Exam 15: The International Financial System

If the exchange rate between the Canadian dollar and the Mexican peso (pesos per Canadian dollar)is less than the relative purchasing power between the two countries, which of the following would be true?

Figure 15.8 Alt text for Figure 15.8: In figure 15.8, a graph illustrates the quantity of rupees traded against the exchange rate. Long description for Figure 15.8: The x-axis is labelled, quantity of rupees traded.The y-axis is labelled exchange rate, Canadian dollar against the rupee, with value 0.02 marked.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.A straight line demand curve, D, slopes down from the top left corner to the bottom right corner.Curves S and D intersect at point with a y-axis value of 0.02, which is connected to the corresponding y-axis value with a dotted line. -Refer to Figure 15.8.At what level should the Indian government peg its currency to the Canadian dollar to make Canadian imports cheaper in India?

Explain why international capital markets have expanded since the 1980s.

The gold standard is an example of

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar, and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

If currencies around the world are based on the gold standard and the European Union lowers the amount of gold for which the euro will trade, then holding all else constant,

According to the theory of purchasing power parity, if the inflation rate in the United States is greater than the inflation rate in Canada, what should happen to the exchange rate between the U.S.dollar and the Canadian dollar?

If a country's currency is "pegged" to the dollar, its exchange rate is

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In July 2011, The Economist reported that the average price of a Big Mac in Canada was $4.07.In Switzerland, the average price of a Big Mac was 6.50 Swiss francs.If the exchange rate between the Canadian dollar and the Swiss franc was 0.93 Swiss francs per Canadian dollar, explain how it would be profitable to buy Big Macs in Canada instead of in Switzerland.

Foreign portfolio investment in Canada has continually declined since 1995.

Figure 15.8 Alt text for Figure 15.8: In figure 15.8, a graph illustrates the quantity of rupees traded against the exchange rate. Long description for Figure 15.8: The x-axis is labelled, quantity of rupees traded.The y-axis is labelled exchange rate, Canadian dollar against the rupee, with value 0.02 marked.A straight line supply curve, S, slopes up from the bottom left corner to the top right corner.A straight line demand curve, D, slopes down from the top left corner to the bottom right corner.Curves S and D intersect at point with a y-axis value of 0.02, which is connected to the corresponding y-axis value with a dotted line. -Refer to Figure 15.8.If the Indian government pegs its currency to the Canadian dollar at a value below $.02/rupee, we would say the currency is

If foreign investors in Thailand begin to realize that Thailand could not maintain its peg to the U.S.dollar indefinitely, they will began to ________ in Thailand and exchange ________.This change in investment by foreigners is termed capital flight.

U.S.dollars can currently be exchanged for gold by foreign central banks, but not by Canadian, U.S., or any other foreign citizens.

If a firm in Thailand borrows dollars from a U.S.bank, its interest payments on the loan in bahts will decrease if the baht appreciates against the U.S.dollar.

By 2015, ________ members of the European Union were using the euro as their currency.

A currency pegged at a value above the market equilibrium exchange rate is

Fluctuating exchange rates can alter a multinational firm's profits and losses.The Canadian corporation, Magna International, produces car parts and sells car parts in Europe.If the dollar depreciates against the euro, then Magna International's revenues from these operations should ________ and its costs from these operations should ________.

You are made better off in which of the following situations?

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

China's exchange rate system from 1994 through 2005 is an example of