dollar is appreciating B)The dollar is less expensive in pounds and is depreciating C)The dollar is growing stronger against the pound D)The dollar is more expensive in pounds and is appreciating Year 2014 2015 2016 US $ 1$ 1$ 1$ British Pound .85 .70 .60An appreciation of the exchange value of the U.S. dollar would: A) increase the dollar prices of U.S. imports and the foreign cost of exports from the U.S. B) decrease the dollar prices of U.S. imports and the foreign cost of exports from the U.S. C) increase the dollar prices of U.S. imports, but decrease the foreign cost of exports from the U.S. D) decrease the dollar prices of U.S. imports, but increase the foreign cost of exports from the U.S.
- The UK pound is trading at 1.54 Canadian dollars per UK pound. There is purchasing power parity at this exchange rate .The interest rate in Canada is 2 percent a year and interest rate in The United Is 4% a year. a) Calculate the Canadian interest rate differential. b) What is the UK pound expected to be worth in terms of Canadian dollars one year from now. c) Which country more likely has a lower inflation rate ? How can you tell?The spot exchange rate between the dollar and the Swiss franc is a floating, or flexible, rate. What are the effects of each of the following on this exchange rate? There is a large increase in Swiss demand for U.S. exports as U.S. culture becomes more popular in Switzerland. There is a large increase in Swiss demand for investments in U.S. dollar-denominated financial assets because of a Swiss belief that the U.S. economy and political situation are improving markedly. Political uncertainties in Europe lead U.S. investors to shift their financial investments out of Switzerland, back to the United States. U.S. demand for products imported from Switzerland falls significantly as bad press reports lead Americans to question the quality of Swiss products.A company located in the US is selling a product in Japan for a price of exactly 7,175.5 Yen. The company claims that to produce the product in the US, they face a cost of $56.5 per unit. If the company is just breaking even at this price, then this implies the exchange rate must be $1 US buys Yen.
- In 1961, Charles de Gaulle decided he did not want the French franc to be considered as a second-rate currency, so he chopped two zeros off the value of the franc, which meant the exchange rate was approximately FF5/$ instead of FF500/$ (he also ordered that the $ key on IBM punchcard machines be replaced by the FF symbol). This had no immediate impact on any domestic or international transactions, but was supposed to convince the French people to put inflation behind them and keep their currency in line with the Dmark and the British pound. Whether or not this change in currency values made any difference, the relative inflation rate did slow down and the value of the FF did rise relative to the dollar over the next two decades. At the same time, the current account balance improved slightly. Based on these factors, explain what happened to the growth rate, show how the NX and NFI curves must have shifted, and describe the underlying economic developments.Suppose the current spot exchange rate for the Chinese yuan is USD 0.15 per CNY. If the domestic prices of traded goods rise 70% over the next 10 years in China and 30% over the same period in the United States, then, according to the relative purchasing power parity hypothesis, the spot exchange rate for the yuan in 10 years will be approximately: USD 0.35 per CNY USD 0.60 per CNY USD 0.11 per CNYAn appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except: a) a decrease in the dollar prices paid by U.S. importers. b) an increase in the cost of vacations in Florida for Japanese tourists. c) foreign holidays for U.S. residents to be less expensive. d) an increase in the foreign currency prices paid for U.S. exports. e) an increase in the demand for U.S. exports.
- Suppose the spot exchange rate today between the US dollar and currency of country W is US $1.9905 per unit of currency of country W, and that for the US dollar and the currency of country V is US $0.00779 per unit of country V. The following forward rates are also quoted today: Country W Currency Country V Currency 30 days 1.9908 0.007774 60 days 1.9597 0.007754 90 days 1.9337 0.007736 Explain what someone who enters into a 30-day forward contract to deliver the currency of country W is agreeing to do? Explain who someone who enters into a 90-day forward contract to buy the currency of country V is agreeing to do? What can you infer about the relationship between US and country W’s short term interest rates and US and country V’s short-term interest rates?Suppose Angola is experiencing an episode of hyperinflation. The currency in Angola is the second kwanza (which is actually the fourth currency called kwanza that has circulated since 1977). The currency code is (AOA). Select all choices below that are implied by the statement if parity conditions (PPP, IRP, FEP) hold: Nominal interest rates in Angola will exceed nominal interest rates in countries not experiencing hyperinflation. The value of the AOA is expected to drop to zero. Real interest rates in Angola will fall relative to countries without hyperinflation. The AOA is expected to depreciate against any currencies that are not experiencing hyperinflation.Depreciation of the dollar will: decrease the prices of both U.S. imports and exports increase the prices of both U.S. imports and exports decrease the prices of U.S. imports, but increase the prices to foreigners of U.S. exports increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports
