Exam 17: The Foreign Exchange Market

When the effects of the global financial crisis started to spread more quickly throughout the rest of the world,the U.S.dollar ________ because demand for U.S.assets ________.

Everything else held constant,increased demand for a country's ________ causes its currency to appreciate in the long run,while increased demand for ________ causes its currency to depreciate.

A decrease in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,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 theory of PPP suggests that if one country's price level falls relative to another's,its currency should

A decrease 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.

The condition that states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency is called

Higher tariffs and quotas cause a country's currency to ________ in the ________ run,everything else held constant.

According to the law of one price,if the price of Colombian coffee is 100 Colombian pesos per pound and the price of Brazilian coffee is 4 Brazilian reals per pound,then the exchange rate between the Colombian peso and the Brazilian real is:

If the inflation rate in the United States is higher than that in Mexico and productivity is growing at a slower rate in the United States than in Mexico,then,in the long run,________,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 ________.

Explain and show graphically the effect of an increase in the expected inflation rate on the equilibrium exchange rate,everything else held constant.

Today 1 euro can be purchased for $1.10.This is the

In the long run,a rise in a country's price level (relative to the foreign price level)causes its currency to ________,while a fall in the country's relative price level causes its currency to ________.

The ________ suggests that the most important factor affecting the demand for domestic and foreign assets is the expected return on domestic assets relative to foreign assets.

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

If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on peso-denominated assets,and if the euro is expected to appreciate at a 4 percent rate,for Manuel the Mexican the expected rate of return on euro-denominated assets is

If the U.S.dollar appreciates from 1.25 Swiss franc per U.S.dollar to 1.5 francs per dollar,then the franc depreciates from ________ U.S.dollars per franc to ________ U.S.dollars per franc.

The theory of portfolio choice suggests that the most important factor affecting the demand for domestic and foreign assets is

Everything else held constant,if a factor increases the demand for ________ goods relative to ________ goods,the domestic currency will appreciate.