Exam 18: The Foreign Exchange Market

________ 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 ________ and the domestic currency to appreciate, everything else held constant.

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.

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

Explain how productivity affects exchange rates in the long-run

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

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.

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.

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.

Why are exchange rates so volatile?

________ 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 domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to appreciate, 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.

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 ________.

The exchange rate 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.

The theory of purchasing power parity cannot fully explain exchange rate movements because ________.

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

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

If the Japanese yen appreciates from $0.01 per yen to $0.02 per yen, the Canadian dollar depreciates from ________ per dollar to ________ per dollar.