Exam 10: Foreign Exchange

Chapter 10 presented data on 71 countries' inflation rates relative to the U.S.rate of inflation and the percent change in the exchange rate for the years 1980-2005.What was the relationship between these two variables?

For many years now the United States has been running large current account deficits.What do you know about the capital account for the United States and what you predict for the exchange rate in the future? Explain.

Please state whether you agree or disagree with the following statement, and why: "An increase in the price level of a country, relative to another country's price level, will cause its currency to appreciate."

If government policymakers intervene in foreign exchange markets to cause the domestic currency to appreciate:

The theory of purchasing power parity implies the real exchange rate between two countries is:

The daily volume of Foreign Exchange Basics transactions:

If Americans develop a greater appreciation for Mexican-made goods, we should observe the following change in the dollar-peso market:

The real exchange rate is defined as:

Considering the dollar-euro market, as a dollar purchases a fewer number of euros, we should see:

The empirical evidence on purchasing power parity seems to point out that:

Explain why a real exchange rate that does not equal one implies purchasing power parity does not hold.

An increase in European wealth, all other factors held constant should:

From October 1997 to January 1998, the economy of South Korea was in turmoil.One of the problems was:

Assuming the law of one price, explain what the exchange rate between U.S.dollars and yen has to be if the price of steel in Japan is 15,000 yen per ton and the price in the U.S.is $125 per ton (assume no transaction costs).

When a currency is described as undervalued, this implies:

If a dollar will currently purchase 120 Japanese yen but it is expected that one year from now a dollar will purchase 130 yen:

The law of one price is a useful theory only when applied to:

An American traveling to Europe will find it easier to make purchases now because:

If Europeans increase their demand for American cars, everything else constant, we should observe the following change in the dollar-euro market:

If Americans develop a greater appreciation for Mexican-made goods, we should observe the following change(s) in the dollar-peso market: