Exam 21: Exchapterange Rates and Financial Links Between Countries

A fixed exchange rate can be an equilibrium rate even if there is a permanent shift in the foreign exchange market supply and demand curves.

A permanent shift in the foreign exchange market supply and demand curves such that the fixed exchange rate is no longer an equilibrium rate is referred to as:

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?

Suppose purchasing power parity exists in the car stereo market in the United States and Australia. If a car stereo costs $230 in the United States and the exchange rate is $1 = $AUD₁.67, the same car stereo may be purchased in Australia for approximately:

The gold standard fixes the:

In the foreign exchange market where French francs are traded for Japanese yen, a decrease in the interest rate in France is most likely to cause:

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

Suppose the 12-month interest rate on a U.S. Treasury bill is 16 percent, and the one-year interest rate on a comparable British Treasury bill is 6 percent. The exchange rate today is $2.00 per pound. What must be the expected exchange rate at maturity for interest rate parity to hold?

When the U.S. dollar depreciates in relation to the Swiss franc:

In effect, during the period immediately following World War II, the world was on a(n):

One of the advantages of floating exchange rates is that:

A downward-sloping demand curve for Korean won in terms of Canadian dollars indicates that the higher the dollar price of Korean won, the more won will be demanded.

Suppose a U.S. citizen purchases a one-year Norwegian bond that yields 10 percent interest. Between the purchase date and the maturity date, the exchange rate changes from to How much was initially invested in the bond if the dollar value of the proceeds at maturity is $3,500? (roundoff up to the nearest whole number)

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:

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:

Assume that a Chrysler automobile sells for $15,000 in the United States and that the exchange rate is $1 = €1.3. For purchasing power parity to hold, the same car should sell in Germany for:

Suppose a 10-mile taxi ride costs £6.50 in London and $10.00 in Los Angeles. If the exchange rate is £1 = $1.70 purchasing power parity holds.

Deviations from purchasing power parity will be increasingly higher as international trade tariffs become more restrictive. The main reason for this phenomenon is that:

If prices rise within a country, then, other things equal, the value of a unit of domestic currency will:

The exchange rate affects the trade in goods and services between California and NewYork.