Exam 17: The Foreign Exchange Market

________ in the expected future domestic exchange rate causes the demand for domestic assets to decrease and the domestic currency to ________,everything else held constant.

A decrease in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant.

________ in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to appreciate,everything else held constant.

________ in the expected future domestic exchange rate causes the demand for domestic assets to shift to the right and the domestic currency to ________,everything else held constant.

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

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.

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 ________.

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 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.

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.

________ 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.

Although foreign exchange market trades are said to involve the buying and selling of currencies,most trades involve the buying and selling of

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.

________ 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.

________ in the foreign interest rate causes the demand for domestic assets to increase and the domestic currency to ________,everything else held constant.

An increase in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant.

A decrease in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant.

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.

Everything else held constant,if a factor increases the demand for ________ goods relative to ________ goods,the domestic currency will appreciate.

________ in the domestic interest rate causes the demand for domestic assets to increase and the domestic currency to ________,everything else held constant.