Exam 19: The Foreign Exchange Market

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 dollar is ________.

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(Multiple Choice)

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Question 1

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Explain how productivity affects exchange rates in the long-run

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Question 2

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When productivity in a country rises,it tends to rise in domestic sectors that produce traded goods rather than nontraded goods.Higher productivity is therefore associated with a decline in the price of domestically produced traded goods relative to foreign-traded goods.As a result,the demand for domestic goods rises,and the domestic currency tends to appreciate.

When Canadians or foreigners expect the return on assets to be high relative to the return on assets,there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets.

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Question 3

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If,in retaliation for "unfair" trade practices,the Canadian government imposes a 30 percent tariff on Japanese DVD recorders,but at the same time,Canadian demand for Japanese goods increases,then,in the long run,________,everything else held constant

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Question 4

If the dollar appreciates from 1.5 Brazilian reals per dollar to 2.0 reals per dollar,the real depreciates from per real to per real.

(Multiple Choice)

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Question 5

When Canadians or foreigners expect the return on assets to be high relative to the return on assets,there is a demand for dollar assets,everything else held constant.

(Multiple Choice)

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Question 6

The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in ________.

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Question 7

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

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Question 8

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

(Multiple Choice)

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Question 9

Assume that the following are the predicted inflation rates in these countries for the year: 2 percent for Canada,3 percent for Canada; 4 percent for Mexico,and 5 percent for Brazil.According to the purchasing power parity and everything else held constant,which of the following would we expect to happen?

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Question 10

If Canada imposes a quota on imports of Japanese cars due to claims of "unfair" trade practices,and Japanese demand for Canadian exports increases at the same time,then,in the long run ________,everything else held constant.

(Multiple Choice)

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Question 11

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

(Multiple Choice)

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Question 12

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.

(Multiple Choice)

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Question 13

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

(Multiple Choice)

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Question 14

An agreement to exchange dollar bank deposits for euro bank deposits in one month is a ________.

(Multiple Choice)

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Question 15

What are the factors that affect exchange rates in the long-run?

(Essay)

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Question 16

Explain how trade barriers affect the exchange rates in the long-run

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Question 17

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.

(Multiple Choice)

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Question 18

Anything that increases the demand for foreign goods relative to domestic goods tends to the domestic currency because domestic goods will only continue to sell well if the value of the domestic currency is ,everything else held constant.

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Question 19

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.

(Multiple Choice)

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Question 20

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Exam 19: The Foreign Exchange Market

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 dollar is ________.

Explain how productivity affects exchange rates in the long-run

When Canadians or foreigners expect the return on ________ assets to be high relative to the return on ________ assets,there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets.

If,in retaliation for "unfair" trade practices,the Canadian government imposes a 30 percent tariff on Japanese DVD recorders,but at the same time,Canadian demand for Japanese goods increases,then,in the long run,________,everything else held constant

If the dollar appreciates from 1.5 Brazilian reals per dollar to 2.0 reals per dollar,the real depreciates from ________ per real to ________ per real.

When Canadians or foreigners expect the return on ________ assets to be high relative to the return on ________ assets,there is a ________ demand for dollar assets,everything else held constant.

The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in ________.

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

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

If Canada imposes a quota on imports of Japanese cars due to claims of "unfair" trade practices,and Japanese demand for Canadian exports increases at the same time,then,in the long run ________,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 ________.

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.

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

An agreement to exchange dollar bank deposits for euro bank deposits in one month is a ________.

What are the factors that affect exchange rates in the long-run?

Explain how trade barriers affect the exchange rates in the long-run

________ 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.

Anything that increases the demand for foreign goods relative to domestic goods tends to ________ the domestic currency because domestic goods will only continue to sell well if the value of the domestic currency is ________,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.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

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When Canadians or foreigners expect the return on assets to be high relative to the return on assets,there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets.

If the dollar appreciates from 1.5 Brazilian reals per dollar to 2.0 reals per dollar,the real depreciates from per real to per real.

When Canadians or foreigners expect the return on assets to be high relative to the return on assets,there is a demand for dollar assets,everything else held constant.

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

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

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.

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

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.

Anything that increases the demand for foreign goods relative to domestic goods tends to the domestic currency because domestic goods will only continue to sell well if the value of the domestic currency is ,everything else held constant.