Exam 19: The Foreign Exchange Market

Everything else held constant,when a country's currency appreciates,the country's goods abroad become ________ expensive and foreign goods in that country become ________ expensive.

If the dollar depreciates relative to the Swiss franc,________.

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

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

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 ________.

Suppose that the European Central Bank conducts a main refinancing sale.Everything else held constant,this would cause the demand for Canadian assets to ________ and the Canadian dollar will ________.

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

On January 25,2009,one Canadian dollar traded on the foreign exchange market for about 0.75 euros.Therefore,one euro would have purchased about ________ Canadian dollars.

The immediate (two-day)exchange of one currency for another is a ________.

If the 2005 inflation rate in Canada is 4 percent,and the inflation rate in Mexico is 2 percent,then the theory of purchasing power parity predicts that,during 2005,the value of the Canadian dollar in terms of Mexican pesos will ________.

The exchange rate is ________.

The starting point for understanding how exchange rates are determined is a simple idea called ________,which states: if two countries produce an identical good,the price of the good should be the same throughout the world no matter which country produces it.

The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is ________.

Suppose the Bank of Canada releases a policy statement today which leads people to believe that the Bank will be enacting expansionary monetary policy in the near future.Everything else held constant,the release of this statement would immediately cause the demand for Canadian assets to ________ and the Canadian dollar to ________.

________ 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.

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

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

When the exchange rate for the British pound changes from $1.80 per pound to $1.60 per pound,then,holding everything else constant,the pound has ________ and ________ expensive.

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

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