Exam 16: How Exchange Rates Are Determined

Interest rate parity means that

If a hotel room in New York City costs $200 a night, and the yen/dollar exchange rate is 100, what is the yen price of the hotel room?

When the dollar appreciates, which of the following generally occurs?

Which of the following is false?

Purchases of U.S. financial securities by foreigners and borrowing from foreign sources by U.S. firms and residents are

A decrease in real income in the United States will do which of following?

A change in foreign real incomes will

Karen has arrived in Switzerland and has a choice of exchanging her dollars at the airport foreign exchange counter (with a dollar/franc rate of 1.2543), or waiting and exchanging her dollars at the Union Bank of Switzerland in Lucerne (with a dollar/franc rate of 1.2743). Which location should she choose?

If the dollar appreciates relative to the euro, then

An increase in the dollar price of foreign goods relative to the dollar price of U.S. goods will have which of the following effects?

The relationship between real income and the supply of dollars is which of the following?

If $1.00 equals 10.380 shillings and $1.00 equals 152.27 escudos, how many escudos equal 1 shilling?

Ultimately, exchange rates are determined by

In the balance of payments, any item which results in a payment by foreigners to Americans is called a/an

The difference between merchandise exports and imports is called the

In the balance of payments, the net amount of government aid to foreigners plus the net amount of private charitable relief is a

Ceteris paribus, an increase in the expected percentage change in the exchange rate will_________ domestic nominal U.S. return on an investment in a foreign instrument that earns the nominal foreign exchange rate?

The appreciation of the dollar would tend to affect the foreign price of U.S.-made goods by causing the foreign prices of U.S. goods to

The relationship between changes in foreign interest rates relative to U.S. interest rates and the demand for dollars is

________________________________ is the condition when interest rates have adjusted so that interest rates between countries differ only by the expected appreciation of depreciation of the currency.