The AA curve represents equilibrium in O the goods market only. O the money market only. O the foreign-exchange market only. O both the money and foreign-exchange markets.
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- If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.When the value of the dollar rises against foreign currencies, exports O rise; fall O none of the other answers are correct. O rise; rise fall; rise O fall; fall and importsIf the government wants to O decrease; contractionary O increase; expansionary O increase; only rules-based O decrease: expansionary the value of its currency in the foreign exchange market, it can use monetary policy.
- QUESTION 1 In the short run, an increase in the nominal exchange rate will O A. increase B. decrease O C. not change net exportsThe approach to exchange rate determination argues that exchange rates are determined by the supply and demand for a wide variety of financial assets. O a. law of one price b. monetary Oc. asset market Od. balance of paymentsThe level of exchange rate can only be determined by market forces or the supply and demand of currencies. O a. True O b. False
- Economics Assume that global warming and abnomally high temperatures in Northem California have rendered it impossible for wine grapes in the Napa Valley (and all over California) to grow properly. Unable to get Califormia wines, demand jumps dramatically for Australian wines. This would cause: O an increase in the demand for the Australian dollar. O a decrease in the demand for the Australian dollar. O a decrease in the supply af u.S. dallars. O an increase in the demand for U.S. dollers. What happens if Eurapean economies begin having a seriaus bout of stagflation? O The dollar becomes stronger In terms of the euro. O The real exchange rate between the euro and the dollar inarcases. O The eurp becomes stronger in terms af dollars. O The nominal exchange rate between the euro and the dollar increases.You observe the following exchange rates Spot GBP/EUR exchange rate 1.120 € per £ 3 month GBP/EUR forward rate 1.115 Which of the following statements is likely to be true? Select one: O a. Neither of the other options O b. UK interest rates are lower than Eurozone interest rates O c. Speculators are expecting GBP to depreciate against EUR for the next year. d. UK interest rates arhigher than Eurozone interest rates. O e. Speculators are expecting GBP to appreciate against EUR for the next year.QUESTION 3 sdenoted by GBP/USD and reflects the price of one Pound in Dollars. Search for the current GBP/USD exchange rate The U.S. Dollar-British Pound exchange rate and select a correct statement among the options below O A. Pound is a less expensive currency than Dollar O B. Pound is a more expensive currency than Dollar O C. Pound has always been less expensive than Dollar in the last 5 years O D. If GBP/USD falls, British goods would be more expensive for American consumers
- Anna has the option to purchase a laptop from the U.S. or Japan. The lap top U.S. price inthe U.S. is 340 dollars and in Japan, the same laptop costs 38,000 Japanese yen. If youknow that each 3.4 U.S. dollars are equivalent to 372.26 Japanese Yen. Find the U.S.nominal exchange rate? Find the U.S. real exchange rate? Assume there are no shippingexpenses, should Anna buy the laptop from the U.S. or Japan?In the foreign exchange market, an increase in the U.S. interest rate leads to in the exchange rate because the supply of dollars a fall; increases O b. no change; does not change Ос a rise; decreases O d. a rise; increases O . a fall; decreasesAccording to purchasing power parity, when a country's central bank decreases the money supply, a unit of money O A. gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy. B. gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy. O C. loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy. D. loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
