Exam 39: Exchange Rates and Financial Links Between Countries

If the price of an ounce of gold is 200 ZARs in South Africa and $75 in Canada, what will be the South African Rand (ZAR)per Canadian dollar (C$)exchange rate?

Interest rate parity can be summarized by which of the following equilibrium conditions?

One of the advantages of floating exchange rates is that:

The euro floats against other currencies, but the member nations of the euro have no separate national money.For this reason, Spain, that uses the euro as its currency is listed under the managed float arrangement.

A reserve currency is a currency that is:

A commodity money standard exists when exchange rates are:

If interest rates in Europe fall below interest rates in the United States, then, other things equal, the demand for euros will decrease.

The IMF comprises of 50 member countries including all developed countries, and a few countries of Asia and Latin America.

Suppose a 10-mile taxi ride costs £6.50 in London and $10.00 in Los Angeles.If the exchange rate is £1 = $1.70 purchasing power parity holds.

Consider a country Atlantica, using dollars ($)as its currency.If this country sets a price for gold, and then issues currency such that the amount in circulation is equivalent to the value of gold held in reserve, it is said to be following:

Which of the following statements concerning the International Monetary Fund is true?

Suppose that the price of an ounce of gold is 120 pesos in Mexico and 2, 400 yen in Japan.Then the Japanese yen is worth two hundred times the value of a Mexican peso.

Given a one-year Canadian bond with a yield of 8 percent, what will be the U.S.investor's rate of return at maturity if the Canadian dollar appreciates 10 percent against the U.S.dollar?

If the euro per dollar exchange rate changes from $1 = 0.8 euros to $1 = 0.7 euros, it implies that the euro has depreciated against the dollar.

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:

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

The IMF mostly receives its funds from:

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.Determine the equilibrium exchange rate and equilibrium quantity of Brazilian reals, if D₁ and S₁ are the relevant demand and supply curves for Brazilian reals in this market.

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.

Suppose a hefty rise in the demand for Mexican pesos create a chronic shortage of this currency in the foreign exchange market.Which of the following steps should be adopted by the Mexican government to eliminate this shortage?