(Chapter 16 HW) Exchange Rates and International Capital Flows

In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?

2010: .12 U.S. dollars; 2012: .15 U.S. dollars

Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets?

French franc

A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy.

exchange rate depreciation

Portfolio investments are often made based on beliefs about how _______________ are likely to move in the near future

exchange rates or rates of return

People or firms use one currency to purchase another currency at the...

foreign exchange market

Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________

interest rates; right

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies

A __________________________ policy in which the government almost never acts to intervene in the exchange rate market will look a great deal like a floating exchange rate

soft peg exchange rate

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits.

swings in exchange rates

The Canadian dollar will most likely strengthen against the U.S. dollar if

the Canadian inflation rate becomes extremely low