Exam 20: The Foreign Exchange Market

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.

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.

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

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 ________.

Everything else held constant, when a country's currency appreciates, the country's goods abroad become ________ expensive and foreign goods in that country become ________ expensive.

An increase in productivity in a country will cause its currency to ________ because it can produce goods at a ________ price, everything else held constant.

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.

The ________ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries.

The condition that states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called

If the real exchange rate between the United States and Japan is ________, then it is cheaper to buy goods in Japan than in the United States.

Lower tariffs and quotas cause a country's currency to ________ in the ________ run, everything else held constant.

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

Everything else held constant, increased demand for a country's exports causes its currency to ________ in the long run, while increased demand for imports causes its currency to ________.

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

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.

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.

An agreement to exchange dollar bank deposits for euro bank deposits in one month is a

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.

Evidence from the United States during the period 1973-2002 indicates that the value of the dollar and the measure of the ________ interest rate rose and fell together.

On January 25, 2009, one U.S. dollar traded on the foreign exchange market for about 49.0 Indian rupees. Thus, one Indian rupee would have purchased about ________ U.S. dollars.