Exchange-Rate Determination

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

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Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

A. 0.67 pesos = $1
B. 0.8 pesos = $1
C. 1.25 pesos = $1
D. 1.67 pesos = $1

Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

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Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

A. appreciation; trade surplus
B. appreciation; trade deficit
C. depreciation; trade surplus
D. depreciation; trade deficit

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

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Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

A. flow from the United States to foreign countries
B. flow from foreign countries to the United States
C. remain totally in foreign countries
D. remain totally in the United States

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

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Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

A. decrease in the money supply
B. increase in the money supply
C. decrease in the money demand
D. None of the above

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

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Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

A. faster economic growth than Japan
B. higher future interest rates than Japan
C. more rapid money supply growth than japan
D. higher inflation rates than japan

Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

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Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

A. increase in the demand for imports and an increase in the demand for foreign currency
B. increase in the demand for imports and a decrease in the demand for foreign currency
C. decrease in the demand for imports and an increase in the demand for foreign currency
D. decrease in the demand for imports and a decrease in the demand for foreign currency

For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

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For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

A. The United States to Japan causing the dollar to depreciate
B. The United States to Japan causing the dollar to appreciate
C. The Japan to United States, causing the dollar to depreciate
D. The Japan to United States, causing the dollar to appreciate

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

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Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

A. the Canadian current account balance is in surplus
B. the Swiss current account balance is in deficit
C. the Canadian current account balance is in equilibrium
D. the Swiss current account balance is in equilibrium

When the price of foreign currency (the exchange rate) is above the equilibrium level ?

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When the price of foreign currency (the exchange rate) is above the equilibrium level ?

A. an excess supply of that currency exists in the foreign exchange market
B. an excess demand for that currency exists in the foreign exchange market
C. the supply of foreign exchange shifts outward to the right
D. the supply of foreign exchange shifts backward to the left