Exam 19: The Foreign Exchange Market

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

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

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

One way to understand the short-run behaviour of exchange rates is ________.

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

Everything else held constant,when a country's currency depreciates,its goods abroad become ________ expensive while foreign goods in that country become ________ expensive.

Explain the interest parity condition.

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

An increase in productivity in a country will cause its currency to ________ because it can produce goods at a ________ price,everything else held constant.

On January 25,2009,one Canadian dollar traded on the foreign exchange market for about 3.33 Romanian new lei.Therefore,one Romanian new lei would have purchased about ________ Canadian dollars.

If the inflation rate in Canada is higher than that in Mexico and productivity is growing at a slower rate in Canada than in Mexico,then,in the long run,________,everything else held constant.

Suppose that the Bank of Canada sells bonds to the chartered banks.Everything else held constant,this will cause the demand for Canadian assets to ________ and the Canadian dollar will ________.

________ in the domestic interest rate causes the demand for domestic assets to shift to the left 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 Canadian assets to ________ and the Canadian dollar will ________.

When the value of the dollar changes from £0.5 to £0.75,then the British pound has ________ and the Canadian 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.

According to the purchasing power parity theory,a rise in Canada price level of 5 percent,and a rise in the Mexican price level of 6 percent cause ________.

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

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

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 ________.