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True or False or uncertainty Uncovered interest parity (UIRP) implies that the market expects the currencies of countries with relatively higher interest rates to lose value. 11. If exports are payable in dollars, while imports require payment in for- eign currency, a change in the nominal exchange rate automatically transfers into a change in the price of imported goods relative to local goods. 12. Eurobanking have grown rapidly because of lack of regulation and con- sequent opportunity for Eurobanks to pay slightly higher deposit rates and make international loans at slightly lower loan rates.

True or False or uncertainty Uncovered interest parity (UIRP) implies that the market expects the currencies of countries with relatively higher interest rates to lose value. 11. If exports are payable in dollars, while imports require payment in for- eign currency, a change in the nominal exchange rate automatically transfers into a change in the price of imported goods relative to local goods. 12. Eurobanking have grown rapidly because of lack of regulation and con- sequent opportunity for Eurobanks to pay slightly higher deposit rates and make international loans at slightly lower loan rates.

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
Section: Chapter Questions
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True or False or uncertainty 10. Uncovered interest parity (UIRP) implies that the market expects the currencies of countries with relatively higher interest rates to lose value. 11. If exports are payable in dollars, while imports require payment in for- eign currency, a change in the nominal exchange rate automatically transfers into a change in the price of imported goods relative to local goods. 12. Eurobanking have grown rapidly because of lack of regulation and con- sequent opportunity for Eurobanks to pay slightly higher deposit rates and make international loans at slightly lower loan rates. 13. If the balance on current account is positive (a surplus), adjustment of the balance to zero would usually require the real exchange rate to rise. 14. With flexible exchange rates, central banks do not have to finance cur- rent account deficits because balance of payments equilibrium is re- stored by changes in exchange rates. 15. Canada should move to a common currency with the United States once it has much the same inflation rate as the United States. 16. The variability of real exchange rates has been much greater when a country adopts of fixed exchange rates (as under the Bretton-Woods system) than when it floats its nominal exchange rate.
Transcribed Image Text:True or False or uncertainty 10. Uncovered interest parity (UIRP) implies that the market expects the currencies of countries with relatively higher interest rates to lose value. 11. If exports are payable in dollars, while imports require payment in for- eign currency, a change in the nominal exchange rate automatically transfers into a change in the price of imported goods relative to local goods. 12. Eurobanking have grown rapidly because of lack of regulation and con- sequent opportunity for Eurobanks to pay slightly higher deposit rates and make international loans at slightly lower loan rates. 13. If the balance on current account is positive (a surplus), adjustment of the balance to zero would usually require the real exchange rate to rise. 14. With flexible exchange rates, central banks do not have to finance cur- rent account deficits because balance of payments equilibrium is re- stored by changes in exchange rates. 15. Canada should move to a common currency with the United States once it has much the same inflation rate as the United States. 16. The variability of real exchange rates has been much greater when a country adopts of fixed exchange rates (as under the Bretton-Woods system) than when it floats its nominal exchange rate.
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