Exam 10: The Determination of Exchange Rates

Craig,a manager at a global firm,is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates. Which factor is Craig most likely monitoring?

The purchasing power parity theory claims that a change in relative ________ between two countries must cause a change in ________ in order to keep the prices of goods in two countries fairly similar.

The IMF uses the quota system to determine how much a country may borrow from the Fund.

In a short essay,compare the roles of the Federal Reserve Bank of New York and the European Central Bank.

The three variables predicted by forecasting are the timing,magnitude,and length of exchange rate movements.

Research has shown that past exchange rates are an accurate predictor of future exchange rates ________.

Producers are affected by exchange rate changes because goods manufactured in a country with a weak currency will be relatively cheap in world markets.

Which of the following statements best describes a limitation of the Big Mac Index?

If the euro continues to remain strong against the U.S. dollar,which of the following strategies would make the most sense for BMW?

According to the purchasing power parity theory,a change in relative interest rates between two countries must cause a change in exchange rates.

The Big Mac Index suggests that exchange rates should leave Big Mac hamburgers costing the same in the U.S. as abroad.

A country's central bank is responsible for ________.

Shelly,a manager at a global firm,is studying the foreign currency intervention practices of Indonesia. Shelly is most likely examining ________ factors.

Dollarization of a currency occurs when a country takes all of its own currency out of circulation and replaces it with U.S. dollars.

Fundamental forecasting uses trends in economic variables to predict future rates.

A black market exists when ________.

The Japanese yen is an example of a soft currency.

It is easier to predict the ________ of a change than the ________ of a change in exchange rates.

Technical forecasting relies on trends in economic variables to predict future exchange rates.

Why is China most likely considering a greater reliance on the SDR?