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
