Exam 21: Exchange Rates and Financial Links Between Countries

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime. Figure 21.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 21.1. The supply curves shown for Brazilian reals are based on:

Suppose a U.S. importer agrees to pay a Japanese firm 55,000 yen for a shipment of goods. If the agreement is made when the exchange rate is $1 = ¥100, what is the change in the dollar value of the goods if the exchange rate changes to $1 = ¥110, on the payment-due date?

A commodity money standard exists when exchange rates are:

Under a fixed exchange-rate system, in order to maintain the exchange rate:

Currency speculators are traders who seek to profit from a(n):

Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?

The U.S. provides about _____ percent of the annual membership fees of IMF member countries.

Foreign exchange market intervention is most effective when:

Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.

The IMF mostly receives its funds from:

What is the interest rate on a 12-month U.K. certificate of deposit if the dollar return on the certificate is 4 percent and the dollar has appreciated 9 percent against the British pound?

Economists typically date the beginning of the gold standard to the period:

Consider a country Atlantica, using dollars ($) as its currency. If this country sets a price for gold, and then issues currency such that the amount in circulation is equivalent to the value of gold held in reserve, it is said to be following:

Assume an Australian importer expects to pay 16,000 Australian dollars (AUD) for $8,000 worth of U.S. goods, but on the shipment date 30 days later, the same volume of U.S. goods costs the Australian importer only 10,000 Australian dollars. This means that between the contract date and the payment date, the exchange rate has changed:

Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity?

When a U.S. importer needs $20,000 to settle an invoice for 228,000 Uruguayan pesos, the price of 1 dollar is 11.4 Uruguayan pesos.

If the euro per dollar exchange rate changes from $1 = 0.8 euros to $1 = 0.7 euros, it implies that the euro has depreciated against the dollar.

In 1991, the French mineral water Perrier was temporarily taken off the market in the United States because of suspected impurities. Other things equal, this action brought about:

Assume that a one-year Malaysian bond yields 10 percent interest and that the dollar return on maturity is 5 percent. If the exchange rate at maturity is $1 = MYR 4.00 (Malaysian ringgit), what was the exchange rate at the time the bond was purchased?

Suppose a U.S. importer purchases "Mexican Oaxaca" cheese for $500. If the present exchange rate is Mexican peso (MXP) 10 per U.S. dollar, and the MXP appreciates 10 percent against the U.S. dollar between the date of purchase and the date of payment, then the peso value of the invoice when payment is due is: