Question 1

According to the interest parity condition,if the domestic interest rate is ________ the foreign interest rate,then ________.

Accepted Answer

A)  above; there is expected appreciation of the foreign currency 
B)  above; there is expected depreciation of the foreign currency 
C)  below; there is expected appreciation of the foreign currency 
D)  below; the interest parity condition is violated 
A)  above; there is expected appreciation of the foreign currency 
B)  above; there is expected depreciation of the foreign currency 
C)  below; there is expected appreciation of the foreign currency 
D)  below; the interest parity condition is violated

Question 2

When the value of the dollar changes from 0.50 pounds to 0.75 pounds,the pound has appreciated and the dollar has depreciated.

Accepted Answer

A) True 
 B)False

Question 3

In the long run,________ affect the exchange rate.

Accepted Answer

A)  relative price levels 
B)  tariffs and quotas 
C)  productivity 
D)  all of the above. 
A)  relative price levels 
B)  tariffs and quotas 
C)  productivity 
D)  all of the above.

Question 4

If the dollar appreciates relative to the Swiss franc,Swiss chocolate will become cheaper in the United States.

Accepted Answer

A) True 
 B)False

Question 5

When the exchange rate for the euro changes from $1.20 to $1.00,then,holding everything else constant,the euro has

Accepted Answer

A)  appreciated and German cars sold in the United States become more expensive. 
B)  appreciated and German cars sold in the United States become less expensive. 
C)  depreciated and American wheat sold in Germany becomes more expensive. 
D)  depreciated and American wheat sold in Germany becomes less expensive. 
A)  appreciated and German cars sold in the United States become more expensive. 
B)  appreciated and German cars sold in the United States become less expensive. 
C)  depreciated and American wheat sold in Germany becomes more expensive. 
D)  depreciated and American wheat sold in Germany becomes less expensive.

Question 6

Increased demand for a country's ________ causes its currency to appreciate in the long run,while increased demand for ________ causes its currency to depreciate.

Accepted Answer

A)  imports; imports 
B)  imports; exports 
C)  exports; imports 
D)  exports; exports 
A)  imports; imports 
B)  imports; exports 
C)  exports; imports 
D)  exports; exports

Question 7

Explain graphically how a change in the domestic price level will affect exchange rates,holding everything else constant.

Accepted Answer

the real exchange rate R is defined as t

According to the interest parity condition,if the domestic interest rate is the foreign interest rate,then .

When the value of the dollar changes from 0.50 pounds to 0.75 pounds,the pound has appreciated and the dollar has depreciated.

In the long run,________ affect the exchange rate.

If the dollar appreciates relative to the Swiss franc,Swiss chocolate will become cheaper in the United States.

When the exchange rate for the euro changes from $1.20 to $1.00,then,holding everything else constant,the euro has

Increased demand for a country's causes its currency to appreciate in the long run,while increased demand for causes its currency to depreciate.

Explain graphically how a change in the domestic price level will affect exchange rates,holding everything else constant.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

Exam 15: The Foreign Exchange Market

According to the interest parity condition,if the domestic interest rate is ________ the foreign interest rate,then ________.

When the value of the dollar changes from 0.50 pounds to 0.75 pounds,the pound has appreciated and the dollar has depreciated.

In the long run,________ affect the exchange rate.

If the dollar appreciates relative to the Swiss franc,Swiss chocolate will become cheaper in the United States.

When the exchange rate for the euro changes from $1.20 to $1.00,then,holding everything else constant,the euro has

Increased demand for a country's ________ causes its currency to appreciate in the long run,while increased demand for ________ causes its currency to depreciate.

Explain graphically how a change in the domestic price level will affect exchange rates,holding everything else constant.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

According to the interest parity condition,if the domestic interest rate is the foreign interest rate,then .

Increased demand for a country's causes its currency to appreciate in the long run,while increased demand for causes its currency to depreciate.