Exam 21: International Finance

If $1 = 96 Japanese yen on Wednesday and on Thursday $1 = 100 Japanese yen, then the dollar depreciated against the yen between Wednesday and Thursday.

There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. An increase in income growth in Mexico relative to income growth in the United States will cause the

Suppose there are only two countries in the world, Mexico and the United States. In the foreign exchange market, it follows that the

Suppose the current exchange rate between the U.S. dollar and the Mexican peso is $0.12 = 1 peso. Furthermore, suppose the price level in Mexico rises 25 percent while the U.S. price level remains constant. According to the purchasing power parity theory, what will be the equilibrium exchange rate?

According to the text, the _______________ is currently the primary reserve currency.

Suppose there is a decrease in U.S. income and Mexican income does not change. We would expect to see

Suppose the governments of Mexico and the United States agree to a fixed exchange rate.  Describe some of the options available to the Mexican government if the peso was persistently overvalued, creating a surplus of pesos on the foreign exchange market.  Be sure to explain how each of these options would be expected to impact the supply and\or demand for Mexican pesos.

Advocates of a fixed exchange rate system argue that fixed exchange rates promote international trade.

As the dollar price of the Mexican peso falls, the __________ Mexican goods will be for Americans to purchase and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

If Japanese real interest rates fall relative to real interest rates in the U.S., the yen will likely appreciate and the dollar will likely depreciate.

Those economists who argue that the European Union is not a true optimal currency area cite _______________ and __________________ as justifications for this position.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.007 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the yen will __________.

Research by economists Autor, Dorn, and Hanson revealed that during the period 1990 to 2007, U.S. regions that faced more competition from Chinese imports had _____________ unemployment rates and ______________ wages than U.S. regions that faced less competition from Chinese imports.

The exchange rate is $1 = 110 yen. If the price of a Japanese good is 37,500 yen, what is the approximate price of the good in dollars?

Suppose that the exchange rate between the U.S. dollar and the Mexican peso is 1 peso = $0.11.  If the U.S. dollar price per Mexican peso changes to 1 peso =$0.10, the peso is said to have __________ and the dollar to have __________.

The U.S. dollar currently serves as the "unit of account" of major global products.

Suppose that prices in the United States rise relative to prices in Japan. We expect that

If it takes 118 Japanese yen to buy one dollar, then how many dollars does it take to buy one euro?

Under a fixed exchange rate system, if the dollar price of Mexican pesos is above its equilibrium level, the peso is referred to as overvalued and the dollar is necessarily undervalued.

If the equilibrium exchange rate is $1 = 90 yen, then at an exchange rate of $1 = 80 yen there is a