international finance

Use the link here to access Federal Reserve Economic Data for "USD for Turkey". What isthe exchange rate (TRY/USD) for October, 2022?

C) 18.5848

The United States has a current account _______ and a financial account _______.

Deficit; surplus

In the class, we learned that China maintained a fixed exchange rate of 6.8 RMB (or ChineseYuan) to 1 USD until 2010. This is not always the case. Use the link here to access FederalReserve Economic Data for "Chinese Yuan Renminbi to U.S. Dollar Spot Exchange Rate".What is the exchange rate (RMB/USD) for November, 2003 (end of period)? Hint: You mayneed to click on "Max" to see the entire data.

RMB 8.2770/ USD

Belize uses a fixed exchange rate with one Belize dollar equal to one half of a U.S. dollar.There is an increase in U.S. citizens traveling to Belize on vacation. What will the centralbank of Belize do?

Sell the country's currency

If interest rates increase in a country with a fixed exchange rate, what will the central bankdo?

Sell the country's currency Interest rate increases would lead to increase in a demand, resulting in an increase in exchangerate. To maintain the fixed exchange rate, the central bank will need to increase the supply of thecurrency. The central bank can achieve this by selling the country's currency (their owncurrency) on the market; the selling means that the central bank is increasing currency supplybecause there will be more currency on the market now. On the other hand, if the central bankbuys the country's currency, this means that the central bank would be taking out currency fromthe market, leading to lower currency supply. Make sure you go through the example questionsin "34 - International Finance 3" slides

Boeing makes an airplane in the United States and sells it to Spain for 20 million Euros.Boeing then spends 10 million Euros in Italy for computer equipment and pays 10 millionEuros in fees to a consulting company in France. What is the total effect on the U.S. balanceof payments?

The current account and the financial account are both unchanged

The United States has floating exchange rates. Suppose there is an increase in inflation in theUnited States. What will happen?

The exchange rate (price of a dollar) will go down

What happens to the exchange rate (price of money) when there is an increase in the demandfor a currency?

The exchange rate increases

What does the term "exchange rate" refer to in international finance?

What does the term "exchange rate" refer to in international finance?

The demand curve for British pounds (in terms of U.S. dollars) is ________.

downward-sloping because a lower dollar price of pounds means British goods arecheaper for Americans

Given an exchange rate of 1 British pound (GBP) to 150 Japanese yen (JPY), if a NintendoSwitch is priced at 300 pounds, what is the equivalent price in yen, assuming there is novariation in the conversion between the two currencies?

45,000 JPY

A new Corvette costs $65,000. The current exchange rate for British pounds (GBP) is 1.25USD to 1 GBP. What is the price of a new corvette in British pounds? Again, assume thereis no variation in the conversion between the two currencies?

52,000 GBP

Use the link here to access Federal Reserve Economic Data for "USD for Turkey". What isthe exchange rate (TRY/USD) for September, 2021?

8.5457

If the exchange rate of the US dollar to the Euro is 1 USD = 0.80 EUR, how many Euros willyou receive in exchange for 100 US dollars?

80 EUR To find the amount of Euros you will receive, multiply the amount in USD (100) by theexchange rate (0.80), i.e., 100 USD* 0.80 EUR/USD = 80 EUR

Initially, the exchange rate of dollars to Euros is 1 to 1. Then, there is a decrease in thesupply of Euros. How does this affect the exchange rate?

A Euro is now worth more than $1

Again, use the link here to access Federal Reserve Economic Data for "Chinese YuanRenminbi to U.S. Dollar Spot Exchange Rate". What is the exchange rate (RMB/USD) forNovember, 2008 (end of period)?

RMB 6.8254/ USD

According to what we learned in class, the change in the exchange rates from the above twoquestions means that: (Hint: Note that it is RMB/USD not USD/RMB in FRED, there is ageneral convention in currency pair. Be careful with the notation and the meaning. Thinkabout how many USD one RMB can buy and how many RMB one USD can buy in differentyears.)

In November 2008, the U.S. dollar's value relative to the RMB is lower than inNovember 2003

How does currency depreciation (the price of a currency decreases) typically impact acountry's exports?

It promotes exports by making them more competitively priced in internationalmarkets

Between September 2021 and October 2022, the annualized inflation rate in Turkey risesfrom 16.7% to 71.3% according to FRED (core-CPI, link). Using your answer from theabove question, what do you expect to happen to Turkish Lira (TRY) in the meantime?

It will depreciate (lower exchange rate)

If a country's inflation rate is significantly higher than that of its trading and tourism partners,what is likely to happen to its currency's exchange rate?

It will depreciate (lower exchange rate) Higher inflation in a country will decrease the value of currency. Supply for the currency will behigher and demand for it will be lower. A rightward shift of the supply curve and a leftward shiftof the demand curve leads to lower exchange rate and ambiguous on quantity traded