Given a system of market determined (floating) exchange rates, if interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to Group of answer choices appreciate and the U.S. dollar to depreciate. appreciate and the U.S. dollar to appreciate. depreciate and the U.S. dollar to depreciate. depreciate and the U.S. dollar to appreciate.

Given a system of market determined (floating) exchange rates, if interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to Group of answer choices appreciate and the U.S. dollar to depreciate. appreciate and the U.S. dollar to appreciate. depreciate and the U.S. dollar to depreciate. depreciate and the U.S. dollar to appreciate.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter18: International Trade And Finance

Section: Chapter Questions

Problem 14SQ

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. According to the exchange rate market model, what happens to the US Dollar/Australian Dollar exchange rate when the interest rate in Australia increases? a. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar appreciates. b. Australian financial assets become more attractive relative to US assets. As a result, the supply for Australian Dollars increases, and the Australian Dollar appreciates. c. Australian financial assets become more attractive relative to US assets. As a result, the demand for Australian Dollars increases, and the Australian Dollar depreciates. d. Australian financial assets become more attractive relative to US assets. As a result, the supply of US Dollars increases, and the Australian Dollar depreciates.
As the price level decreases, the cost of borrowing money will (remain the same/increase/decrease) , causing the quantity of output demanded to (rise/increase/fall/remain the same) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect. Additionally, as the price level decreases, the impact on the domestic interest rate will cause the real value of the dollar to (rise/decrease/falll) in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore (rise/increase/fall/remain the same) , and the number of foreign products purchased by domestic consumers and firms (imports) will (rise/decrease/fall/remain the same) . Net exports will therefore (rise/increase/fall/remain the same) , causing the quantity of domestic output demanded to (fall/increase/remain the same/rise) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect.
If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate: A) increases, demand for the domestic currency increases, supply of the domestic currency decreases, and the exchange rate increases. B) falls, demand for the domestic currency decreases, supply of the domestic currency increases, and the exchange rate decreases. C) falls, demand for the domestic currency remains unchanged, supply of the domestic currency increases, and the exchange rate decreases. D) falls, demand for the domestic currency decreases, supply of the domestic currency increases, and the effect on the exchange rate is ambiguous.
Currency traders expect the dollar to depreciate. What impact will this have on equilibrium in the foreign exchange market? The dollar will appreciate, and the equilibrium quantity of dollars will decrease. The dollar will depreciate, and the equilibrium quantity of dollars exchanged will decrease. The dollar will appreciate, and the equilibrium quantity of dollars will increase. The dollar will depreciate, and the change in the equilibrium quantity of dollars exchanged cannot be determined.
Under a flexible exchange rate regime, if a foreign trading partner goes into recession a. the nominal exchange rate falls and the RER falls, increasing demand for tradeable goods, reducing the balance of trade and reducing demand for domestic goods and services b. the nominal exchange rate rises, which increases net exports and improves the trade balance c.the nominal exchange rate rises and the RER rises, improving the balance of trade and boosting demand for domestic goods and services d. None of the available answers are relevant
The pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound? a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product
If the equilibrium exchange rate changes so that it takes more dollars to buy a British pound, then: the dollar has appreciated in value. Americans will import more British goods. the British will buy fewer U.S. goods. the dollar has depreciated in value.
To keep the U.S. dollar from depreciating against the Japanese yen, the U.S. Federal Reserve must Buy Yen and sell U.S. dollars. Buy both Yen and U.S. dollars. Sell Yen and buy U.S. dollars. Sell both Yen and U.S. dollars.
Consider a country that is facing a supply crisis, and is planning to increase their imports as a way to make more goods available for households and businesses. Which movement in the exchange rate would benefit that policy? 1-Making the domestic currency stronger, which would harm exports but benefit imports 2-Making the domestic currency stronger, which would benefit both exports and imports 3-Making the domestic currency weaker, which would benefit both exports and imports 4-Making the domestic currency weaker, which would harm exports but benefit imports