The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish): demand supply left right buy sell imports exports rise fall increases decreases What happens to the exchange rate when the current account balance falls? A falling current account balance means that the value of ____(1) are rising relative to _____(2). Let's assume that one does rise and one does fall to cause the current account balance to fall. _____(3) affects the ____(4) for/of $NZ so a decline in this means ____(5) for/of $NZ shifts left. _____(6) affects the _____(7) for/of $NZ so a rise in this means _____ (8)for/of $NZ to shift right. The combined effect from the fall in the current account balance is that we expect the value of the $NZ to ____(9). What happens to the exchange rate when New Zealand interest rates fall relative to the rest of the world? A fall in NZ interest rates (all else held constant) reduces ____(10) for/of $NZ assets which reduces _____(11) for/of $NZ in the foreign exchange market. Some holders of $NZ assets will now wish to _____ (12) $NZ assets. This will increase the _____(13) for/of $NZ. Both of these cause the value of the $NZ to ______(14).
The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish):
supply
left
right
buy
sell
imports
exports
rise
fall
increases
decreases
What happens to the exchange rate when the current account balance falls?
A falling current account balance means that the value of ____(1) are rising relative to _____(2). Let's assume that one does rise and one does fall to cause the current account balance to fall.
_____(3) affects the ____(4) for/of $NZ so a decline in this means ____(5) for/of $NZ shifts left.
_____(6) affects the _____(7) for/of $NZ so a rise in this means _____ (8)for/of $NZ to shift right.
The combined effect from the fall in the current account balance is that we expect the value of the $NZ to ____(9).
What happens to the exchange rate when New Zealand interest rates fall relative to the rest of the world?
A fall in NZ interest rates (all else held constant) reduces ____(10) for/of $NZ assets which reduces _____(11) for/of $NZ in the foreign exchange market. Some holders of $NZ assets will now wish to _____ (12) $NZ assets. This will increase the _____(13) for/of $NZ. Both of these cause the value of the $NZ to ______(14).
Step by step
Solved in 2 steps
