Exam 4: Exchange Rate Determination

At the beginning of 2002 the AUD/USD exchange rate was 1.9585 and the 2002 inflation rates were 3.10% for Australia and 2.33% for the US. What should the USD/AUD exchange rate have been at the end of 2002, according to PPP theory?

Expectations affect the exchange rate because:

If PPP holds precisely, then the real exchange rate will be:

At the beginning of 2003 the AUD/USD exchange rate was 1.7662. At the same time, the forecast change in the AUD/USD in 2003 was 2.00% and the forecast inflation rate for the US in 2003 was 1.50%. What should be the forecast inflation rate for Australia in 2003, according to PPP theory?

If the foreign currency equivalent of the domestic price of a commodity is less than the foreign price of the same commodity, then the derivation of PPP implies that:

Destabilising speculation occurs when speculators:

Which of the following was NOT a reason for the depreciation of the Australian dollar between March

An exchange rate is said to follow a random walk when:

Which of the following was NOT a reason for the depreciation of the Australian dollar between 1997 and 2002?

Which of the following conditions is the LEAST likely to produce support for PPP?

The offer exchange rate is determined by:

Assuming the exchange rate is measured in direct quotation and that a PPP trading rule is adopted, if the actual exchange rate is higher than the PPP rate, then:

Calculate the bid offer spread. You are given the following demand and supply functions:

A rise in the domestic and foreign growth rates leads to:

The bid exchange rate is determined by:

Assuming the exchange rate is measured in direct quotation and that a PPP trading rule is adopted, if the actual exchange rate is lower than the PPP rate, then:

At the beginning of 2002 the AUD/USD exchange rate was 1.9585 and the forecast inflation rates for 2002 were 4.00% for Australia and 2.50% for the US. What is the USD/AUD exchange rate forecast to be at the end of 2002, according to PPP theory?

At the beginning of 2002 the AUD/USD exchange rate was 1.9585 and the 2002 inflation rates were 3.10% for Australia and 2.33% for the US. What should the AUD/USD exchange rate have been at the end of 2002, according to PPP theory?

A speculative attack on a currency is triggered when:

Stabilising speculation occurs when speculators: