Exam 12: Exchange Rate Determination

What is the asset market approach to exchange rate determination?

In the foreign exchange market,the exchange value of the U.S.dollar will depreciate if

If you were considering hiring a forecasting firm to predict future spot rates of the yen,you would hope that the firm could predict better what would be implied by the yen's forward rate.

A decrease in the U.S.demand for automobile imports will cause the supply curve of dollars to ______ and result in a (an)

If investors anticipate that the exchange value of the euro will depreciate against the dollar in the future,the current exchange value of the euro will appreciate against the dollar.

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

Given a floating exchange rate system an increase in ____ would cause the dollar to appreciate against the euro.

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates. Figure 12.1 The Market for Francs -Refer to Figure 12.1.If Switzerland experienced a disastrous wheat-crop failure,leading to additional wheat imports from the United States,there would occur an:

If the rate of growth in labor productivity in the United States increases relative to the rate of growth in labor productivity in other countries

That identical goods should cost the same in all nations,assuming it is costless to ship goods between nations and there are no barriers to trade,is a reflection of the:

Due to increased air travel,suppose that Saudi Arabian Airlines purchases 40 jetliners from Airbus,a European firm.This results in

The international exchange value of the U.S.dollar is determined by:

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 consumer tastes in the United States change in favor of goods produced in France,the demand for francs will increase which causes an appreciation of the dollar against the franc under a floating exchange rate system.

According to the purchasing power parity theory,if the inflation rate in Mexico is greater than the inflation rate in Switzerland,the nominal exchange value of the peso will appreciate against the franc.

Exchange rate determination in the short run is underlied by which of the following assumptions:

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

Figure 12.3Market 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?

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

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,Barclays will