Exam 22: Exchange Rates and Financial Links Between Countries

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -The gold standard ended in the 1970s because the gold supplies failed to keep pace with the increase in money supplies required for industrialization and rapid economic growth witnessed in this era.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Assume that a British investor buys a one-year U.S. Treasury bill that pays 6 percent annual interest. Given a yield of 4 percent on a comparable British Treasury bill, the U.S. dollar must depreciate 2 percent against the British pound during the year for interest rate parity to hold.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Demand for U.S. dollars by speculators is likely to increase if the dollar is expected to depreciate in the near future.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Fixed exchange rates allow countries to formulate their economic policies independent of other nations.

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -A commodity money standard exists when exchange rates are:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -A permanent shift in the foreign exchange market supply and demand curves such that the fixed exchange rate is no longer an equilibrium rate is referred to as:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -What is the interest rate on a 12-month U.K. certificate of deposit if the dollar return on the certificate is 4 percent and the dollar has appreciated 9 percent against the British pound?

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -One of the advantages of floating exchange rates is that:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -When an exchange rate is established as a fixed peg, active intervention may be required to maintain the target-pegged rate.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -If a dollar invested in the United States yields the same return as a dollar's worth of yen invested in Japan, then it implies that:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Deviations from purchasing power parity will be increasingly higher as international trade tariffs become more restrictive. This is mainly because:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Refer to Figure 22.2. At the initial equilibrium point, with demand curve D and supply curve S₁:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -In the foreign exchange market where French francs are traded for Japanese yen, a decrease in the interest rate in France is most likely to cause:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -How many dollars do you need to buy a Swedish Kronor (SEK) when the exchange rate is $1 = 6.429 SEK?

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Suppose a U.S. investor buys a Canadian government bond with a face value of Canadian dollar (CAD) 100 and an annual yield of 8.8 percent. Which of the following statements is true?

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -If the official gold value of the Australian dollar changes from 470 Australian dollars per ounce to 493 Australian dollars per ounce, we can say that the Australian dollar has appreciated in value.

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 22.1. The supply curves shown for Brazilian reals are based on:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -A fixed exchange rate can be an equilibrium rate even if there is a permanent shift in the foreign exchange market supply and demand curves.

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -The gold standard fixes the:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Suppose the 12-month interest rate on a U.S. Treasury bill is 16 percent, and the one-year interest rate on a comparable British Treasury bill is 6 percent. The exchange rate today is $2.00 per pound. What must be the expected exchange rate at maturity for interest rate parity to hold?