Exam 4: Exchange Rate Determination

When the "real" interest rate is relatively low in a given country, then the currency of that country is typically expected to be:​

An increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demand for euros and ____ the supply of euros for sale.

If the Japanese yen is expected to appreciate against the U.S. dollar and interest rates in the United States and Japan are similar, banks may try speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____.

Assume that the United States experiences a significant decline in income, while Japan's income remains steady. This event should place ____ pressure on the value of the Japanese yen, other things being equal. (Assume that interest rates and other factors are not affected.)​

Expectations of a currency crisis may trigger actions by investors and speculators that make the crisis worse.

Assume that Japan places a strict quota on goods imported from the United States and the United States places a strict quota on goods imported from Japan. This event should immediately cause the U.S. demand for Japanese yen to ____, and the supply of Japanese yen to be exchanged for U.S. dollars to ____.

Assume that British corporations begin to purchase more supplies from the United States as a result of several labor strikes by British suppliers. This action reflects:​

The phrase "the dollar was mixed in trading" means that:​

Which of the following events would most likely result in an appreciation of the U.S. dollar?​

The main effect of interest rate movements on exchange rates is through their effect on international trade.

Government controls can affect only the supply of a given currency for sale and not the demand.

____ are not a factor that causes currency supply and demand schedules to change.

Illiquid currencies tend to exhibit less volatile exchange rate movements than liquid currencies.

A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) ____ in Mexican demand for U.S. goods, and the Mexican peso should ____.

If one foreign currency appreciates against the dollar, then all foreign currencies will appreciate against the dollar but by different degrees.

An increase in U.S. inflation relative to Singapore inflation places upward pressure on the Singapore dollar.

The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollar was $0.69. The Australian dollar ____ by ____ percent

A currency's liquidity can affect the extent to which speculation can impact the currency's value.

Capital flows have become _______ over time; a significant portion of capital flows are due to _______ .

If a currency's spot rate market is ____, its exchange rate is likely to be ____ to a single large purchase or sale transaction.