Exam 12: Exchange Rate Determination

Suppose that Barclays Bank of the United Kingdom expects the exchange rate to be $1.40 per pound at the end of the year.If today's exchange rate is $1.50 per pound, then Barclays will

A forward premium on the British pound serves as a rough benchmark of the expected rate of appreciation in the pound's spot rate.

A shift in the U.S.supply curve of dollars in the foreign exchange market could be caused by all of the following EXCEPT a change in

The supply of francs would shift to the right for all of the following reasons EXCEPT

The demand curve for euros in the foreign exchange market will increase (shift rightward) if

Given floating exchange rates, a simultaneous decrease in the Canadian demand for British products and increase in the British desire to invest in Canadian government securities would cause a(n)

If German tastes for Microsoft software become stronger, then

The law of one price would least likely apply to

Figure 12.3 Market for British Pounds ​ -Consider Figure 12.3.The market is initially governed by demand curve D₀ and supply curve S₀.Suppose US productivity growth is faster than the UK, which supply and demand curves depict the new situation?

The U.S.demand for pesos would shift to the right if there occurred a(n)

Suppose the exchange rate between the U.S.dollar and the Japanese yen is initially 90 yen per dollar.According to purchasing-power parity, if the price of traded goods rises by 5 percent in the United States and 15 percent in Japan, then the exchange rate will become

Figure 12.3 Market for British Pounds ​ -Consider Figure 12.3.The market is initially governed by demand curve D₀ and supply curve S₀.Suppose US consumers develop stronger preferences for UK made goods, which supply and demand curves depict the new situation?

According to the asset-markets approach, adjustments among financial assets are a key determinant of long-run movements in exchange rates.

Suppose that trade barriers and transportation costs are nonexistent.If the exchange rate is 0.9 Swiss francs per dollar, then according to the law of one price, a refrigerator that costs $1,000 in the United States will cost

If the U.S.inflation rate rises to the foreign inflation rate, then in the foreign exchange market

In the long run, exchange rates are mainly determined by economic fundamentals, such as the productivity levels of different countries.

Which of the following is likely to result in long-run appreciation of the U.S.dollar relative to the peso?

Given floating exchange rates, assume that the Swiss decrease their import purchases from Italy while the Italians increase their purchases of Swiss government securities.The first action by itself would lead to a(n) ____ of the franc against the lira while the second action by itself would lead to a(n) ____ of the franc against the lira.

The Canadian dollar would depreciate on the foreign exchange market if

If the rate of growth of labor productivity in the United States rises relative to the rate of growth of labor productivity in other countries, then the dollar's exchange value will depreciate.