Econ 131 Final Exam: Chapter 16

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

Canadian inflation rate becomes extremely low

The ______________ is no longer one of the most commonly traded currencies in the foreign exchange markets

French franc

If the the Canadian dollar is strengthening, then it has ____________________

appreciated in terms of other currencies

The ________ is an example of a large-scale common currency

euro

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

If the government uses an expansionary monetary policy to reduce interest rates, then it will cause the _____________

exchange rate for currency to depreciate

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then ___________

exchange rates will have less reason to vary

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

exchange rates/ rates of return

A stronger British pound is beneficial for ___________

exchange students with a British scholarship studying in Canada

When Mateo buys euros through the _____________, he will use U.S. dollars to pay for them

foreign exchange market

If a government uses monetary policy to alter the exchange rate, then it cannot at the same time use monetary policy to address the issues of __________

inflation or recession

________________ equalizes the prices of internationally traded goods across countries

purchasing power parity

Greece, Ireland, and Germany all _________

share a common currency (euro)

When a government uses a ________ exchange rate policy, it usually allows the exchange rate to be set by the market

soft peg

A ____________ policy is which government almost never acts to intervene in the exchange rate market looks a great deal like a floating exchange

soft peg exchange rate

A tight monetary policy decreases aggregate demand by _____________

stimulating exports and reducing imports

A soft peg exchange rate may create additional _______ as exchange rate markets try to anticipate when and how the government will intervene

volatility