Exam 13: Exchange Rates and the Open Economy

A currency revaluation is a(n):

The major suppliers of U.S. dollars to the foreign exchange market are:

If a certain automotive part can be purchased in Mexico for 32 pesos or in the United States for $5.25, and if the nominal exchange rate is 8 pesos per U.S. dollar, then the automotive part:

Holding all else constant, a decrease in the real interest rate on Mexican assets will ______ the supply for dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will appreciate when:

To counter a speculative attack on an overvalued currency, the monetary policymakers must _____ monetary policy and to fight a recession the monetary policymakers must ____ monetary policy.

For a given domestic and foreign price level, a decrease in the nominal exchange rate ______ the real exchange rate.

Proponents of fixed exchange rates argue that the predictability of the fixed exchange rate:

Net exports will tend to be low when the real exchange rate:

Holding all else constant, a decrease in the real interest rate on U.S. assets will ______ the demand for dollars in the foreign exchange market and ______ the equilibrium Mexican peso/U.S. dollar exchange rate.

The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will depreciate when:

An alternative to maintaining an undervalued currency is to ____ the fundamental value of the exchange rate by ______ monetary policy.

U.S. households wishing to purchase shares of stock in a European company are ______ the foreign exchange market.

As the dollar exchange rate, e, decreases, the quantity of dollars supplied in the foreign exchange market ____, and the quantity of dollars demanded in the foreign exchange market ____.

Foreign currency assets held by a government for the purpose of purchasing domestic currency in the foreign exchange market are called:

If the market equilibrium value of the nominal exchange rate equals 0.20 U.S. dollars per franc, but the franc is officially fixed at 0.25 U.S. dollars per franc, then the franc exchange rate is _____ and to maintain this exchange rate there will be _____ in the government's stock of international reserves.

Suppose the government of South Island fixes the exchange rate of its currency, the Islandia, in terms of the U.S. dollar. Initially the exchange rate is set at $1 per Islandia. Later the government changes the exchange rate to $2 per Islandia. This is an example of a(n):

The demand for the Franconian franc in the foreign exchange market equals 14,000 - 3,000e and the supply of francs in the foreign exchange market equals 2,000 + 2,000e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 3 U.S. dollars per franc, then to maintain this fixed rate Franconia's international reserves must:

The principal demanders of U.S. dollars in the foreign exchange market are:

The rate at which two currencies can be traded for each other is called the ____ exchange rate.