exam c2

There are two kinds of exchange rate transactions: spot transactions and forward transactions. Correct! True False Question 2 1 / 1 pts A rise in the expected future exchange rate shifts the expected return schedule for ________ deposits to the ________ and causes the domestic currency to appreciate. domestic; right domestic; left foreign; right Correct! foreign; left Question 3 0 / 1 pts If the 2015 inflation rate in Britain is 6 percent, and the inflation rate in the U.S. is 4 percent, then the theory of purchasing power parity predicts that, during 2015, the value of the British pound in terms of U.S. dollars will rise by 10 percent. rise by 2 percent. fall by 10 percent. Correct Answer fall by 2 percent. You Answered do none of these. Question 4 1 / 1 pts If a U.S. traveler needs foreign currency for a trip abroad, she would buy the currency in the ________ market from a dealer such as American Express. dollar foreign exchange Correct! retail bankers Question 5 1 / 1 pts An increase in the foreign interest rate shifts the expected return schedule for ________ deposits to the ________ and causes the domestic currency to depreciate. domestic; right domestic; left Correct! foreign; right foreign; left Question 6 1 / 1 pts When the value of the dollar changes from £0.50 to £0.75, the pound has ________ and the dollar has ________. appreciated; appreciated Correct! depreciated; appreciated appreciated; depreciated depreciated; depreciated Question 7 1 / 1 pts An increase in which factor will cause domestic currency depreciation? trade barriers export demand Correct! import demand relative productivity Question 8 1 / 1 pts Depreciation of a currency makes it easier for domestic manufacturers to sell their goods abroad and makes foreign goods less competitive in domestic markets. Correct! True False Question 9 1 / 1 pts If the interest rate on foreign deposits increases, holding everything else constant, Correct! the expected return on these deposits must also increase. the expected return on domestic deposits must decrease. the expected return on domestic deposits must increase. both the expected return on these deposits must also increase and the expected return on domestic deposits must decrease. both the expected return on these deposits must also increase and the expected return on domestic deposits must increase. Question 10 1 / 1 pts In the short run, the quantity of dollars supplied (deposits, bonds, equities) is Correct! fixed with respect to the exchange rate. quite volatile and difficult to model in a supply-demand framework. typically following the business cycle (procyclical). is best represented with a horizontal supply curve.

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