Exam 17: The Foreign Exchange Market

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

If the dollar appreciates from 1.5 Brazilian reals per dollar to 2.0 reals per dollar,the real depreciates from ________ per real to ________ per real.

During the beginning on the subprime crisis in the United States when the effects of the crisis were mostly confined within the United States,the U.S.dollar ________ because demand for U.S.assets ________.

The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in

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

Suppose the Federal Reserve releases a policy statement today which leads people to believe that the Fed 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 U.S.assets to ________ and the U.S.dollar to ________.

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

A decrease in the domestic interest rate causes the demand for domestic assets to ________ 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 U.S.assets to ________ and the U.S.dollar will ________.

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

When Americans or foreigners expect the return on ________ assets to be high relative to the return on ________ assets,there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets.

Explain the law of one price and the theory of purchasing power parity.Why doesn't purchasing power parity explain all exchange rate movements? What factors determine long-run exchange rates?

On January 25,2009,one U.S.dollar traded on the foreign exchange market for about 49.0 Indian rupees.Thus,one Indian rupee would have purchased about ________ U.S.dollars.

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

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

Suppose that the European Central Bank enacts expansionary policy.Everything else held constant,this will cause the demand for U.S.assets to ________ and the U.S.dollar to ________.

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

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 Francois the Frenchman the expected rate of return on peso-denominated assets is

The expected return on dollar deposits in terms of foreign currency can be written as the ________ of the interest rate on dollar deposits and the expected appreciation of the dollar.

If the U.S.dollar appreciates from 1.25 Swiss franc per U.S.dollar to 1.5 francs per dollar,then the franc depreciates from ________ U.S.dollars per franc to ________ U.S.dollars per franc.