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Q: Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement
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When the value of a currency rises due to demand and supply factors, is it correct to say that the currency has undergone revaluation? Explain briefly.
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- In the Mundell-Fleming model with floating, exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. What would happen if exchange rates were fixed rather than floating?What is currency depreciation?Why does a money has an intristic value and a currency doesn't have an intristic value?
- The reduction in the value of a currency due to market forces is known as O a. Appreciation Ob. Revaluation Oc. Depreciation O d. DowngradingConsider the money market. What happens and why to interest rates during an economic expansion (e.g., a decrease in Y)? Go through the complete process in detail explaining in words.Which of the following is a determinant of exchange rates? a. A change in consumer preferences b. A change in productivity c. A change in real interest rates d. all of these
- What is the basic accounting problem created by the monetary unit assumption when there is significant inflation? What appears to be the IASB position on a stable monetary unit?Question Which of the following is a determinant of exchange rates? Answer a. A change in consumer preferences b. A change in productivity c. A change in real interest rates d. all of these1. What is the optimum currency area? 2. What is the specie-flow mechanism?
- Explain, why appreciation of exchange rate (E) today results in the increase of expected return from foreign currency deposits (investments), assuming expected exchange rate does not change?Differentiate between devaluation/revaluation of a currency and depreciation/appreciation of a currency.Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement