Exam 39: Exchange Rates and Financial Links Between Countries

Deviations from purchasing power parity will be increasingly higher as international trade tariffs become more restrictive.The main reason for this phenomenon is that:

Suppose a U.S.importer purchases "Mexican Oaxaca" cheese for $500.If the present exchange rate is Mexican peso (MXP)10 per U.S.dollar, and the MXP appreciates 10 percent against the U.S.dollar between the date of purchase and the date of payment, then the peso value of the invoice when payment is due is:

How many U.S.dollars does a U.S.importer need to pay for 100, 000 yen worth of stereo equipment when the price of 1 yen is $0.008?

How many dollars do you need to buy a Swedish Kronor (SEK)when the exchange rate is $1 = 6.429 SEK?

The World Bank was created to help finance economic development in poor countries.

If you receive a dollar return of 6 percent on a one-year Korean bond that yields 10 percent annually, this means that between the purchase date and the time of maturity:

The U.S.provides about _____ percent of the annual membership fees of IMF member countries.

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

Which of the following had resulted from the Smithsonian agreement of 1971?

Purchasing power parity holds when the exchange rate is equal to the product of the foreign price level and the domestic price level.

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.If the initial equilibrium exchange rate is 6 pesos per real, then other things equal, a decrease in the number of Brazilian tourists to Mexico would:

Assume a one year U.S.bond pays 4.0% interest and a similar U.K.bond pays 5.2% interest.Which of the following changes will establish interest rate parity?

The World Bank obtains the funds it lends by:

If prices rise within a country, then, other things equal, the value of a unit of domestic currency will:

Suppose purchasing power parity exists in the car stereo market in the United States and Australia.If a car stereo costs $230 in the United States and the exchange rate is $1 = $AUD1.67, the same car stereo may be purchased in Australia for approximately:

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

Fixed exchange rates serve as a constraint on inflationary government policies.

Suppose the official gold value of the Brazilian real changes from 527 reals per ounce to 508 reals per ounce.We can then say that:

Foreign exchange market intervention is most effective when:

The Bretton Woods System of exchange rates was established: