If one country has higher inflation than another, its exchange rate should depreciate. True False

Q: Suppose for Home: Ms=1284, Md/P=8521-83465*R, P=3 Suppose for Foreign: Ms=2257, Md/P=5910-28382*R,…

A: Given; For home:- MS=1284MdP=8521-83465RP=3 For foreign:- MS=2257MdP=5910-28382RP=3

Q: The U.S. economy is growing faster than that of Japan. The faster growth rate in the U.S. should…

A: Economy- It means managing available resources carefully.

Q: If the Chinese nominal exchange rate (foreign currency per Chinese Yuan) does not change, but prices…

A: Given that Chinese nominal exchange rate does not change, but prices rise slower in China than in…

Q: A country with fixed exchange rate can always raise its policy interest rate to curb down…

A: Exchange rate:- Exchange rates between different currencies indicate how strong one currency is…

Q: What measures can be used by a globally operating US-based manufacturing company facing a major…

A: Currency appreciation: It is an expansion in the estimation of one money according to another cash.…

Q: A rise in the domestic interest rate leads to capital inflows, which make the exchange rate…

A: A rise in domestic interest rate signifies a higher return from investment. That incentivises…

Q: Would a domestic period of very high inflation make it easier or more difficult for a country to…

A: Answer to the question is as follows:

Q: Many developing countries, like Mexico, have moderate to high rates of inflation. At the same time,…

A: There is high inflation in many developed countries, such as México. As inflation is high currency…

Q: According to the monetary model of exchange rate, if real income increases, then the price level…

A: In talking about an open economy, any change in real income of the people have a significant impact…

Q: Which of the following best describes Relative Purchasing Power Parity? A basket of goods should…

A: The amount of goods and services that can be bought with given income is referred to as purchasing…

Q: Which of the following is a big disadvantage of fixed exchange rate a. Uncertainity b. Susceptible…

A: Fixed Exchange Rate:- A fixed exchange rate system is one implemented by a nation's central bank or…

Q: According to the prediction of covered interest parity, if the U.S. interest rate is 4% per year,…

A: Covered interest parity: F1 = S0 * [1 + (RUS - RUK)] Where F1 is the forward exchange rate. It is…

Q: In an economy with a flexible exchange rate, an expansion in the nominal stock of money leads to the…

A: In an economy with a flexible exchange rate, an increase in the money supply will have an effect on…

Q: When the exchange rate for a currency rises and becomes stronger, we say that the currency's value…

A: When a currency appreciates, it means it increased in value relative to a different currency;…

Q: Under a flexible exchange rate system a decrease in the vue of a domestic currency in terms of…

A: Decrease in value of domestic currency in terms of foreign currency is referred to as currency…

Q: An increase in the interest rate causes investment to rise and the exchange rate to appreciate. rise…

A: If the interest rates rise relatively in home country as compared to elsewhere, it'll become more…

Q: Which of the following exchange rate system is effective to fight inflation? I. Floating exchange…

A: The measure that depicts the value of one currency being measured in terms of another currency in…

Q: When more than one government intervenes to move the value of an exchange rate, this is known as…

A: Answer: Correct option: 3 (Coordinated) Explanation: When more than one government intervenes to…

Q: According to Hume's price-specie-flow mechanism, a sudden increase in the money stock of Country A:…

A: When talking about Price-Specie-Flow mechanism, it can be said that the inflow of money in one…

Q: Given that the country has a floating exchange rate regime, what are the consequences of a policy…

A: As a result of expansionary monetary policy, the LM shifts rightwards and the output and interest…

Q: ch one iS king or (a) Fixed exchange rate (b) Flexible exchange rate c) Both (a) and (b) d) None of…

A: According to the given question the king of the exchange rate is the OPTION(C) IS THE CORRECT ANSWER…

Q: Under a flexible exchange rate regime, if a foreign trading partner goes into recession  a. the…

A: A floating exchange rate is a regime where the currency price of a nation is set by the foreign…

Q: Under a floating exchange rate regime, following an expansion in the money supply, the change in the…

A: In the Mundell-Fleming Model, when the exchange rate is free to adjust, the central bank can control…

Q: An increase in the value of domestic currency in terms of foreign currencies under fixed exchange…

A: According to the given question In simple words we can say that a foreign exchange rate it is…

Q: In the short run, all of the following are disadvantages of a fixed exchange rate regime except:

A: In the short run,  fixed exchange create both advantage and disadvantage to the economy.

Q: If the nominal exchange rate rises 5%,domestic inflation is 2% and foreign inflation is 3%,what is…

A: Nominal exchange rate refers to the rate at which a person can trade the currency of one country for…

Q: how nominal and real exchange rates are determined, in both the short runand the long run.

A: The nominal exchange rate tells how much foreign currency can be exchanged for a unit of domestic…

Q: Explain how the exchange-rate transmission mechanism can strengthen the interest-rate transmission…

A: The Monetary Policy is defined as a policy which is used by the government to control a nations…

Q: The SARB can reduce inflationary pressure in the economy if an increase in interest rates leads to a…

A: An interest rate is the amount of cost for borrowers to pay for receiving the loan amount, while the…

Q: How is it necessary for a nation with a fixed exchange rate and open financial markets to renounce…

A: The rate about which one currency will be swapped for another is known as the exchange rate. The…

Q: Empirical studies find that exchange rates are much more variable then   inflation differentials.…

A: The exchange rate refers to the relative value of a currency in terms of other foreign currencies.…

Q: If the exchange rate between the US Dollar ($) and the Euro (E) goes from being $7/E to $6/E, we say…

A: Value of U.S dollar has decreased against euro. Therefore U.S dollar has depreciated against euro.

Q: otherwise downvote switches from a flexible exchange rate regime to a fixed exchange rate regime,…

A: The monetary policy is not an effective when a country follow the fixed exchange rate system.  The…

Q: Under flexible exchange rate regime, the spot exchange rate a. Is maintained by the monetary…

A: Exchange rate: - the exchange rate is the rate at which the currency of one country can be exchanged…

Q: What happens when international financial capital is completely free to move in and out of countries…

A: The interaction between the countries will have a significant impact on the domestic trade and the…

Q: A country would always prefer to have a floating exchange rate regime in operation . Discuss .

A: Flexible exchange rates: The equilibrium exchange rate is determined by demand (DD) and supply (SS)…

Q: Country A’s goods have become relatively more expensive for Country B’s buyers due to a change in…

A: Country A’s goods have become relatively more expensive for Country B’s buyers due to a change in…

Q: The US economy is growing faster than that of Japan. The faster growth rate in the US should cause…

A: Answer to the question is as follows :