Econ Exam 3 - ch 17

When domestic real interest rates​ rise, the domestic currency​ ________. A. appreciates B. depreciates C. does not change D. appreciates or depreciates depending on the change in nominal interest rates

A. appreciates

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

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 interest parity condition. B. the theory of foreign capital mobility. C. money neutrality. D. the purchasing power parity condition.

A. the interest parity condition.

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. pound£​2; pound£1.5 B. pound£​2; pound£1.33 C. pound£​2; pound£2.5 D. pound£​2; pound£1.25

B. pound£​2; pound£1.33

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 terms of​ ________ percent. A. ​euro; euros is 7 B. ​euro; dollars is 1 C. ​dollar; euros is 1 D. ​dollar; dollars is 7

B. ​euro; dollars is 1

________ in the domestic interest rate causes the demand for domestic assets to​ ________ and the domestic currency to​ depreciate, everything else held constant. A. A​ decrease; decrease B. An​ increase; decrease C. An​ increase; increase D. A​ decrease; increase

C. An​ increase; increase

According to the Purchasing Power​ Parity, if one​ country's price level rises relative to​ another's by a certain​ percentage, then the other​ country's currency A. lose its value. B. depreciates by the same percentage. C. appreciates by the same percentage. D. maintains its value.

C. appreciates by the same percentage.

In an agreement to exchange dollars for euros in three months at a price of​ $0.90 per​ euro, the price is the A. fixed exchange rate. B. money exchange rate. C. forward exchange rate. D. spot exchange rate.

C. forward exchange rate.

Everything else held​ constant, increased demand for a​ country's ________ causes its currency to appreciate in the long​ run, while increased demand for​ ________ causes its currency to depreciate. A. ​imports; exports B. ​imports; imports C. ​exports; imports D. ​exports; exports

C. ​exports; imports

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. ​foreign; foreign B. ​foreign; dollar C. ​dollar; dollar D. ​dollar; foreign

D. ​dollar; foreign