In this class, you have learned about exchange rates and how they have been historically set, as well as how the exchange rate for the U.S. dollar is set. Based on this knowledge, please identify the CORRECT statement from the statements listed below: Group of answer choices The exchange rate for the U.S. dollar is set to be inversely related to the price of gold. The exchange rate of the U.S. dollar is determined by the demand and supply for the U.S. dollar in the world financial markets.

In this class, you have learned about exchange rates and how they have been historically set, as well as how the exchange rate for the U.S. dollar is set. Based on this knowledge, please identify the CORRECT statement from the statements listed below: Group of answer choices The exchange rate for the U.S. dollar is set to be inversely related to the price of gold. The exchange rate of the U.S. dollar is determined by the demand and supply for the U.S. dollar in the world financial markets.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: International Finance

Section: Chapter Questions

Problem 14QP

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This is not a writing assignment, this is a multiple-choice question Which of the below statements does NOT include nternational exchange rates, how these are determined, and how exchange rates impact the economy? Group of answer choices The international exchange rate for the British pound (or any other currency) in the international exchange rates market is determined by demand for that currency relative to its supply. By increasing real interest rates to prop up the British pounds the British government would also be boosting the British economy which was in a state of economic recession at that time. To prop up (increase) the exchange rate for the British pound the British government could use monetary policy and increase real inerest rates. The higher interest rates on British bonds would make them more interesting to foreign investors who would need to get more British pounds to purchase British bonds - thus increasing the demand for the British pound. To prop up…
This is not a writing assignment, this is a multiple-choice question Which of the below statements does NOT include international exchange rates, how these are determined, and how exchange rates impact the economy? Group of answer choices By increasing real interest rates to prop up the British pounds the British government would also be boosting the British economy which was in a state of economic recession at that time. To prop up (increase) the exchange rate for the British pound the British government could use monetary policy and increase real interest rates. The higher interest rates on British bonds would make them more interesting to foreign investors who would need to get more British pounds to purchase British bonds - thus increasing the demand for the British pound. To prop up (increase) the exchange rate of the British pound the British government could use its reserves of foreign currencies to purchase British pounds, thus directly increasing the demand for the…
In this class you have learned about exchange rates and how they have been historically set, as well as how the exchange rate for the U.S. dollar is set. Based on this knowledge, please identify the CORRECT statement from the statements listed below: Group of answer choices The exchange rate for the U.S. dollar is set to be inversely related to the price of gold. The exchange rate of the U.S. dollar is determined by the demand and supply for the U.S. dollar in the world financial markets. The U.S. dollar is backed by gold (Gold Standard).
In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. Suppose that Singapore wants to return the exchange rate to 1 euro = 0.58 Singaporean dollars. Should the Singaporean central bank buy or sell euros in the foreign exchange market? Instead of buying or selling euros, what domestic open-market operation can the Singaporean central bank use to achieve the same result? Explain.
The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate One-Year Forward Exchange Rate Canadian dollar (U.S. dollar/Canadian dollar) 0.8932 0.9133 Which of the following statements is implied by interest rate parity theory? A product bought in one country should have the same price in other countries,…
The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: An American investor is considering investing $1,000 in default-free 90-day Japanese bonds that promise a 4% annual nominal return. • The spot exchange rate is ¥101.12 per dollar. • The 90-day forward exchange rate is ¥100.25 per dollar. A. The investor’s annualized return on these bonds—if he or she can lock in the dollar return by selling the foreign currency in the forward market—will be ____…
Suppose the current spot exchange rate for the Chinese yuan is USD 0.15 per CNY. If the domestic prices of traded goods rise 70% over the next 10 years in China and 30% over the same period in the United States, then, according to the relative purchasing power parity hypothesis, the spot exchange rate for the yuan in 10 years will be approximately: USD 0.35 per CNY USD 0.60 per CNY USD 0.11 per CNY
Use the money market and FX diagrams to answer the following questions. This question considers the relationship between the Indian rupee (Rs) and the U.S. dollar ($). The exchange rate is in rupees per dollar, ERs/$. On all graphs, label the initial equilibrium point A. a. Illustrate how a permanent increase in India’s money supply affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. b. By plotting them on a chart with time on the horizontal axis, illustrate how each of the following variables changes over time (for India): nominal money supply MIN, price level PIN, real money supply MIN/PIN, interest rate iRs, and the exchange rate ERs/$. c. Using your previous analysis, state how each of the following variables changes in the short run (increase/decrease/no change): India’s interest rate iRs, ERs/$, expected exchange rate EeRs/$, and price level PIN. d. Using your previous analysis, state how each of the…
Suppose the current spot exchange rate for the Chinese yuan is USD 0.15 per CNY. If the domestic prices of traded goods rise 70% over the next 10 years in China and 20% over the same period in the United States, then, according to the relative purchasing power parity hypothesis, the spot exchange rate for the yuan in 10 years will be approximately:
It is possible to assert that the exchange rate is endogenous in the equation system nx = c1 + c2 y + c2 ex + u, where nx is net exports, y is gross domestic product, and ex is real exchange rate. Defend this assertion.
Suppose the government releases information that causes people to expect the purchasing power of the local currency in the future will be less than they previously had expected. What will happen to the FX rate today? Select one: a.The currency will weaken. b.There will be no immediate change. c.The currency will strengthen. d.It is hard to forecast. Which of the following statements is/are true with regard to the movements in cross exchange rates? Choose all that apply. Select one or more: a.A change in the equilibrium cross exchange rate over time is due to the same types of forces that affect the demand and supply conditions between two currencies. b .If currencies A and B move in the same direction by the same degree against the dollar, currency A will also move in the same direction by the same degree against currency B. c.When currency A appreciates against the dollar by a greater degree than currency B, then currency A depreciates against currency B. d.If currency A appreciates…
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