Exam 42: Exchange Rates and Financial Links Between Countries

What is a currency board?

Which of the following was the reserve currency under the gold exchange standard?

Suppose a Canadian investor buys a one-year U.S.government bond that pays 7 percent interest.If the U.S.dollar appreciates 4 percent against the Canadian dollar during the year, what must be the yield on a comparable Canadian government bond for interest rate parity to hold?

When the U.S.dollar depreciates in relation to the Swiss franc:

When the exchange rate fluctuates around a fixed central target, allowing for a moderate amount of fluctuation, while tying the currency to the target central rate, the exchange rate is under:

An Australian investor buys a U.S.Treasury bond that has a price of $10, 000, pays 5 percent interest, and matures in a year.Between the purchase date and the maturity date, the exchange rate changes from $1 = AUD 5.0 to $1= AUD 5.2.What will be the Australian investor's rate of return from the U.S.bond?

In 1991, the French mineral water Perrier was temporarily taken off the market in the United States because of suspected impurities.Other things equal, this action brought about:

Suppose the yen value of a $100, 000 wheat import contract rises from ¥12, 000, 000 to ¥13, 000, 000 between the contract and the payment date.This implies that the yen value of 1 dollar has declined so that, other things equal, we can expect an increase in Japanese demand for U.S.goods.

Fixed exchange rates allow countries to formulate their economic policies independently of other nations.

The Bretton Woods system required countries to actively buy and sell dollars to maintain fixed exchange rates when:

The IMF mostly receives its funds from:

The dollar return on a foreign investment is less than the interest rate on the foreign asset, if the foreign currency depreciates against the U.S.dollar between the purchase date and the maturity date.

A commodity money standard exists when exchange rates are:

The exchange rate that is established in the absence of foreign exchange market intervention by the government is known as a(n):

The gold standard ended with the:

Economists typically date the beginning of the gold standard to the period:

The focal point of the Bretton Woods system was the:

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?

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.Suppose the British central bank is committed to maintaining an exchange rate of £1 = $1.50, but there is a permanent shift in supply from S₁ to S₃.According to the Bretton Woods agreement:

The exchange-rate arrangement that emerged from the Bretton Woods conference is often called a managed float standard.