Exam 12: Exchange-rate Determination

In a free market,the equilibrium exchange rate occurs at the point where the quantity demanded of a foreign currency equals the quantity of that currency supplied.

Exchange rate determination in the short run is underlied by which of the following assumptions:

Assume that the United States faces an 8 percent inflation rate while no (zero)inflation exists in Japan.According to the purchasing-power parity theory,the dollar would be expected to:

The asset market theory of exchange rate determination suggests that the most important factor influencing the demand for domestic and foreign securities is:

Concerning exchange-rate determination,"market fundamentals" include all of the following except:

With floating exchange rates,relatively high productivity growth for a nation leads to

Which of the following is likely to result in long-run appreciation of the U.S.dollar relative to the peso?

Which example of market expectations causes the dollar to depreciate against the yen--expectations that the U.S.economy will have:

The Canadian dollar would depreciate on the foreign exchange market if:

The demand in the United States for yen will increase if,other things remaining equal:

Suppose the exchange rate between the U.S.dollar and the Japanese yen is initially 90 yen per dollar.According to purchasing-power parity,if the price of traded goods rises by 5 percent in the United States and 15 percent in Japan,the exchange rate will become:

All of the following are important long-run determinants of exchange rates except

If you were considering hiring a forecasting firm to predict future spot rates of the yen,you would hope that the firm could predict better what would be implied by the yen's forward rate.

If Mexico applies tariffs to imports of manufactured goods,Mexico's demand for foreign exchange will rise and the peso will depreciate under a system of floating exchange rates.

For an American investor,the expected rate of return on European securities depends on all of the following factors except the:

Under a system of floating exchange rates,relatively high productivity and low inflation rates in the United States result in:

According to exchange-rate overshooting,an appreciation of the Australian dollar is likely to be greater over a long time period than over a short time period.

Figure 12.1 The Market for Francs -Refer to Figure 12.1.Should real interest rates in the United States rise relative to real interest rates in Switzerland,there would occur a (an):

A forward discount on Mexico's peso serves as a rough benchmark of the expected appreciation in the peso's spot rate.

When the price of foreign currency (i.e.,the exchange rate)is above the equilibrium level: