Exam 12: Exchange Rate Determination

Lower tariffs on U.S.agricultural imports cause the dollar to ____ in the ____.

In a free market, exchange rates are determined by market fundamentals and market expectations.

Day-to-day influences on foreign exchange rates always cause rates to move in the same direction as changes in long-term market fundamentals.

If the current exchange value of the dollar is $1.25 per euro, then

In the long run, exchange rates are mainly determined by

An increase in the British demand for exports of American steel will ______ the demand for U.S.dollars and result in a (an) ______ of the dollar.

If the Federal Reserve decreases interest rates in the United States relative to interest rates in other countries, then in the foreign exchange market

If the United States reduces its tariffs on the import of natural gas, then

For the United States, suppose the annual interest rate on government securities equals 12 percent, while the annual inflation rate equals 8 percent.For Japan, suppose the annual interest rate equals 5 percent.These variables would cause investment funds to flow from

In a free market, the equilibrium exchange rate occurs at the point where the quantity demanded of a foreign currency equals the quantity of that currency supplied.

What is the purchasing power parity approach to exchange rate determination?

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 falls by 5 percent in the United States and rises by 5 percent in Japan, then the exchange rate will become

Exchange rates are determined by the unregulated forces of supply and demand for foreign currencies as long as central banks do not intervene in the foreign exchange markets.

In recent decades, the safe-haven effect has applied to the United States, with a long history of stable government, relatively stable economy, and large and efficient financial markets.

​ Figure 12.1 The Market for Francs -Refer to Figure 12.1.Should the United States impose tariffs on imports from Switzerland, there would occur a(n)

Concerning exchange rate forecasting, judgmental forecasts are common sense models that rely on a wide array of political and economic data.

Assume the initial dollar/pound exchange rate to be $2 per pound.If the U.S.inflation rate is 8 percent, and the U.K.inflation rate is 3 percent, then the exchange rate should move to $2.10 per pound according to the purchasing-power-parity theory.

In 1985 and 1986, U.S.interest rates fell relative to interest rates in Japan.Under floating exchange rates, this would lead to the dollar's exchange value depreciating against the yen.

Concerning exchange rate forecasting, ____ is a common-sense approach based on a wide array of political and economic data.

Assume a system of floating exchange rates.Due to a high savings rate, suppose the level of savings in Japan is in excess of domestic investment needs.If Japanese residents invest abroad, then the yen's exchange value will ____ , and the Japanese trade balance will move toward ____.