Exam 39: Exchange Rates and Financial Links Between Countries

Suppose a permanent increase in demand for the Argentinean peso causes a chronic shortage of this currency in the foreign exchange market.The Argentinean government should then:

Which of the following holds true, if goods sell for the same price worldwide when converted to a common currency?

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 21.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals Refer to Figure 21.1.Assume that the initial equilibrium exchange rate is 6 pesos per real.Other things remaining equal, an increase in the number of Brazilian tourists to Mexico is most likely to:

The primary function of the World Bank is to:

The figure given below depicts the foreign exchange market for British pounds traded for U.S.dollars. Figure 21.2 Refer to Figure 21.2.Suppose that the British central bank wishes to maintain a fixed exchange rate of £1 = $1.60.If supply decreases from S₁ to S₂, the bank must:

A country on a gold standard was able to maintain people's confidence in the value of its currency by:

Under the _____ arrangement, the exchange rate is adjusted periodically by small amounts at a fixed, pre-announced rate or in response to certain indicators.

The exchange-rate arrangement that emerged from the Bretton Woods conference is often referred to as the:

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?

An appreciation of the Norwegian kroner in relation to the U.S.dollar is most likely to cause:

Assume that you have just returned to the United States from a summer vacation in Russia, where you exchanged American dollars for Russian rubles.Your economic actions can be said to have:

Assume an Australian importer expects to pay 16, 000 Australian dollars (AUD)for $8, 000 worth of U.S.goods, but on the shipment date 30 days later, the same volume of U.S.goods costs the Australian importer only 10, 000 Australian dollars.This means that between the contract date and the payment date, the exchange rate has changed:

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.

Under a fixed exchange-rate system, in order to maintain the exchange rate:

The figure given below depicts the foreign exchange market for British pounds traded for U.S.dollars. Figure 21.2 Refer to Figure 21.2.At the initial equilibrium point, with demand curve D and supply curve S₁:

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

Assume that a one-year Malaysian bond yields 10 percent interest and that the dollar return on maturity is 5 percent.If the exchange rate at maturity is $1 = MYR 4.00 (Malaysian ringgit), what was the exchange rate at the time the bond was purchased?

Assume a U.S.investor buys a Mexican bond with a face value of MXP 1, 000 and a 20 percent annual interest yield while the exchange rate is MXP 10 per dollar.What is the dollar return from the bond if the exchange rate at the end of the year is MXP 11 per dollar?

Because of their greediness, speculators are considered bad for exchange-rate markets.

Appreciation of the dollar means that now it takes more dollars to buy one unit of foreign currency.