Econ 3229 Part 5 -- Ch 20
An increase in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
A) increase; appreciate (Ch. 20)
Everything else held constant, when the current value of the domestic exchange rate increases, the ________ of domestic assets ________. A) quantity supplied; does not change B) supply; decreases C) quantity supplied; increases D) supply; increases
A) quantity supplied; does not change (Ch. 20)
An increase in the domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
A) right; appreciate (Ch. 20)
A decrease in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
A) right; appreciate (Ch. 20)
An increase in the expected future domestic exchange rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
A) right; appreciate (Ch. 20)
If the inflation rate in the United States is higher than that in Mexico and productivity is growing at a slower rate in the United States than in Mexico, then, in the long run, ________, everything else held constant. A) the Mexican peso will appreciate relative to the U.S. dollar B) the Mexican peso will depreciate relative to the U.S. dollar C) the Mexican peso will either appreciate, depreciate, or remain constant relative to the U.S. dollar D) there will be no effect on the Mexican peso relative to the U.S. dollar
A) the Mexican peso will appreciate relative to the U.S. dollar (Ch. 20)
If the British pound appreciates from $0.50 per pound to $0.75 per pound, the U.S. dollar depreciates from ________ per dollar to ________ per dollar. A) £2; £2.5 B) £2; £1.33 C) £2; £1.5 D) £2; £1.25
B) £2; £1.33 (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to shift to the right and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
C) A decrease; appreciate (Ch. 20)
When the value of the British pound changes from $1.25 to $1.50, the pound has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
C) appreciated; depreciated (Ch. 20)
When the value of the dollar changes from £0.75 to £0.5, then the British pound has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
C) appreciated; depreciated (Ch. 20)
When the exchange rate for the Mexican peso changes from 10 pesos to the U.S dollar to 9 pesos to the U.S. dollar, then the Mexican peso has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
C) appreciated; depreciated (Ch. 20)
In the long run, a rise in a countryʹs price level (relative to the foreign price level) causes its currency to ________, while a fall in the countryʹs relative price level causes its currency to ________. A) appreciate; appreciate B) appreciate; depreciate C) depreciate; appreciate D) depreciate; depreciate
C) depreciate; appreciate (Ch. 20)
Lower tariffs and quotas cause a countryʹs currency to ________ in the ________ run, everything else held constant. A) depreciate; short B) appreciate; short C) depreciate; long D) appreciate; long
C) depreciate; long (Ch. 20)
When the exchange rate for the British pound changes from $1.80 per pound to $1.60 per pound, then, holding everything else constant, the pound has ________ and ________ expensive. A) appreciated; British cars sold in the United States become more B) appreciated; British cars sold in the United States become less C) depreciated; American wheat sold in Britain becomes more D) depreciated; American wheat sold in Britain becomes less
C) depreciated; American wheat sold in Britain becomes more (Ch. 20)
According to the interest parity condition, if the domestic interest rate is 10 percent and the foreign interest rate is 12 percent, then the expected ________ of the foreign currency must be ________ percent. A) appreciation; 4 B) appreciation; 2 C) depreciation; 2 D) depreciation; 4
C) depreciation; 2 (Ch. 20)
As the relative expected return on dollar assets increases, foreigners will want to hold more ________ assets and less ________ assets, everything else held constant. A) foreign; foreign B) foreign; dollar C) dollar; foreign D) dollar; dollar
C) dollar; foreign (Ch. 20)
Everything else held constant, increased demand for a countryʹs ________ causes its currency to appreciate in the long run, while increased demand for ________ causes its currency to depreciate. A) imports; imports B) imports; exports C) exports; imports D) exports; exports
C) exports; imports (Ch. 20)
In an agreement to exchange dollars for euros in three months at a price of $0.90 per euro, the price is the A) spot exchange rate. B) money exchange rate. C) forward exchange rate. D) fixed exchange rate.
C) forward exchange rate. (Ch. 20)
An agreement to exchange dollar bank deposits for euro bank deposits in one month is a A) spot transaction. B) future transaction. C) forward transaction. D) deposit transaction.
C) forward transaction. (Ch. 20)
The exchange rate is A) the price of one currency relative to gold. B) the value of a currency relative to inflation. C) the change in the value of money over time. D) the price of one currency relative to another.
D) the price of one currency relative to another. (Ch. 20)
If the dollar appreciates from 1.5 Brazilian reals per dollar to 2.0 reals per dollar, the real depreciates A) $0.67; $0.50 B) $0.33; $0.50 C) $0.75; $0.50 D) $0.50; $0.67 E) $0.50; $0.75
A) $0.67; $0.50 (Ch. 20)
Although foreign exchange market trades are said to involve the buying and selling of currencies, most trades involve the buying and selling of A) bank deposits denominated in different currencies. B) SDRs. C) gold. D) ECUs.
A) bank deposits denominated in different currencies. (Ch. 20)
The theory of PPP suggests that if one countryʹs price level rises relative to anotherʹs, its currency should A) depreciate in the long run. B) appreciate in the long run. C) depreciate in the short run. D) appreciate in the short run.
A) depreciate in the long run. (Ch . 20)
The theory of PPP suggests that if one countryʹs price level rises relative to anotherʹs, its currency should A) depreciate. B) appreciate. C) float. D) do none of the above.
A) depreciate. (Ch. 20)
An increase in the expected future domestic exchange rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
A) increase; appreciate (Ch. 20)
The ________ suggests that the most important factor affecting the demand for domestic and foreign assets is the expected return on domestic assets relative to foreign assets. A) theory of asset demand B) law of one price C) interest parity condition D) theory of foreign capital mobility
A) theory of asset demand (Ch. 20)
The ________ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries. A) theory of purchasing power parity B) law of one price C) theory of money neutrality D) quantity theory of money
A) theory of purchasing power parity (Ch. 20)
On April 7, 2006, one U.S. dollar traded on the foreign exchange market for about 1.30 Swiss francs. Therefore, one Swiss franc would have purchased about ________ U.S. dollars. A) 0.30 B) 0.77 C) 1.30 D) 3.10
B) 0.77 (Ch. 20)
With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7 percent over the coming year, the expected return on dollar deposits in terms of the dollar is A) 3 percent. B) 10 percent. C) 13.5 percent. D) 17 percent.
B) 10 percent. (Ch. 20)
If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets, and if the dollar is expected to appreciate at a 4 percent rate, for Francois the Frenchman the expected rate of return on dollar-denominated assets is A) 11 percent. B) 9 percent. C) 5 percent. D) 3 percent. E) 1 percent.
B) 9 percent (Ch. 20)
When the exchange rate for the Mexican peso changes from 9 pesos to the U.S. dollar to 10 pesos to the U.S. dollar, then the Mexican peso has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
B) depreciated; appreciated (Ch. 20)
The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is A) the level of trade and capital flows. B) the expected return on these assets relative to one another. C) the liquidity of these assets relative to one another. D) the riskiness of these assets relative to one another.
B) the expected return on these assets relative to one another. (Ch. 20)
The theory of purchasing power parity cannot fully explain exchange rate movements because A) all goods are identical even if produced in different countries. B) monetary policy differs across countries. C) some goods are not traded between countries. D) fiscal policy differs across countries.
C) some goods are not traded between countries. (Ch. 20)
The expected return on dollar deposits in terms of foreign currency can be written as the ________ of the interest rate on dollar deposits and the expected appreciation of the dollar. A) product B) ratio C) sum D) difference
C) sum (Ch. 20)
Suppose that the Federal Reserve enacts expansionary policy. Everything else held constant, this will cause the demand for U.S. assets to ________ and the U.S. dollar to ________. A) increase; appreciate B) decrease; appreciate C) increase; depreciate D) decrease; depreciate
D) decrease; depreciate (Ch. 20)
Everything else held constant, if a factor decreases the demand for ________ goods relative to ________ goods, the domestic currency will depreciate. A) foreign; domestic B) foreign; foreign C) domestic; domestic D) domestic; foreign
D) domestic; foreign (Ch. 20)
A decrease in the domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
D) left; depreciate (Ch. 20)
If, in retaliation for ʺunfairʺ trade practices, Congress imposes a 30 percent tariff on Japanese DVD recorders, but at the same time, U.S. demand for Japanese goods increases, then, in the long run, ________, everything else held constant A) the Japanese yen should appreciate relative to the U.S. dollar B) the Japanese yen should depreciate relative to the U.S. dollar C) there is no effect on the Japanese yen relative to the U.S. dollar D) the Japanese yen could appreciate, depreciate or remain constant relative to the U.S. dollar
D) the Japanese yen could appreciate, depreciate or remain constant relative to the U.S. dollar (Ch. 20)
On April 7, 2006, one U.S. dollar traded on the foreign exchange market for about 44.5 Indian rupees. Thus, one Indian rupee would have purchased about ________ U.S. dollars. A) 0.02 B) 1.20 C) 7.00 D) 44.5
A) 0.02 (Ch. 20)
Suppose that the Federal Reserve conducts an open market sale. Everything else held constant, this will cause the demand for U.S. assets to ________ and the U.S. dollar will ________. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
A) increase; appreciate (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate, everything else held constant. A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
B) An increase; decrease (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to decrease and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
B) An increase; depreciate (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to shift to the left and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
B) An increase; depreciate (Ch. 20)
With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7 percent over the coming year, the expected return on dollar deposits in terms of the foreign currency is A) 3 percent. B) 10 percent. C) 13.5 percent. D) 17 percent.
D) 17 percent. (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate, everything else held constant. A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
D) A decrease; decrease (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to decrease and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
D) A decrease; depreciate (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to shift to the left and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
D) A decrease; depreciate (Ch. 20)
Everything else held constant, when the current value of the domestic currency increases, the ________ domestic assets ________. A) demand for; increases B) quantity demanded of; increases C) demand for; decreases D) quantity demanded of; decreases
D) quantity demanded of; decreases (Ch. 20)
The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in A) the trade balances of the two countries. B) the current account balances of the two countries. C) fiscal policies of the two countries. D) the price levels of the two countries.
D) the price levels of the two countries. (Ch. 20)
On April 7, 2006, one U.S. dollar traded on the foreign exchange market for about 2.86 Romanian new lei. Therefore, one Romanian new lei would have purchased about ________ U.S. dollars. A) 0.35 B) 1.86 C) 2.86 D) 3.35
A) 0.35 (Ch. 20)
If the U.S. dollar appreciates from 1.25 Swiss franc per U.S. dollar to 1.5 francs per dollar, then the franc depreciates from ________ U.S. dollars per franc to ________ U.S. dollars per franc. A) 0.80; 0.67 B) 0.67; 0.80 C) 0.50; 0.33 D) 0.33; 0.50
A) 0.80; 0.67 (Ch. 20)
If the Japanese yen appreciates from $0.01 per yen to $0.02 per yen, the U.S. dollar depreciates from ________ per dollar to ________ per dollar. A) 100¥; 50¥ B) 10¥; 5¥ C) 5¥; 10¥ D) 50¥; 100¥
A) 100¥; 50¥ (Ch. 20)
If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets, and if the euro is expected to appreciate at a 4 percent rate, for Francois the Frenchman the expected rate of return on peso-denominated assets is A) 11 percent. B) 15 percent. C) 17 percent. D) 19 percent.
A) 11 percent. (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to increase and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
A) An increase; appreciate (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to shift to the right and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
A) An increase; appreciate (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to appreciate, everything else held constant. A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
A) An increase; increase (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to appreciate, everything else held constant. A) An increase; right B) An increase; left C) A decrease; right D) A decrease; left
A) An increase; right (Ch. 20)
Assume that the following are the predicted inflation rates in these countries for the year: 2% for the United States, 3% for Canada; 4% for Mexico, and 5% for Brazil. According to the purchasing power parity and everything else held constant, which of the following would we expect to happen? A) The Brazilian real will depreciate against the U.S. dollar. B) The Mexican peso will depreciate against the Brazilian real. C) The Canadian dollar will depreciate against the Mexican peso. D) The U.S. dollar will depreciate against the Canadian dollar.
A) The Brazilian real will depreciate against the U.S. dollar. (Ch. 20)
Anything that increases the demand for foreign goods relative to domestic goods tends to ________ the domestic currency because domestic goods will only continue to sell well if the value of the domestic currency is ________, everything else held constant. A) depreciate; lower B) depreciate; higher C) appreciate; lower D) appreciate; higher
A) depreciate; lower (Ch. 20)
A decrease in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
A) increase; appreciate (Ch. 20)
Suppose that the European Central Bank enacts expansionary policy. Everything else held constant, this will cause the demand for U.S. assets to ________ and the U.S. dollar to ________. A) increase; appreciate B) decrease; appreciate C) increase; depreciate D) decrease; depreciate
A) increase; appreciate (Ch. 20)
In a world with few impediments to capital mobility, the domestic interest rate equals the sum of the foreign interest rate and the expected depreciation of the domestic currency, a situation known as the A) interest parity condition. B) purchasing power parity condition. C) exchange rate parity condition. D) foreign asset parity condition.
A) interest parity condition. (Ch. 20)
Everything else held constant, when a countryʹs currency appreciates, the countryʹs goods abroad become ________ expensive and foreign goods in that country become ________ expensive. A) more; less B) more; more C) less; less D) less; more
A) more; less (Ch. 20)
Today 1 euro can be purchased for $1.10. This is the A) spot exchange rate. B) forward exchange rate. C) fixed exchange rate. D) financial exchange rate.
A) spot exchange rate. (Ch. 20)
According to the purchasing power parity theory, a rise in the United States price level of 5 percent, and a rise in the Mexican price level of 6 percent cause A) the dollar to appreciate 1 percent relative to the peso. B) the dollar to depreciate 1 percent relative to the peso. C) the dollar to depreciate 5 percent relative to the peso. D) the dollar to appreciate 5 percent relative to the peso.
A) the dollar to appreciate 1 percent relative to the peso. (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to depreciate, everything else held constant. A) An increase; right B) An increase; left C) A decrease; right D) A decrease; left
B) An increase; left (Ch. 20)
The theory of PPP suggests that if one countryʹs price level falls relative to anotherʹs, its currency should A) depreciate in the long run. B) appreciate in the long run. C) appreciate in the short run. D) depreciate in the short run.
B) appreciate in the long run. (Ch. 20)
The theory of PPP suggests that if one countryʹs price level falls relative to anotherʹs, its currency should A) depreciate. B) appreciate. C) float. D) do none of the above.
B) appreciate. (Ch. 20)
Everything else held constant, increased demand for a countryʹs exports causes its currency to ________ in the long run, while increased demand for imports causes its currency to ________ A) appreciate; appreciate B) appreciate; depreciate C) depreciate; appreciate D) depreciate; depreciate
B) appreciate; depreciate (Ch. 20)
An increase in productivity in a country will cause its currency to ________ because it can produce goods at a ________ price, everything else held constant. A) depreciate; lower B) appreciate; lower C) depreciate; higher D) appreciate; higher
B) appreciate; lower (Ch. 20)
According to the interest parity condition, if the domestic interest rate is 12 percent and the foreign interest rate is 10 percent, then the expected ________ of the foreign currency must be ________ percent. A) appreciation; 4 B) appreciation; 2 C) depreciation; 2 D) depreciation; 4
B) appreciation; 2 (Ch. 20)
When the value of the British pound changes from $1.50 to $1.25, then the pound has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
B) depreciated; appreciated (Ch. 20)
When the value of the dollar changes from £0.5 to £0.75, then the British pound has ________ and the U.S. dollar has ________. A) appreciated; appreciated B) depreciated; appreciated C) appreciated; depreciated D) depreciated; depreciated
B) depreciated; appreciated (Ch. 20)
When Americans or foreigners expect the return on ________ assets to be high relative to the return on ________ assets, there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets. A) dollar; dollar B) dollar; foreign C) foreign; dollar D) foreign; foreign
B) dollar; foreign (Ch. 20)
When Americans or foreigners expect the return on ________ assets to be high relative to the return on ________ assets, there is a ________ demand for dollar assets, everything else held constant. A) dollar; foreign; constant B) dollar; foreign; higher C) foreign; dollar; higher D) foreign; dollar; constant
B) dollar; foreign; higher (Ch. 20)
When Americans or foreigners expect the return on dollar assets to be high relative to the return on foreign assets, there is a ________ demand for dollar assets and a correspondingly ________ demand for ________ foreign assets. A) higher; higher B) higher; lower C) lower; higher D) lower; lower
B) higher; lower (Ch. 20)
The immediate (two-day) exchange of one currency for another is a A) forward transaction. B) spot transaction. C) money transaction. D) exchange transaction.
B) spot transaction. (Ch. 20)
If the Brazilian demand for American exports rises at the same time that U.S. productivity rises relative to Brazilian productivity, then, in the long run, ________, everything else held constant. A) the Brazilian real will appreciate relative to the U.S. dollar B) the Brazilian real will depreciate relative to the U.S. dollar C) the Brazilian real will either appreciate, depreciate, or remain constant relative to the U.S. dollar D) there is no effect on the Brazilian real relative to the U.S. dollar
B) the Brazilian real will depreciate relative to the U.S. dollar (Ch. 20)
If the U.S. Congress imposes a quota on imports of Japanese cars due to claims of ʺunfairʺ trade practices, and Japanese demand for American exports increases at the same time, then, in the long run ________, everything else held constant. A) the Japanese yen will appreciate relative to the U.S. dollar B) the Japanese yen will depreciate relative to the U.S. dollar C) the Japanese yen will either appreciate, depreciate or remain constant against the U.S. dollar D) there will be no effect on the Japanese yen relative to the U.S. dollar
B) the Japanese yen will depreciate relative to the U.S. dollar (Ch. 20)
Exchange rates are determined in A) the money market. B) the foreign exchange market. C) the stock market. D) the capital market.
B) the foreign exchange market. (Ch. 20)
The condition that states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called A) the purchasing power parity condition. B) the interest parity condition. C) money neutrality. D) the theory of foreign capital mobility.
B) the interest parity condition. (Ch. 20)
The starting point for understanding how exchange rates are determined is a simple idea called ________, which states: if two countries produce an identical good, the price of the good should be the same throughout the world no matter which country produces it. A) Greshamʹs law B) the law of one price C) purchasing power parity D) arbitrage
B) the law of one price (Ch. 20)
On April 7, 2006, one U.S. dollar traded on the foreign exchange market for about 0.83 euros. Therefore, one euro would have purchased about ________ U.S. dollars. A) 0.83 B) 1.00 C) 1.20 D) 1.83
C) 1.20 (Ch. 20)
If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets, and if the euro is expected to appreciate at a 4 percent rate, for Manuel the Mexican the expected rate of return on euro-denominated assets is A) 11 percent. B) 13 percent. C) 17 percent. D) 19 percent.
C) 17 percent. (Ch. 20)
According to the law of one price, if the price of Colombian coffee is 100 Colombian pesos per pound and the price of Brazilian coffee is 4 Brazilian reals per pound, then the exchange rate between the Colombian peso and the Brazilian reals is: A) 40 pesos per real. B) 100 pesos per real. C) 25 pesos per real. D) 0.4 pesos per real.
C) 25 pesos per real. (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to increase and the domestic currency to ________, everything else held constant. A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
C) A decrease; appreciate (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to appreciate, everything else held constant. A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
C) A decrease; increase (Ch. 20)
________ in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to appreciate, everything else held constant. A) An increase; right B) An increase; left C) A decrease; right D) A decrease; left
C) A decrease; right (Ch. 20)
If the dollar depreciates relative to the Swiss franc A) Swiss chocolate will become cheaper in the United States. B) American computers will become more expensive in Switzerland. C) Swiss chocolate will become more expensive in the United States. D) Swiss computers will become cheaper in the United States.
C) Swiss chocolate will become more expensive in the United States. (Ch. 20)
The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is the ________ on these assets relative to one another. A) interest rate B) risk C) expected return D) liquidity
C) expected return (Ch. 20)
________ in the domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to depreciate, everything else held constant. A) An increase; right B) An increase; left C) A decrease; right D) A decrease; left
D) A decrease; left (Ch. 20)
Higher tariffs and quotas cause a countryʹs currency to ________ in the ________ run, everything else held constant. A) depreciate; short B) appreciate; short C) depreciate; long D) appreciate; long
D) appreciate; long (Ch. 20)
A decrease in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
D) decrease; depreciate (Ch. 20)
An increase in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
D) decrease; depreciate (Ch. 20)
Suppose that the European Central Bank conducts a main refinancing sale. Everything else held constant, this would cause the demand for U.S. assets to ________ and the U.S. dollar will ________. A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate
D) decrease; depreciate (Ch. 20)
Everything else held constant, if a factor increases the demand for ________ goods relative to ________ goods, the domestic currency will appreciate. A) foreign; domestic B) foreign; foreign C) domestic; domestic D) domestic; foreign
D) domestic; foreign (Ch. 20)
If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets, and if the dollar is expected to appreciate at a 4 percent rate, the expected return on ________-denominated assets in ________ percent. A) dollar; euros is 3 B) euro; dollars is 1 C) dollar; euros is 1 D) euro; dollars is 3
D) euro; dollars is 3 (Ch. 20)
If the 2005 inflation rate in Canada is 4 percent, and the inflation rate in Mexico is 2 percent, then the theory of purchasing power parity predicts that, during 2005, the value of the Canadian dollar in terms of Mexican pesos will A) rise by 6 percent. B) rise by 2 percent. C) fall by 6 percent. D) fall by 2 percent.
D) fall by 2 percent. (Ch. 20)
An increase in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
D) left; depreciate (Ch. 20)
Everything else held constant, when a countryʹs currency depreciates, its goods abroad become ________ expensive while foreign goods in that country become ________ expensive. A) more; less B) more; more C) less; less D) less; more
D) less; more (Ch. 20)
