Exam 12: Exchange-Rate Determination

In the long run, exchange rates are primarily determined by:

Suppose that the yen-dollar exchange rate changes from 85 yen per dollar to 80 yen per dollar. One can say that the:

A primary reason that explains the $\underline { \text { appreciation } }$ in the value of the U.S. dollar in the 1980s is:

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

For the United States, suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent. For Japan, suppose the annual interest rate equals 5 percent. These variables would cause investment funds to flow from:

Given floating exchange rates, assume that the Swiss decrease their import purchases from Italy while at the same time the Italians increase their purchases of Swiss government securities. The first action by itself would lead to a (an) ____ of the franc against the lira while the second action by itself would lead to a (an) ____ of the franc against the lira.

If wheat costs $4 per bushel in the United States and 2 pounds per bushel in Great Britain, then in the presence of purchasing-power parity the exchange rate should be:

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

Which theory of exchange-rate determination best views the foreign exchange market as being similar to a stock exchange where future expectations are important and prices are volatile?

Which example of market expectations causes the dollar to $\underline { \text { appreciate } }$ against the yen--expectations that the U.S. economy will have:

Given a system of floating exchange rates, assume that Boeing Inc. of the United States places a large order, payable in yen, with a Japanese contractor for jet engine parts. The immediate effect of this transaction will be a shift in the:

When the price of foreign currency (i.e., the exchange rate) is $\underline { \text { below } }$ the equilibrium level:

Suppose the exchange rate between the U.S. dollar and the Japanese yen is initially 90 yen per dollar. According to purchasing-power parity, if the price of traded goods rises by 5 percent in the United States and 15 percent in Japan, the exchange rate will become:

Day-to-day influences on foreign exchange rates always cause rates to move in the same direction as changes in long-term market fundamentals.

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

Increased tariffs on U.S. steel imports cause the dollar to ____ in the ____.

$\underline{\mathrm{High}}$ real interest rates in the United States tend to:

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:

With floating exchange rates, a country experiencing faster economic growth than its trading partners find its currency's exchange value appreciating.

Concerning exchange rate forecasting, ____ involves the use of historical exchange rate data to estimate future values, while ignoring the economic determinants of exchange rate movements.