Exam 17: The Foreign Exchange Market

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

Evidence from the United States during the period 1973-2002 indicates that the value of the dollar and the measure of the ________ interest rate rose and fell together.

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 theory of PPP suggests that if one country's price level falls relative to another's,its currency should

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

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

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

Everything else held constant,when the current value of the domestic currency increases,the ________ domestic assets ________.

With a 10 percent interest rate on dollar deposits,and an expected appreciation of 7 percent over the coming year,the expected return on dollar deposits in terms of the foreign currency is

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

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

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 ________.

If the real exchange rate between the United States and Japan is ________,then it is cheaper to buy goods in Japan than in the United States.

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

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

________ 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.

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.

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

On January 25,2009,one U.S.dollar traded on the foreign exchange market for about 1.15 Swiss francs.Therefore,one Swiss franc would have purchased about ________ U.S.dollars.

The theory of PPP suggests that if one country's price level rises relative to another's,its currency should