Exam 14: Exchange Rates and Their Determination: A Basic Model

An exchange rate between two countries should equal the ratio of the price level in one country to the price level in the other country is a statement of:

As the dollar appreciates against the Euro:

As the dollar appreciates:

Suppose that Mexican incomes are increasing and everything else has remained constant then:

Explain why it is important to know if the real exchange rate is appreciating or depreciating.

An increase or decrease in domestic income will cause the demand for foreign exchange to:

In the short run we expect that exchange rate movements will largely reflect inflation differentials.

Countries with a low rate of inflation relative to the rest of the world would tend to experience:

If inflation rates in Norway accelerate relative to inflation rates in Malaysia then the Malaysian ringgit will _____ and the Norwegian krone will _____.

If relative purchasing power parity holds, then:

Describe the various types of exchange-rate indexes.

Factors that change the real exchange rate include all of the following except:

Explain how exchange rate volatility tends to lower the amount of international trade.

The symbol k is the proportion of nominal GDP the public wishes to hold in the form of money.

A high rate of growth of GDP will tend to cause the exchange rate to appreciate.

Nominal exchange rates are calculated by adjusting the exchange rate for changes in the price levels in the two countries.

In converting currencies to a common denominator such as the dollar, the procedure that uses the cost of a given basket of goods and services as the basis for setting the conversion rate for one currency into another is known as:

Suppose that Japanese prices are rising more slowly than U.S. prices. In this case the demand for U.S. products is likely to:

If the dollar appreciates against the Australian dollar at a faster rate than the Australian inflation rate exceeds the U.S. rate, then the dollar would appear to be:

If the only thing that changes is the exchange rate then there has been: