Which of the following is true? A large increase in the income level in Singapore along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) an increase in Singapore demand for U.S. goods, and the Singapore dollar should depreciate. If inflation in Australia suddenly increased while U.S. inflation stayed the same, there would be an outward shift in the demand schedule for AU$ and an inward shift in the supply schedule for AU$. (AU$ stands for the Australian dollar.) For a U.S. speculator, when expecting a foreign currency to depreciate, a possible way to speculate on this movement is to borrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan. The main effect of interest rate movements on exchange rates is through their effect on international trade.
Which of the following is true? A large increase in the income level in Singapore along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) an increase in Singapore demand for U.S. goods, and the Singapore dollar should depreciate. If inflation in Australia suddenly increased while U.S. inflation stayed the same, there would be an outward shift in the demand schedule for AU$ and an inward shift in the supply schedule for AU$. (AU$ stands for the Australian dollar.) For a U.S. speculator, when expecting a foreign currency to depreciate, a possible way to speculate on this movement is to borrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan. The main effect of interest rate movements on exchange rates is through their effect on international trade.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Which of the following is true?
A large increase in the income level in Singapore along with no growth in the
U.S. income level is normally expected to cause (assuming no change in interest
rates or other factors) an increase in Singapore demand for U.S. goods, and the
Singapore dollar should depreciate.
If inflation in Australia suddenly increased while U.S. inflation stayed the same,
there would be an outward shift in the demand schedule for AU$ and an inward
shift in the supply schedule for AU$. (AU$ stands for the Australian dollar.)
For a U.S. speculator, when expecting a foreign currency to depreciate, a
possible way to speculate on this movement is to borrow dollars, convert the
proceeds to the foreign currency, lend in the foreign country, and use the
proceeds from this investment to repay the dollar loan.
The main effect of interest rate movements on exchange rates is through their
effect on international trade.
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