Exam 17: The Foreign Exchange Market

________ in the expected future domestic exchange rate causes the demand for domestic assets to shift to the ________ and the domestic currency to depreciate,everything else held constant.

The exchange rate is

If one U.S. dollar is traded on the foreign exchange market for about 0.89 euros,then one euro can purchase about ________ U.S. dollars.

________ in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate,everything else held constant.

If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets,and if the dollar is expected to appreciate at a 4 percent rate,the expected return on ________-denominated assets in terms of ________ percent.

The expected return on dollar deposits in terms of foreign currency can be written as the ________ of the interest rate on dollar deposits and the expected appreciation of the dollar.

If the interest rate is 7 percent on euro-denominated assets and 5 percent on dollar-denominated assets,and if the dollar is expected to appreciate at a 4 percent rate,the expected return on ________-denominated assets in ________ percent.

In an agreement to exchange dollars for euros in three months at a price of $0.90 per euro,the price is the

When the exchange rate for the Mexican peso changes from 10 pesos to the U.S dollar to 9 pesos to the U.S. dollar,then the Mexican peso has ________ and the U.S. dollar has ________.

The theory of purchasing power parity cannot fully explain exchange rate movements in the short run because

When the exchange rate for the Mexican peso changes from 9 pesos to the U.S. dollar to 10 pesos to the U.S. dollar,then the Mexican peso has ________ and the U.S. dollar has ________.

When the value of the British pound changes from $1.50 to $1.25,then the pound has ________ and the U.S. dollar has ________.

________ in the foreign interest rate causes the demand for domestic assets to shift to the right and the domestic currency to ________,everything else held constant.

If one U.S. dollar is traded on the foreign exchange market for about 3.33 Romanian new lei,then one Romanian new lei can purchase about ________ U.S. dollars.

________ in the expected future domestic exchange rate causes the demand for domestic assets to ________ and the domestic currency to depreciate,everything else held constant.

Suppose a report was released today that showed the Euro-Zone inflation rate is running above the European Central Bank's inflation rate target. This leads people to expect that the European Central Bank will enact contractionary policy in the near future. Everything else held constant,the release of this report would immediately cause the demand for U.S. assets to ________ and the U.S. dollar will ________.

The real exchange rate between U.S. dollars and the Japanese yens is the price of U.S. goods relative to the price of Japanese goods denominated in the U.S. dollar. If this real exchange rate is below one,the same basket of goods is ________ in the United States than in Japan,and the purchasing power of the U.S. dollars is ________ than the Japanese yens.

If the British pound appreciates from $0.50 per pound to $0.75 per pound,the U.S. dollar depreciates from ________ per dollar to ________ per dollar.

________ in the expected future domestic exchange rate causes the demand for domestic assets to shift to the right and the domestic currency to ________,everything else held constant.

________ in the foreign interest rate causes the demand for domestic assets to shift to the left and the domestic currency to ________,everything else held constant.